Q4 2024 Earnings Summary
- Strong underlying sales growth of 4.2%, led by volume growth of 2.9% across all business groups. The 30 Power Brands, representing over 75% of turnover, achieved 5.3% underlying sales growth driven by 3.8% volume growth, indicating robust market demand and effective brand strategies.
- Significant gross margin expansion of 280 basis points to 45%, surpassing pre-pandemic levels. This improvement allowed Unilever to increase brand and marketing investment by EUR 900 million to 15.5% of turnover, enhancing competitive positioning and supporting future growth.
- Strategic portfolio optimization focusing on high-growth, premium segments through acquisitions like K18, a premium biotech hair care brand, and Minimalist in India. Simultaneously, Unilever is divesting lower-growth businesses, such as Elida Beauty and certain Foods brands, to allocate capital to areas with greater growth potential.
- Unilever anticipates a slower start to 2025, with market growth subdued in Q1 and an expected sequential slowdown from Q4 2024's 4% growth, which may negatively impact sales performance in the near term.
- The company is experiencing softer growth in key categories such as Home Care and Nutrition, partly due to lower pricing and increased commodity costs, which could pressure overall sales growth and margins.
- Challenges in emerging markets like China and Indonesia, including market slowdowns and structural issues, are causing volume declines and may continue to impact sales growth in these regions.
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Consistent Underlying Sales and Volume Growth | Reported as driving Q2 performance with 4.1% growth overall, led by volume increases (2.9% volume growth in Q2) | Emphasized in Q4 with continued volume-led progress, showing 3.2% volume growth in the second half and consistent underlying sales performance | Steady performance with consistently positive volume-led growth. |
Evolving Gross Margin Expansion and Margin Transformation | Q2 highlighted robust improvement with a 420bps expansion reaching 45.7%, driven by cost efficiencies and procurement initiatives | Q4 reported significant margin expansion of 280bps to 45%, with efforts on productivity and margin transformation underlined | Margins continue to expand; drivers remain similar though Q4 sentiment is slightly more cautious on the pace. |
Ongoing Emphasis on Power Brands and Increased Marketing Investment | Focused on Power Brands as growth drivers with increased brand and marketing spend to 15.1% of turnover and 85% of incremental investment backing these brands | Reiterated focus on the 30 Power Brands with a further increased marketing investment to 15.5% of turnover and strong underlying sales growth | Consistent emphasis with incremental investment and sustained growth in key brands. |
Strategic Portfolio Optimization and Divestment of Lower-Growth Businesses | Only mentioned in relation to disposals impacting turnover (e.g., Suave, Dollar Shave Club, Elida Beauty) with streamlined segments | Detailed discussion on portfolio reshaping with active divestments (e.g., Russian subsidiary sale) and targeted acquisitions in premium segments (K18, Minimalist) | New emphasis in Q4 with a more proactive restructuring strategy than previously noted. |
Emerging Markets Challenges | Addressed challenges in China (muted market recovery) and Indonesia (sales decline amid geopolitical tensions) with moderate corrective actions noted | Provided deeper insights on market-specific issues: in China, issues such as channel shifts and portfolio adjustments; in Indonesia, a notable 8.7% decline and long‐term structural actions | Increased focus and detail on emerging market obstacles, highlighting more aggressive corrective measures in Q4. |
Rising Cost Pressures and Currency Headwinds Affecting Margins | Mentioned a moderate return of inflation impacting commodities (e.g., aluminum, palm, cocoa) and a negative currency effect of about 1% | Detailed the impact of commodity-specific inflation (palm oil, surfactants, cocoa, tea), a negative currency impact of –0.7%, and rising finance costs | Cost pressures remain significant with enhanced focus on specific commodities and finance challenges, with a cautious tone in Q4. |
New Emphasis on Health & Wellbeing Business Growth | Highlighted strong performance in Health & Wellbeing with double-digit growth, international expansion of brands like Liquid I.V. and Nutrafol, and strategic focus within the segment | Emphasized as part of the broader Beauty & Wellbeing business, achieving 6.5% growth with premiumization and international expansion efforts noted (e.g., progress in China) | Continued strong growth and strategic focus, with a subtle rebranding and consistent positive sentiment. |
Segment-Specific Slowdowns | Detailed in Q2 with Home Care facing negative pricing; Nutrition showing mixed trends; Ice Cream impacted by low volume growth in challenging regions; and Prestige Beauty slowed by muted demand in key markets | Q4 provided additional granularity: Home Care had softer growth due to commodity inflation; Nutrition remained subdued; Ice Cream and Prestige Beauty challenges persisted with regional and cost pressures amplified | Persistent challenges across segments with more detailed data in Q4, indicating ongoing issues that require corrective actions. |
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Slower Start and 2025 Growth Outlook
Q: Are you guiding for slower growth in Q1, and what's your 2025 outlook?
A: Yes, we anticipate a sequential slowdown in Q1, with growth below the 4% achieved in Q4 due to slower market growth and pricing effects lagging. However, we expect growth to ramp up during the year, aiming for 3% to 5% growth in 2025, consistent with our guidance. -
Gross Margin and COGS Inflation
Q: Can you comment on gross margin outlook and COGS inflation?
A: We have achieved a 45% gross margin, reaching our pre-COVID target earlier than expected. We expect annual material inflation of around EUR 0.7 to EUR 0.8 billion, concentrated in palm oil, surfactants, cocoa, and tea, with about half being currency-related. Pricing actions will be implemented, but there will be a time lag, so pricing will materialize from Q2 onwards. -
Market Share and Competitiveness
Q: How are you performing versus markets and in terms of market share?
A: In H2 2024, we saw improved market shares and are back to a neutral market share position in measured markets. Our Wellbeing, Prestige, and out-of-home Ice Cream businesses are gaining share. We see stronger performance in Europe and U.S. Personal Care, while experiencing softness in China and Indonesia due to resets and channel shifts. -
North America Growth Sustainability
Q: How sustainable is your strong growth in North America?
A: North America grew by 7% with volumes over 6% for two consecutive quarters, reflecting our transformed portfolio with strong roles for Wellbeing (double-digit growth) and Prestige (mid-single-digit growth). Personal Care has also improved, contributing to growth in Q4. We believe this performance is sustainable due to the higher quality of our portfolio. -
Volume and Pricing Balance
Q: What visibility do you have on achieving volume growth amid pricing?
A: In H2 2024, we realized 3.2% volume growth and 1.1% price growth, showing a return to volume-led growth. We aim to maintain a healthy balance between volume and price, continuing to drive fewer, bigger, better innovations, with around 12 big bets, each targeting EUR 100 million platforms. Pricing will be more back-weighted due to lag in implementation. -
European Market Share Recovery
Q: How is your performance in Europe unfolding?
A: We've improved market shares in Europe, particularly in Home Care and Personal Care, reversing previous declines. Europe represents 18% of turnover, and we're committed to competitiveness and margin improvement in the region. -
De-merger of Ice Cream Business
Q: How will the Ice Cream demerger affect growth and listings?
A: Post-demerger, we are targeting 4% to 6% growth, but for now, we stick to our 3% to 5% guidance until the demerger is completed. The Ice Cream business will be incorporated in the Netherlands, with the primary listing on Euronext Amsterdam and additional listings in London and New York. -
Commodity Inflation Details
Q: What's the outlook for commodity inflation beyond Ice Cream?
A: Net material inflation is expected to be around EUR 0.8 billion, with 55% from palm oil and surfactants affecting soap bars and HPC liquids, and 25% from cocoa and chocolate, impacting Ice Cream. The impact varies by category, with higher percentages in Ice Cream due to cocoa and chocolate. -
China Business and Strategy
Q: Can you discuss your China portfolio and competition?
A: Our China portfolio focuses on Beauty, Hair Care (e.g., Clear), Home Care (OMO), and Food Solutions. We're making profitable inroads in channels like Douyin to adapt to consumer shifts. We expect a positive effect from these actions in the second half of 2025. -
Liquid I.V. Growth and Capacity
Q: Have capacity constraints affected Liquid I.V.’s growth?
A: Liquid I.V. has grown 7x since acquisition, expanded to 7 other markets, and may have faced temporary capacity constraints. These are now resolved, and we continue to invest above the company average BMI of 15.5%. -
U.S. Personal Care Innovations
Q: How has U.S. Personal Care improved, especially Deodorants?
A: We've seen positive developments in Deodorants and Skin Cleansing, with successful launches like Whole Body Deodorants and Dove serum body washes, offering more premium products. These innovations have gained strong consumer traction. -
Project Sky and AI Integration
Q: Is Project Sky contributing to U.S. growth, and what's its impact?
A: Project Sky is part of digitizing our company using AI to improve planning and forecasting. It's being rolled out globally, including in the U.S. and Europe, leading to improved service and forecasting accuracy. While it's contributing to better execution, there's no specific indication of it causing sell-in ahead of going live.