Unilever H1 Results Down, Maintains FY25 Outlook

Unilever reported a weaker first half, with profit before taxation down 8.5% to €5.09 billion and turnover declining 3.2% to €30.13 billion, despite 3.4% underlying sales growth. Despite this, the company maintained its fiscal 2025 outlook for 3-5% underlying sales growth and improved operating margins, anticipating stronger second-half performance driven by developed and improving emerging markets. The planned demerger of its Ice Cream business is also on track for mid-November.

Analysis

Unilever reported a mixed first half, with headline figures showing an 8.5% decline in pre-tax profit to €5.09 billion and a 3.2% drop in turnover to €30.13 billion. However, these figures are contrasted by a more resilient underlying performance, which saw sales grow 3.4% on the back of a 1.5% increase in volume and 1.9% in price. This suggests the core business maintains momentum despite external pressures affecting the top line. Management's confidence is underscored by the reaffirmation of its fiscal 2025 outlook for 3-5% underlying sales growth and improved operating margins. More significantly, the company projects an acceleration in the second half, with sales growth expected to surpass H1 levels and margins guided to be at least 18.5%. This optimism is predicated on strength in developed markets and a recovery in key emerging markets. Key strategic developments include the Ice Cream business demerger, which is proceeding on schedule for mid-November, and a 3% increase in the quarterly dividend, signaling a continued commitment to shareholder returns.

Key Decisions for Investors

• Investors should look beyond the negative headline H1 results and focus on the positive 3.4% underlying sales growth and reaffirmed full-year guidance as key indicators of the company's operational strength.
• The upcoming demerger of the Ice Cream business in mid-November is a significant catalyst that could unlock value; monitor progress closely as it will reshape the company's portfolio and financial profile.
• The confident forecast for an accelerated second half, with margins improving to at least 18.5%, warrants close attention to future earnings reports to validate whether this management optimism translates into tangible results.
• The 3% dividend increase, despite a drop in reported profit, signals management's confidence in future cash flow and should be considered a positive signal for income-focused investors.