Unilever PLC Q4 FY2024 Earnings Call

Good morning and welcome to Unilever’s Full Year Results. Thank you for joining us. In a moment, Fernando Fernandez, our CFO, will give a breakdown of the results for 2024, after which I will look at some of the key priorities for this year and beyond. In total, we expect prepared remarks to last around 40 minutes, followed by 30 minutes of Q&A. And all of today’s webcast is available live transcribed on the screen. Before I provide a few reflections of my own on the results, I want to touch on some of the broader shifts we have made in 2024 to set us up for higher, more consistent performance. There are five, in particular, I want to highlight. First, having been adopted and embedded across the business following its launch in October 2023, the Growth Action Plan, or GAP, was executed last year with speed and discipline. And we see this reflected across the company. A few examples: In the plans behind our top 30 Power Brands. In our Unmissable Brand Superiority framework. In the step-up in the size and scale of our innovations. Or in the embedding of net productivity in the Unilever supply chain. And in all these areas, and more, the GAP is critical to our work across Unilever, working on the same themes, on the same imperatives and bundling our energy, passion, and resources together on the things that really matter. Second, the wide-ranging but necessary productivity program announced in March is being implemented at pace. Actually, we are ahead of plan in creating a leaner, more accountable organization. By the end of 2024, the number of full-time roles had been reduced by 4,300, with an expected total reduction of 7,500 roles by the end of 2025. Third, capital and resources are being deployed behind our keenest priorities and our biggest opportunities, whether that's our top brands, our leading markets, our key capabilities, or in meeting our biggest net productivity opportunities. On top of these investments, we returned €5.8 billion in capital to shareholders in 2024 in the form of dividends and buybacks. Fourth, we are on track to complete a significant portfolio shift with the separation, by the end of this year of our Ice Cream business. I’ll talk more on that later. And fifth, we are giving increasingly tangible expression to our desire to dial-up Unilever’s performance edge and create a winning culture. For example: The productivity program is being used to de-layer the organization and people are finding their roles now come with greater scope but also more accountability. Measures are being put in place to help motivate and incentivize for performance, whether through more stretching targets or through greater differentiation in reward. And the new organization structure, with the Business Groups focusing on the top 24 markets and the 30 Power Brands. And that’s bringing simplicity and much sharper category focus. These five shifts represent just some of the ways in which operationally, organizationally, and on the portfolio we moved quickly and decisively last year to bring much-needed clarity and focus to the business. And while these changes are intended to set us up for consistent, higher performance over the long term, the benefits are already apparent in improved performance. And that brings me to our results for 2024. First, a reminder. When we launched the GAP, towards the end of 2023, we said that our priority was to improve both the quality and the consistency of Unilever’s top-line performance. In fact, the GAP was a direct response to that challenge. We also made clear that, central to achieving this was restoring gross margin, as a first step, to pre-pandemic levels, thereby enabling us to step-up investment behind our brands and in the rest of the business. The results we are announcing today reflect progress against each of these objectives. Growth was volume-led. And importantly, within that, underlying volume growth of 2.9% was broad-based across all five Business Groups and across all four quarters. This was supported by a significant increase in gross margin, up by 280 basis points versus the prior year, to 45%, exceeding the pre-COVID level in all Business Groups, except Ice Cream. The increase in gross margin allowed us to increase brand and marketing investment by €0.9 billion, to 15.5% of Group turnover. Gross margin expansion also contributed to profit growth. Underlying operating profit growth was 12.6% versus the prior year, to €11.2 billion. These results confirm the progress we are making against our most important and immediate priorities. They also enabled us to deliver top-third total shareholder returns in 2024, and that is in line with our ambition. However, consistency is not about one good year. We know there is a lot still to do, and some way yet to travel and in somewhat turbulent waters. But as I have said, we laid some important foundations for the future in 2024, as well as delivering results in line with our objectives. And Fernando will now take you through those results in more detail. Fernando?

Thank you, Hein. Underlying sales growth in the full year was 4.2%, led by volume of 2.9% and with price contributing 1.3%. We delivered four consecutive quarters of underlying volume growth above 2%, with all Business Groups driving positive volume growth for the year. Our 30 Power Brands, which represent more than 75% of our Group turnover, performed well with 5.3% underlying sales growth, driven by volume growth of 3.8%. While the Power Brands had the first call on incremental resources and led our growth, we did not neglect the rest of the business. This paid off as these brands also delivered improved volume growth of 0.7% in the second half, up from minus 1.6% in the first half of 2024. As expected, given the favorable commodity cycle in the first half of 2024, underlying price growth slowed down to 1.3% for the year. However, with input cost inflation in our basket of commodities returning in the second half, we expect an acceleration of price growth through 2025. Let’s take a closer look now, by Business Group. Beauty & Wellbeing delivered a strong full year performance led by broad-based volume growth, particularly across its Power Brands. Underlying sales growth was 6.5%, with volume at 5.1% and price at 1.3%. In the fourth quarter, underlying sales growth was 5.2% with 3.9% volume against a strong quarter 4, '23 comparator. Beauty & Wellbeing’s strong performance reflects the ongoing premiumization of our core Hair Care and Skin Care portfolio and the continued strength of our Prestige Beauty and Wellbeing portfolio, which combined now accounts for approximately 30% of Beauty & Wellbeing’s turnover. Hair Care grew mid-single digit with balanced volume and price growth. Dove Hair delivered high single-digit volume growth, and our largest hair brand, Sunsilk, continued its positive momentum following the 2023 relaunch. Nexxus, our masstige proposition in the U.S., grew double-digit, while Clear's growth was muted due to its big exposure to a subdued Chinese market. Our core Skin business continued to grow well with Vaseline achieving double-digit growth for the second consecutive year. This success was driven by the expansion of the Gluta-Hya range into more markets and new variants. Dove also posted double-digit growth in the Skin Care, supported by new successful launches of body serums and face treatments across Latin America. Wellbeing delivered double-digit volume growth led by Liquid I.V., Nutrafol, and Olly. This performance reflects continued strength in the brands’ core products and innovations, as well as the early benefits of our selective international expansion. Liquid I.V. entered seven new markets during the year, while Olly made good inroads in China. Prestige Beauty grew at a mid-single digit rate due to the beauty market slowing in the U.S. and China. Growth remained lower in the fourth quarter, but several brands still delivered good performances. Notably, Hourglass and Tatcha both achieved double-digit growth in the year. Beauty & Wellbeing underlying operating margin improved by 70 basis points. Positive mix was a key driver of a strong 220 basis points gross margin expansion. This allowed further investment in BMI to support the continued strengthening of our brands in this Business Group.

Personal Care also had a strong year driven by Deodorants, which delivered double-digit growth, and Dove, our largest brand, which accounted for close to 40% of Personal Care turnover. Underlying sales growth was 5.2% for the year, with 3.1% volume and 2.1% price. Volume growth accelerated in the fourth quarter to 3.6%, contributing to our underlying sale growth of 5.3%. Dove’s strong growth was supported by the launch of Whole Body Deodorants, featuring our superior odor control technology. First introduced in the U.S. in 2024, we will expand this innovation to new markets and to new brands in 2025. Dove also launched its new serum shower collection, bringing active face care ingredients to body wash formats. The impressive growth in Deodorants was led by Dove but also with solid contributions from Rexona and Axe, both benefitting from disruptive technology introductions in the areas of odor control and fragrances, respectively. Skin Cleansing grew low single-digit with positive volume and price, despite declines in Indonesia, China, and India. Lux and Lifebuoy are two of our Power Brands where our performance has been poor and in which we are making significant interventions in 2025. Oral Care delivered mid-single digit growth, with solid results from Pepsodent and Close Up, our Power Brands in the category. Underlying operating margin improved by 190 basis points during the year. Significant gross margin expansion enabled us to continue re-investing in our Personal Care brands, with special focus on our U.S. business as we elevate our portfolio to a more premium offering.

Home Care delivered underlying sales growth of 2.9% driven by a 4.0% increase in volume. Commodity deflation was more significant in the powders format than in liquids, resulting in negative pricing in several emerging markets. Fourth quarter underlying sales growth was 3.0%, with 3.3% volume growth and price growth getting close to flat. In Fabric Cleaning, we introduced Persil’s Wonder Wash, designed for the consumer trend towards short and cold wash cycles. Launched in eight markets, this product has shown excellent market share results, contributing to a significant turnaround in Europe during the year. We are continuing to roll it out to more markets and expect it to become a €100 million innovation platform. Comfort launched its new ranges utilizing our patented Crystal Fresh technology. This product line brings superior fragrances to the fabric booster market, helping Comfort achieve nearly 10% volume growth for the year. Domestos and Cif both grew double-digit, supported by strong format innovations in power foam, sprays, and creams. Underlying operating margins for Home Care improved by 220 basis points during the year, driven by strong gross margin expansion. This resulted in a 19% improvement in underlying operating profit, despite a step-up in brand and marketing investment behind our premium innovations. Foods delivered growth of 2.6% in 2024, with 2.4% price and volume at 0.2%, amidst an overall deceleration in the market. In the fourth quarter, Foods grew 2.6% with 2.1% from price and 0.5% from volume. Our two largest brands, Knorr and Hellmann’s, which account for around 60% of Foods turnover, outperformed the Foods average. Knorr enhanced its global leadership in the bouillon and seasonings category. Hellmann’s achieved volume-led growth through the continued success of its flavored mayo ranges and premium formats. Our Unilever Food Solutions business continued to deliver good results outperforming markets in both China and the U.S. In 2024, we expanded our digital selling program and drove unique product formats and sizes specifically designed for professional kitchens. We continue to work on focusing and simplifying our Foods portfolio, anchoring it more and more in our Power Brands. In line with that goal, the disposals of Unox, Conimex, and Zwan were announced in the fourth quarter and will be completed during 2025. In 2024, Foods significantly improved its underlying operating margin by 270 basis points, driven by a strong gross margin expansion. This improved profitability reflects our strategic efforts to streamline the business, focusing on our Power Brands, reducing the number of items, and executing disciplined net revenue management. Ice Cream delivered 3.7% underlying sales growth, with a return to volume growth at 1.6% and 2.1% from price. The fourth quarter saw underlying sales growth of 4.3%, with balanced volume and price. Ben & Jerry’s and Wall’s were our fastest-growing brands in the category. Ice Cream’s improved performance in 2024 reflects operational improvements across much of our business, including enhancements to our supply chain, go-to-market strategy, and promotional activities. These efforts have strengthened our business and laid a foundation for continued improvements in the years ahead as an independent company. Our results also reflect a step-up in innovation, including the launch of Magnum Bon Bons and Yasso Poppables, new bite-sized, premium formats that meet evolving snacking habits. Ice Cream's underlying operating margin improved by 100 basis points in 2024. Gross margin expansion led by positive mix enabled further investment in brand and marketing. The actions taken in 2024 have improved our results and during 2025, we will remain focused on strengthening our operational model while navigating the challenges brought by significant inflation in key materials like cocoa and dairy. We run the business entirely through the lens of our five Business Groups, however we believe it’s important to provide also some color on the performance we achieve across different geographies. In 2024, we delivered broad-based volume and price growth, with positive contributions from all regions, from developed and from emerging markets, an imperative to deliver both volume growth and hard currency profit growth. Developed markets, which account for 42% of Group turnover, grew underlying sales 4.4% with volumes up 3.3%. This reflected a strong, accelerating performance in North America, led by Beauty & Wellbeing, and a big improvement in Europe, driven mainly by Personal Care and Home Care. A stronger innovation pipeline and increased levels of brand investment are evidence of our commitment to accelerate performance consistently in these important hard currency markets. Latin America, one of Unilever’s strongholds, grew 6.0% with positive volume growth across Brazil, Mexico, and Argentina. Growth slowed in the second half, reflecting increased currency volatility in the region that will require significant pricing corrections in the short term with potential impacts on volumes. In Asia Pacific Africa, our biggest region, underlying sales growth of 3.1% was more subdued than in previous years. Our India business continued to increase market share during a period of modest market growth. We expect conditions to improve mid-term following recent fiscal and monetary stimulus. India grew 1.8% with 2.4% underlying volume growth, with tonnage volume growing mid-single digit, partially offset by negative mix due to the strong growth in Home Care versus other categories. Our performance in Africa and Turkey was strong with double-digit growth driven by positive volume and price in each quarter. China declined mid-single digit with market weakness across all categories apart from Foods. South East Asia declined low-single digit, driven by an 8.7% decline in Indonesia. Both China and Indonesia are critical markets for us with significant long-term potential. We are taking decisive action in both. In China, we are strengthening our business during a market slowdown. We are accelerating our portfolio premiumization to drive growth in the premium and super-premium segments through innovations behind unmissably superior Power Brands. We are serving emerging channels better through social-first demand creation models and direct-to-consumer models. We are transforming our route-to-market, to effectively address lower-tier cities and smaller format stores. We have redesigned the sales organization with separate sales teams at category level and have leveraged digital selling tools for salesforce and distributors to improve our reach. The transition to a tailored customer development organization and to a digital route-to-market takes time and faces stock corrections in some channels and categories. However, we are encouraged by the executional progress in line with our plans. In Indonesia, we have long-standing portfolio and brand proposition issues, which will take several quarters to fix. In the short term, we are correcting misaligned investments and price structures across channels and resetting stock levels in retail. We are expanding our direct and indirect coverage with fewer and bigger distributors. We are paying particular attention to the health & beauty channel for which we are innovating in growing demand spaces. The reset is underpinned by a far-reaching cost savings program that fuels brand investment. As we said previously, we expect to see in our results the benefits of the changes in China and Indonesia from the second half of 2025 onwards. Let me return now to performance at the Group level. Turnover for the full year was €60.8 billion, up 1.9% versus the previous year. Excluding the effect of M&A actions to further sharpen our portfolio, turnover growth would be 3.4%, primarily driven by underlying sales growth of 4.2%, with an adverse currency impact of minus 0.7%, considerably lower than in 2023, when the Euro strengthened against most currencies. A result of our portfolio actions, the net impact from acquisitions and disposals was minus 1.5%. Acquisitions added 0.4%, driven by Yasso and K18, both performing well and in line with acquisition business cases. This was more than offset by a disposal impact of minus 1.8%, driven by Suave, Dollar Shave Club, as well as Elida Beauty and Unilever Russia, which sales were completed in June and October 2024 respectively. During the year, we expanded our gross margin by 280 basis points to 45.0%, building upon the improvement of 200 basis points achieved in 2023. Within 18 months, we have rebuilt gross margin beyond the pre-COVID level in all Business Groups apart from Ice Cream. Gross margin is the backbone of our financial plan, and our new base is 45%. Our ambition is to improve from here. In 2024, we made progress in transforming Unilever into a structurally higher gross margin business, by driving volume leverage, positive mix, and net productivity gains. These were enabled by procurement interventions in key materials and by allocating a significantly higher fraction of our capital expenditure to margin expansion, which resulted in lower production and logistics costs. The very strong improvement of 420 basis points in the first half of 2024 was boosted by tailwinds, namely the strong benefits of deflation in some components of our commodity basket and the pricing carry-over from 2023. This strong gross margin expansion gave us flexibility to both, increase investment in our brands and expand underlying operating margin. We increased brand and marketing investment by 120 basis points to 15.5% of turnover, an increase of €900 million. All additional investment was concentrated in our top 30 brands behind a much more focused innovation program. Our brand and marketing investment has been the highest percentage of turnover in over a decade with an increase of 250 basis points or €1.6 billion over the last two years. Overheads reduced by 10 basis points, as a result of tighter cost control and savings in the second half from the productivity program. The combination of strong gross margin expansion, lower overheads and substantially increased brand support results in underlying operating profit of €11.2 billion, up 12.6% versus the previous year. The underlying operating margin improved 170 basis points to 18.4%. Underlying earnings per share were €2.98, up 14.7%. Our operational performance, the combination of sales growth and strong margin expansion, contributed 15.6% to underlying earnings per share growth. An increase in finance costs had an adverse effect of minus 1.4%. As expected, higher interest rates impacted the cost of debt, while interest income and interest credit from pensions were slightly lower than in the prior year. Net finance costs as a percentage of average net debt were 2.5%. For 2025, we continue to expect net finance costs to be around 3% of average net debt. Tax was a drag of 0.6% on underlying EPS, as our underlying effective tax rate slightly increased to 25.8%. This was driven primarily by increases in non-deductible interest and in withholding tax, which were largely offset by benefits from tax settlements and other one-off items. We expect our underlying tax rate to be at around 26% for full year 2025. The impact of our share buyback programs made a positive contribution of 1.0%. Net profit from joint ventures and associates as well as others increased versus the prior year, while minority interest decreased. Together they contributed 0.8% to underlying earnings per share growth. Negative currency effect in underlying EPS was the same as the one experienced at the turnover level at minus 0.7%. Our free cash flow in the full year was €6.9 billion versus €7.1 billion in 2023 that included a tax refund of €400 million in India. Our average working capital remained strong at minus 9% of turnover in 2024. Cash conversion, which indicates our ability to convert profit into cash, was strong at 106%, above our long-term ambition of around 100%. Keeping a robust balance sheet is a key feature of our value creation model. Closing net debt was €24.5 billion, up €900 million. At year-end, net debt to underlying EBITDA was 1.9 times versus 2.1 times in the previous year, and in line with our guidance of around two times. The step-up in underlying operating profit was the prime driver behind a 190 basis points increase in underlying return on invested capital to 18.1%. We maintain our medium-term expectation of high teens underlying ROIC, which is a key building block of our multi-year value creation model. We have allocated capital during 2024 in line with our priorities, growth, productivity, portfolio reshaping and capital returns to shareholders. Investing for growth and productivity are critical to ensure sustainable long-term economics of our business. It's investing in our brands, investing in R&D, and investing in capacity expansion and productivity. We stepped up brand support by €900 million in 2024, up 120 basis points as a percentage of turnover. Capital expenditure increased by 13.6% to €1.9 billion, resulting in 3.2% of turnover, up 30 basis points versus the previous year, as we invest more CapEx for margin expansion. Our three-year guidance of average 1.2% restructuring spend remains unchanged for the period 2024 to 2026. Due to the acceleration of the productivity program, we increased restructuring costs to 1.4% of turnover in 2024, and we expect a similar ratio for 2025. Over time, we plan to allocate around €1.5 billion a year to optimize our portfolio, as we rotate into more premium segments. 2024 was a year in which we did more portfolio pruning through disposals than additions through bolt-on acquisitions. We remain very disciplined and value-rational in our M&A activities. The bar is high for any additions to our portfolio, and transformational acquisitions remain off the table. I will cover the completed and announced transactions in more detail in a moment. We also delivered €5.8 billion of capital returns to our shareholders in 2024, through cash dividends of €4.3 billion and a share buyback program of €1.5 billion. Our quarter 2 interim dividend was increased by 3%. Reflecting the full year performance, the Board increased the quarter 4 interim dividend by 6.1% versus the prior year. We continued to optimize our portfolio, allocating capital to premium segments through bolt-on acquisitions and divesting lower-growth businesses. In February 2024, we acquired K18, a premium biotech hair care brand. In January 2025, Hindustan Unilever Limited signed an agreement to acquire the premium actives-led beauty brand, Minimalist. This marks another step in the transformation journey of our Beauty & Wellbeing portfolio towards fast growth, premium demand spaces in India. We completed several disposals during the year. These included Elida Beauty and the water purification businesses, Qinyuan Group and Pureit. In October, we completed the sale of our Russian subsidiary to the Arnest Group. In addition, we announced several disposals that we expect to complete during 2025, including the sale of the Foods brands Unox, Conimex, and Zwan, as well as the disposal of our laundry business in Central America.

Turning to the outlook for 2025. We expect underlying sales growth for full year 2025 to be within our multi-year range of 3% to 5%. Market growth slowed throughout 2024. We anticipate a slower start to 2025 with subdued market growth in the near term. We expect the market and our growth to improve during the year as prices increase, reflecting higher commodity costs. We expect for the full year a more balanced contribution between volume and price. We anticipate a modest improvement in underlying operating margin for the full year versus 18.4% in 2024. We expect this improvement to be realized in the second half given the very strong first half comparator of 19.6%, which benefitted strongly from carryover pricing and input cost deflation. As we said at our Investor Event last year, our goal is very simple. Deliver absolute profit growth in hard currency that is in line with companies that consistently feature in the top third of the peer group when it comes to total return. We made a step forward in 2024 by increasing underlying operating profit by 12.6% to €11.2 billion. And we are determined to grow profit from here, in 2025 and beyond. We will deliver capital returns in line with our capital allocation framework. This includes an attractive, sustainable dividend, based on paying out around 60% of underlying EPS and returning surplus cash via share buybacks. In that vein, we have announced a new share buyback of up to €1.5 billion, which will commence today, and complete in the first half of 2025, well ahead of the separation of Ice Cream. With that, over to you, Hein. In turning now to the priorities for this year and beyond, it is important to note that the process of transforming Unilever continues. We are thinking about this under three broad headings: Number 1, implementing our new strategy, the Growth Action Plan 2030. Number 2, continuing the wide-ranging productivity program we have embarked on, and as part of that, delivering the savings we have promised. Number 3, completing the separation of the Ice Cream business by the end of this year. Now let me take each of these briefly in turn, starting with the Growth Action Plan 2030. As a reminder, this is a comprehensive five-year strategic plan, encompassing a refreshed purpose, anchored firmly back with the consumer. To brighten everyday life for all. An ambitious goal to be a best-in-class performer, founded on the twin objectives of ensuring our brands are unmissably superior and market-making. At its core, the Growth Action Plan 2030 rests on three key strategic pillars. Where we intend to focus. Where we want to excel. And where we need to accelerate. And underpinning all of this are two critical and defining platforms, sustainability and culture. And even though this is a comprehensive strategic approach, its beauty in many ways is its simplicity. It draws on Unilever’s inherent strengths, while at the same time building on the changes and the progress that we have made over the last 18 months. Since unveiling GAP 2030 towards the end of last year, we have been focused on aligning the organization behind the new strategy. But already we see the process of ‘strategy into action’ taking effect. Under the Focus pillar, for example, we said we would double down in India as one of our key markets, that we would look to accelerate our Beauty & Wellbeing business and that we would commit capital in support of these as well as the few other priorities. Well, these came together with the announcement last month that Hindustan Unilever had signed an agreement to acquire the premium beauty brand, Minimalist, which Fernando mentioned earlier. This is an acquisition that strengthens our position in a high growth premium demand space in a key market, and is one we are very excited about. As we go through the year, we will share progress with you on each of the different elements of the GAP 2030. Today, I want to say something specifically about our work on sustainability. As you know, since last year we have focused our agenda on four areas: Climate, Nature, Plastics, Livelihoods. These are the areas that have the most direct impact on the business, but also the ones where we can use our scale and influence to have the greatest positive change. The commitments we have made under each pillar are stretching, ambitious, time bound and, importantly, transparent. And while the figures that we are sharing today are subject to final assurance and will appear next month in our 2024 Annual Report, I wanted to give you an indication today of where we are on some of the anchor metrics supporting each pillar. On climate, for example, at 76%, we are on target when it comes to the reduction of Scope 1 and 2 emissions coming from our own operations. And that’s up from 74% last year. On nature, we’ve exceeded our target for this year of 500,000 hectares of land benefitting from our regenerative agriculture and protect and restore practices. Up from around 300,000 last year and well on our way to 2 million hectares by 2030. On plastic, we are on track in the reduction of our virgin plastic used in our packaging, at 23%. And, again, good progress versus last year where we were at 18%. And, on livelihoods, and the new target of the proportion of procurement spend with suppliers committing to the Living Wage, we are ahead of plan, at 32%. I hope you can see, we are as committed to making progress in the area of sustainability as we are in any other part of the GAP 2030. And we also know we cannot achieve these commitments alone, and that we can benefit from external views to make us better. And as such, we have refreshed our Sustainability Advisory Council to ensure we have access to the very best people and to the most up-to-date and relevant sources of advice and counsel. The second key priority in 2025 is the continuing implementation of our wide-ranging productivity program. The significance of this to the ongoing transformation of Unilever cannot be overstated. When we launched the program last March, we said we expected to deliver cost savings of €800 million over three years, more than enough to offset the operational dis-synergies from the separation of Ice Cream. In doing that, we identified 7,500 roles that would be impacted. But by the end of 2024, the program had led to a reduction of 4,300 full-time roles and to in-year savings of close to €200 million. As I said earlier, this puts us ahead of the plan, so much so that we are now confident of completing the program of 7,500 role reductions by the end of 2025. As a result, from 2026, we expect levels of restructuring spend to be substantially lower. But the significance of the productivity program goes beyond the savings it will generate. A leaner, more accountable organization is also a key enabler in creating the kind of winning culture I spoke about earlier. And these are big but necessary changes. And we will continue to implement them in 2025, with the combination of care, speed, and discipline that characterized our approach in 2024. Now let me turn now to the third key priority for 2025, the separation of Ice Cream. Again, we are well on track. Today, we have set out the progress we are making towards the demerger of the business by the end of 2025. And this includes the appointment of a highly experienced Chair Designate, Jean-Francois van Boxmeer. Currently Chair of Vodafone, and previously CEO of Heineken, Jean-Francois brings vast knowledge of the consumer goods industry, as well as considerable experience as a non-executive. We are delighted he has agreed to take on this important role. We are also announcing today the route to separation. Ice Cream will be separated by way of demerger, through listing of the business in Amsterdam, London, and New York, the same three exchanges on which Unilever PLC shares are currently traded. Ice Cream will be incorporated in the Netherlands and will continue to be headquartered there in Amsterdam. This decision follows a full review by the Board of separation options, which we’re focused on maximizing returns for shareholders, setting the Ice Cream business up for success, and ensuring execution certainty by the end of 2025. We will give further updates on progress at quarter 1, but are confident that, with the decisions we are announcing today we remain firmly on track to complete separation by the end of the year. Let me sum up before moving to questions. We have made clear that our aim is to deliver higher performance on a consistent basis. One is no good without the other. We know that. And we are not there yet. There is a lot to do. But as our performance in 2024 suggests, we are on track. And as an operational intervention, the GAP, the Growth Action Plan is working for us. The quality of our execution is getting better and our grip on the organization is getting tighter. We are moving with new levels of speed, with clarity and precision to address areas of weakness, and to open up areas of opportunity. The priority now, in 2025, is to give effect to the revised strategy, the GAP 2030, and we look forward to sharing progress with you as we go through the year. And this is also a vital year in delivering the leaner, more accountable, more productive organization together with the stronger, better-positioned portfolio on which our model depends. We are resolutely focused on delivering both of these in 2025, and with a highly motivated Unilever team now fully in place – we are confident that we will. On that note, thank you for listening. We look forward now to taking your questions.

Thank you. Good morning, and thank you for joining the call.

Thank you very much. I see our first question on the line is from Warren at Barclays. Warren, please go ahead.

Yes, good morning, Hein, Fernando, Jemma, Warren Ackerman here at Barclays. A couple of questions. First one is can you just comment on the category growth, please, and market share trends and what you expect in 2025? It sounds like Q1 is a slower start. Can you maybe explain what's driving this a bit more subdued Q1? And just to check, are you comfortable with 2025 organic growth consensus? That's the first one. The second one is, again, maybe moving to margins. Can you perhaps comment on the margin phasing of gross margin and the underlying trading operating profit margin? Can you confirm, for example, that gross margins will be up for the year? And perhaps give us some help on what you expect on COGS inflation cost savings and perhaps brand and marketing in 2025 from that slightly higher base, I think, 15.5%? Thank you.

Thank you, Warren. I will address the questions one by one and then let Fernando add any additional information. First, regarding market growth, we have noted that growth has slowed down, particularly in the fourth quarter, and we expect this trend to continue into the first quarter. However, there are variations by category. In the Beauty & Wellbeing and Personal Care segments, we continue to experience market growth in the mid-single digits, which is slightly below average but still decent growth in Europe and the U.S., both of which are key markets for us. Consequently, we achieved good growth in these developed markets in Q4, and we plan to maintain this momentum going forward. Conversely, we are seeing weaker growth in Home Care due to lower pricing in Q4, a trend that is expected to persist. Nutrition and ice cream categories are also experiencing subdued growth, primarily driven by significant increases in commodity costs affecting ice cream volumes. This provides some insight into the various categories. We expect our growth to be back-weighted as some commodity costs continue to rise, and any price adjustments will take time to implement, leaving room for pricing actions throughout the year as we manage this through our Growth Action plan. Our stock remains stable, and we are confident in our competitive position, as we see opportunities to outperform the market, as reflected in our Q4 results. Regarding margins and phasing, our main objective has been to achieve a gross margin above pre-COVID levels, initially targeted for the end of 2025 or early 2026. We have accelerated this timeline and have now reached an overall margin of 45%, which we consider our new baseline. While I won't provide specific quarterly guidance for gross margins, we are comfortable with a 45% level from which to grow. I want to highlight a few critical components of our Growth Action Plan. First, we achieved net productivity in cost per tonne in 2024 and anticipate similar results in 2025. While there will be some COGS inflation, pricing will be significant, with implementation expected throughout the year. Additionally, we aim to enhance our premium product portfolio, and we expect the positive effects of volume and mix to take time to develop. As for BMI, we have not provided guidance on this, and I don’t regard a perfect growth percentage of 15.5% as our benchmark. We believe this level is more competitive than where we previously were, and maintaining our top-line growth around this figure seems appropriate. When we identify the need to invest to boost growth, as we did in Q4 for our Personal Care products in the U.S., we have seen encouraging results in terms of hard currency growth. Although there is a noticeable market slowdown globally, we are addressing this challenge through greater competitiveness and commitment to our Growth Action plan, focusing on aspects within our control. We are dedicated to continuing our net productivity efforts next year, and we are pleased with achieving a gross margin of 45%, but we recognize the need to build upon this success. Fernando?

Yes. Good morning, Warren. I believe that what I would add is, basically, we have seen some return of inflation to our basket of commodities. It is not a general increase, it is really concentrated in a few family of materials. I'll call three of them, palm oil and surfactants that affect soap bar and HPC liquids. Cocoa, with a very significant impact in ice cream and tea, that affects our Indian business. It's very difficult with the start, stop, start of tariffs and the significant volatility in currencies to predict the material inflation. With the current information we have now, we see an annual material inflation of around €0.78 million, of which half is currency-related. This material inflation, of course, will drive some acceleration of pricing, and hence, our guidance of more balance between volume and pricing. And we expect that pricing to be materialized from quarter 2 onwards.

Thank you. Our next question comes from Celine at JPMorgan. Go ahead, Celine.

Thank you, Jemma. Good morning, everyone. So my first question is on what you said you can control in the market that is slowing. You are talking about the balance of volume and pricing. So I understand the pricing accelerate through the year. I would like to understand, on volume, what visibility you have of achieving, I don't know, a number which I presume will be around the 2% mark? If you could talk about innovation, launches, market share. What is it that makes you confident that you can stay at this level despite potentially pricing as well hitting on elasticity? And my second question is on Europe. Last year, you said that 70% of your market share gap was due to Europe. Can you talk about your performance in that region and how you see 2025 unfolding? Thank you.

Thanks, Celine. Let me first discuss volume and pricing. In the second half of 2024, we focused on growth driven by volume, achieving 3.2% volume growth in UVG and 1.1% in UPG. In the fourth quarter, our growth continued to be volume-led across all business groups, which is crucial to our growth action plan aimed at restoring a healthy balance between volume, mix, and price. Looking ahead, we anticipate that 2025 will be more balanced between volume and price, especially considering the commodity spikes mentioned by Fernando, but we remain committed to driving volume and mix growth. Trends from the third and fourth quarters indicate that our strategy of pursuing fewer, bigger, and better innovations is paying off; we have identified around 12 major initiatives for 2025, each expected to become $100 million platforms, such as Wonder Wash and Gluta-Hya. In Europe, we have significantly improved our market share, particularly in the Home Care category, marking a true shift in trends. We have also increased our leadership in Personal Care, with positive developments in deodorants, and Dove showing solid growth. Europe accounts for approximately 18% of our turnover, and we aim to be competitive there, driven by innovation and positive consumer responses. We are committed to continuing our investment in that region and improving margins. Regarding volumes, we anticipate pricing developments in 2025 to be more back-loaded; pricing takes time to implement, and we expect actions to begin yielding results from the second quarter onwards, contributing to overall top-line growth.

Next question comes from Jeff at BNP. Go ahead, Jeff.

Good morning, everyone. Two questions, if I may. The first question is, excluding Ice Cream, would you expect the business to achieve 4% to 6% growth this year, i.e., in line with the mid-term guidance? And secondly, with respect to the three exchanges where the Ice Cream business will be listed, will one of these be sort of the primary listing, i.e., most of the trading will happen on one venue? And if that's right, where will that be? Thank you.

Thank you, Jeff. Regarding our guidance, after the demerger of Ice Cream, we are aiming for 4% to 6% growth. That target remains our focus. While Ice Cream will have some impact, by that time, our Growth Action Plan will have been in effect for a significant period. We have effectively invested in our core brands, and the innovations and platforms I mentioned should mature before then, contributing to that growth. Therefore, I prefer to maintain our guidance of 3% to 5% for this year, reflecting our outlook post the Ice Cream demerger. As for the three exchanges, the company is incorporated in the Netherlands, which means that Amsterdam, or Euronext, will be our primary listing location, alongside listings in London and New York to manage any potential technical flowback.

Thank you very much. The next question comes from Olivier at Goldman Sachs. Go ahead, Olivier.

Hi, good morning, Hein, Fernando, and Jemma. Two questions, please. Could you give us a bit more detail on COGS inflation? You mentioned cocoa and dairy inflation, but obviously, that relates to the Ice Cream business only. What's the outlook for the rest of your commodity baskets, which would be for the four divisions left? And then on Liquid I.V., I mean growth has been phenomenal. You boosted production in the U.S. due to strong demand. Did you have some capacity constraints, which was preventing you from growing as much as you wanted? And how much white space do you see for the brand globally?

Thanks, Olivier. I'll turn the question on inflation and COGS over to Fernando. Just a few words about Liquid I.V. We believe it is the leading powdered hydration brand in the U.S. It has experienced significant growth, now about seven times larger than when we acquired it. We have also expanded into seven additional markets beyond the U.S. In 2024, we started with some product expansions and, of course, we needed to increase our capacity, which we have done internally and are partnering with others as well. There may have been a few weeks where we experienced disruptions and weren't able to fully meet demand, but overall, that is resolved, and we are confident in our ability to serve our customers appropriately. We're very optimistic about Liquid I.V. The expansion in other markets hasn't reached the same level as in the U.S. because it requires a change in consumer habits, but we still see significant growth opportunities even within the U.S. itself. We remain very positive regarding Liquid I.V. and will continue to invest at levels at or above the company average of 15.5%. Fernando, can you address the COGS?

Phenomenal growth in Liquid I.V. And I would highlight also our sugar-free launch has been probably more successful launch in the year for Unilever. In COGS, I mentioned that the inflation, the impact of net material inflation, is around €0.8 billion with the information we have today, and it's very concentrated. As I mentioned, palm oil and surfactants, they are part of soap bars and liquids in Beauty and Personal Care and Home Care. This is around 55% of inflation. And 25% of the total inflation is around cocoa. Cocoa and chocolate that, of course, is just fundamentally using Ice Cream. So these are the caters that are more affected. Of course, in percentile term, the impact in Ice Cream is significantly higher than in the other categories due to the cocoa, chocolate effect.

Thank you. Next question comes from Guillaume at UBS. Go ahead, Guillame.

Thank you, Jemma. Good morning, everyone. I have one clarification point and one question. For the clarification, Hein, when you mention a slower start to the year, can you confirm if you are indicating a sequential slowdown in the first quarter compared to the 4% growth in the fourth quarter? Similarly, regarding margins, when you mention modest margin expansion based on improvements in the second half, does that imply we should expect margin declines in the first half of the year? Additionally, does your margin guidance include any potential benefits from Ice Cream being treated as discontinued operations from the fourth quarter? My question is about North America, where for the second consecutive quarter, the region has grown by 7%, with volumes exceeding 6%. Can you provide insight into this strong volume performance, particularly in terms of categories and where you are seeing the most significant share gains? Also, looking forward, how sustainable is the strong mid-single digit underlying sales growth? Thank you.

Thank you, Guillaume. Regarding our guidance, we expect the full year to remain within that range, and we are confident in this outlook. We have noted a slower start to the year. To expand on that, market growth slowed in Q4 and continues to be subdued in Q1. Pricing changes will require some time to take full effect due to commodity price fluctuations, leading to overall volume instability. Despite these factors, we are firmly committed to our Growth Action Plan and will not divert from that path. We anticipate a sequential slowdown, with 4% growth in Q4 which indicates a deceleration in Q1, but expect to see an increase throughout the year. Regarding margins, we are not providing specific guidance for the quarter or the first half of the year, but we consider a 45% gross margin as a solid baseline, which we reached sooner than expected. Additionally, we have made significant progress in our restructuring efforts, currently having reduced our workforce by 4,300 full-time positions. We expect the productivity program to complete by the end of 2025, ahead of our initial timeline. As for restructuring expenses, we have allocated 1.4% of our turnover in 2025 and anticipate a similar percentage for 2024 and 2025. However, our target is an average of 1.2% over three years, which implies considerably lower spending in 2026. This provides some insight into our current status. We are dedicated to meeting our medium-term commitments as well as our full-year goals, but we do foresee a sequential slowdown from Q4 to Q1, as previously mentioned.

Yes. On North America, two quarters about 7%, with volume up 6%. We believe that this reflects the fundamental formation of our portfolio in the region, with an important role for businesses like Wellbeing that is growing double digit or Prestige, that also has grown in mid-single digits in the region. I feel good news also the development of Personal Care along 2024. We have been increasing performance, and it has been a key contributor to growth in quarter 4. So fundamentally, we believe that our business in North America is a very different business to the one we had a few years ago, with much more underlying growth potential. So good performance in a business that is of much better quality than we used to have.

I agree with that. Before we go to the next question, there was one other question on Ice Cream, which I noted, I just wanted to mention. So in the guidance that we have given, Ice Cream is fully part of the group for 2025. What we've said before is once ice cream is demerged, it will have a technical effect on margins overall of around 90 basis points. But that is not included in our guidance remarks that we're making today. So guidance remarks simply include Ice Cream for the year.

Thank you. Next question comes from Jeremy HSBC. Go ahead.

Good morning. A couple of questions from me. First one is just on some of these competitive metrics that I know we've had in kind of previous quarters. Can you just give us a bit more detail on where you think Unilever grew versus its markets in kind of '24 and perhaps in the more recent period? And then also some color on what your sort of market share, sales gaining or losing market shares? And then the second question is on your China business. Obviously, you put the slide up about some of the changes that you're making there. Perhaps you could talk more about your portfolio in China and the competition in that market? So are there areas which you've seen become dramatically more competitive where you think you might have to withdraw or sort of deprioritize, or even divest certain parts of your business in that market? Thanks.

Thank you, Jeremy. I want to touch on competitiveness. Let's revisit early 2024, as it's essential to discuss our expectations and actions. At that time, we anticipated an improvement in turnover weighted market shares in the latter half of 2024, which is exactly what we've observed. Over the past six months, our market shares have improved, and we believe that by the last quarter, we've reached a fairly neutral position in terms of market share—meaning no significant gains or losses overall. However, this neutral situation pertains to about two-thirds of our total business; the remaining third is not measured in that way. Consider our Wellbeing, Prestige, out-of-home Ice Cream, and Food Solutions businesses. Based on alternative calculations, we believe these segments are actually gaining market share. Comparing our reported figures with competitors and market performance supports this belief. For 2025, we expect this trend to continue, backed by clear strategies in our Growth Action Plan and a notable increase in our brand investment to 15.5%. Specifically, this means in 2024, an increase of €900 million, following a €600 million rise in the last half of 2023, totaling about €1.5 billion in brand support, focusing on fewer yet more impactful innovations. Regarding competitiveness, we are seeing strengths and pressures geographically. Europe has performed well for us, particularly in the Home Care and Personal Care sectors. In the U.S., we have seen positive developments in Personal Care, alongside gains in our Foods business, particularly in condiments and cooking aids. Similarly, we've experienced good performance in Latin America. On the other hand, we find challenges in China due to our strategic reset and a consumer shift towards channels where we lack a strong presence, like Douyin. There is also some softness in Indonesia as we undertake necessary adjustments, while India's performance is relatively neutral. Focusing on China, our portfolio is quite concentrated there, particularly in Beauty with significant brands like Clear and in Home Care with the OMO brand, along with Food Solutions. We believe these are strong brands with promising innovation plans. We are making strategic and profitable advances into channels like Douyin, and we anticipate seeing positive results from these efforts in the latter half of 2025 on a comparable basis.

The next question comes from Victor at TD Securities. Go ahead, Victor.

Hi, good morning. This is Victor on for Rob Moskow. And thanks for the question. Two for me, please. So I wanted to ask about U.S. Personal Care, specifically deodorants. It seems that trends are improving. They didn't talk about challenges here last year and being late to the emerging super premium segment in the U.S. Can you talk about how that's improved? Maybe what you did specifically behind brands like Dove to address this? And the consumer traction behind the new innovation? And also, given my second question is that given that exits are more than 70% higher in the U.S. year-over-year, how much of the €0.8 billion commodity inflation outlook is this? How do you see the effects of higher cost impact in the P&L, specifically like in mayonnaise? Thanks.

Thanks, Victor. I'll share some thoughts on the U.S. PC business before Fernando discusses inflation. Regarding deodorants and skin cleansing, we’re seeing positive trends. Our whole body deodorant is in the early stages but we believe it has exciting potential, supported by strong market activation. In skin cleansing, the premium body washes, particularly behind Dove, are off to a great start. We are very enthusiastic about these products, which benefit from the backing of major brands and superior product quality. Our execution through social and digital channels has also been very effective. Overall, we are noticing improved momentum in the U.S. PC business and anticipate that will continue. Now, Fernando, would you like to address inflation?

Yes. Our responsibility is to protect the integrity of the profit and loss statement, and we are committed to continuing our investment in our brands and adjusting pricing to counteract commodity inflation. We will do that. There is typically a delay between experiencing net material inflation and implementing pricing in the market. However, we are dedicated to maintaining the integrity of the profit and loss statement.

Thank you. Our final question comes from Tom Sykes at Deutsche Bank. Go ahead, Tom.

Thank you. Morning. Yes. Just trying to square the guidance a little bit more on the shape of the year in that you're seeing a slowdown before you're putting pricing through? And then you're saying that growth will improve as you put pricing in? I mean when you think about the volume mix, are you also assuming or budgeting for volume mix to improve in the second half of the year, even though you're pushing pricing through? And I suppose, therefore, what are the sort of particular drags on volume mix that you expect to annualize out? And then just following up on the U.S. growth, and I suppose slightly more widely, but you've got this project guy you piloted with Walmart Mexico, and I believe that may be going into Walmart U.S. this year. Where you are putting that system in? Is there a sell-in that's slightly greater before you go live with that? And is that at all contributing to the strong performance in North America and will improve on rolling out that system, do you think you'll get in '25, please?

Thank you, Tom. Regarding our guidance, I want to make a few general comments about volume and pricing. I may repeat some points, but Fernando will provide additional details, and I’ll return to your customer question afterward. First, you're correct that pricing will indeed take some time to reflect in our results, particularly in the second quarter and beyond. We may experience some fluctuations in volume mix during the first quarter as well. However, keep in mind that we have some areas where we expect positive year-over-year results in the latter half of 2025, specifically in China and Indonesia, which should enhance our overall performance at that time. We will maintain the strategy we've discussed for the U.S. and Europe, including in the first quarter, although pricing is expected to evolve. In terms of timing, various factors are at play, such as the Chinese New Year and Easter trading days, and we're observing intense interest in Latin America, which is causing leading retailers to reduce their stock levels. These elements are contributing to the volume volatility in the first quarter. Nevertheless, we are actively managing this situation, implementing necessary actions, and adjusting pricing throughout the year. We aim to be realistic about the business's trajectory and its evolution. Regarding the Sky program, we are very optimistic. This initiative is central to our digitization efforts, particularly in harnessing AI to enhance planning and forecasting. We are deploying this program with numerous customers globally, including in Europe and the U.S., and we are receiving very positive feedback along with noticeable improvements in service and forecasting capabilities. We remain committed to advancing this initiative.

I would add to that, Hein, that the scores in our advantage service, the way that key retailers measure the different players in the industry. We have seen a significant improvement in the course of Unilever and the relative position of the company.

Yes, I think we have observed one of the best performances in over a decade, and we feel very positive about it. Execution is central to our Growth Action Plan. In summary, 2024 has shown improved performance, as highlighted in the video, reflecting a year filled with significant activity. We are committed to ensuring we deliver on our promises, which you can sense from our progress in 2024. Our focus is on consistently achieving higher performance with a multiyear program in mind. We are confident that the Growth Action Plan is effective; we notice improvements in competitiveness, cost control, and innovation. The quality of our execution is enhancing, and we are tightening our grip on the company. Consequently, we are determined to operate with new levels of speed, clarity, and precision to address our weaknesses while also seizing great opportunities. We believe we are in a better position today than we were a year ago and are confident in meeting our goals for 2025 and beyond. Thank you very much for participating in this call, and we look forward to speaking with you in person soon. Thank you.