Unilever Reports Mixed H1 2025 Results Amid Economic Uncertainties
Why we think this is neutral
Unilever's H1 2025 results present a mixed picture. While underlying sales growth of 3.4% shows resilience, with an improvement to 3.8% in Q2, there are concerns about profitability. The underlying operating profit declined by 4.8%, and the underlying operating margin contracted by 30bps. The decrease in free cash flow from €2.2bn to €1.1bn and increased net debt are also noteworthy. However, the company's strategic moves, including acquisitions in premium beauty and the planned demerger of the Ice Cream business, demonstrate proactive management. The full-year outlook remains cautiously optimistic, with expected acceleration in emerging markets. Given these factors, the overall sentiment is neutral, balancing growth prospects against profitability challenges and economic uncertainties.
Key Points
- Underlying sales growth of 3.4%, improving to 3.8% in Q2
- Turnover down 3.2% due to currency impact and disposals
- Underlying operating profit decreased 4.8% to €5.8bn
- Underlying operating margin contracted 30bps to 19.3%
- Underlying EPS down 2.1% to €1.59
- Free cash flow reduced to €1.1bn from €2.2bn in H1 2024
- Net debt increased to €26.4bn from €24.5bn at end of 2024
- On track to demerge Ice Cream business by mid-November
- Completed strategic acquisitions in premium beauty space
- Full year underlying sales growth expected within 3-5% range
- Anticipate improvement in underlying operating margin for full year
- Expect acceleration in emerging markets, particularly Asia
Summary
Unilever's H1 2025 results reveal a complex picture of growth and challenges. Underlying sales grew by 3.4%, with volume contributing 1.5% and price 1.9%. However, turnover decreased by 3.2% due to currency impacts and disposals. Profitability faced headwinds, with underlying operating profit down 4.8% to €5.8bn and underlying operating margin contracting by 30bps to 19.3%. Underlying EPS decreased by 2.1% to €1.59. The company's free cash flow reduced to €1.1bn from €2.2bn in H1 2024, while net debt increased to €26.4bn. On a positive note, Unilever is progressing with strategic initiatives, including premium beauty acquisitions and the planned demerger of its Ice Cream business by mid-November. The outlook remains cautiously optimistic, with full-year underlying sales growth expected within the 3-5% range and anticipated improvement in underlying operating margin. The company foresees acceleration in emerging markets, particularly in Asia, despite current challenges in some regions like Latin America.