First-half revenue came in at €25.6bn, reflecting underlying sales growth of 4.8% (4.1% expected). All business divisions contributed positively, with growth driven by a 4.2% uplift in volumes and higher prices accounting for the remainder.
Underlying operating profit rose at a slower pace of 0.9% to €5.2bn (€5.2bn expected), as currency headwinds and commodity inflation largely offset top-line growth and efficiency improvements.
Free cash flow rose 42.9% to €1.5bn, driven by strong cash conversion. Net debt decreased by €0.4bn to €26.0bn.
The group completed €1.5bn in share buybacks during the period and increased the quarterly dividend by 3.0% to €0.4664 per share.
Full-year guidance was upgraded, with underlying sales growth expected to be between 4.0-6.0% (previously: lower end of this range), including volume growth of around 3.0%.
The shares rose 4.9% in early trading.
Our view
Unilever delivered a strong set of first-half results. Sales growth accelerated well ahead of market expectations, driven by improving volumes across all business divisions. That gave management the confidence to upgrade its full-year outlook, and markets reacted positively on the day.
Unilever is accelerating its shift toward a more focused home and personal care business. It has already spun off its Ice Cream business, and the sale of its Foods business is expected to be completed in 2027 at an attractive price tag. Taken together, these moves should improve the group’s mix and strategic clarity.
But it’s a part-cash, part-stock deal for Foods. If it does go ahead, we would expect some short-term pressure on any newly received McCormick shares as investors decide whether to keep their new US-listed holding.
We’re supportive of Unilever’s sharper focus, which is concentrated on doing fewer things but doing them better. The group’s collection of 30 so-called ‘Power Brands’ is its beating heart and the driving force behind recent sales momentum. We expect continued investment behind these names, with brand and marketing spending standing at near decade-high levels of 16.1% of revenue to help drive consumer awareness and sales growth.
Emerging markets are the real growth lever in our view. Market share gains, digital initiatives, and a shift in focus towards more premium products are helping to grow the top line. And with these end-markets generally improving, we see a long runway of growth ahead if Unilever can execute well.
Despite the impressive top-line momentum, profit growth has been more subdued because of unfavourable exchange rates and commodity inflation. The latter is likely to remain a challenge moving forward as the Middle East conflict drags on. But Unilever’s strong brands mean that there’s room to raise prices without denting demand too much, so we expect margins to continue trending higher.
The 3.7% forward dividend yield is supported by strong free cash flow and a robust balance sheet. There’s also another €4.5bn worth of share buybacks expected to be completed by the end of 2029. But, as ever, potential returns can't be relied on.
There are clear signs that management is executing well on its strategy, and the recently upgraded guidance looks well within reach. With a long-term view in mind, the current valuation looks attractive to us. But in the short term, macroeconomic challenges are likely to persist, and the sale of its Foods business brings additional execution risk.
Environmental, social and governance (ESG) risk
The retail industry is low/medium in terms of ESG risk but varies by subsector. Online retailers are the most exposed, as are companies based in the Asia-Pacific region. The growing demand for transparency and accountability means that human rights and environmental risks within supply chains have become a key risk driver. The quality and safety of products as well as their impact on society and the environment are also important considerations.
According to Sustainalytics, Unilever’s overall management of material ESG issues is strong.
Unilever's latest sustainability efforts followed global reporting standards, with the board overseeing progress and a dedicated committee tracking risks and goals. The company focuses on three main areas: improving planet health, enhancing people’s wellbeing, and fostering social inclusivity, with ambitious targets like 100% recyclable packaging and biodegradable ingredients by 2030. However, Unilever faces criticism for its plastic pollution and struggles to meet some of its plastic-related goals, suggesting that there's still work to be done.
Unilever key facts
All ratios are sourced from LSEG Datastream, based on previous day’s closing values. Please remember that yields are variable and not a reliable indicator of future income. Keep in mind that key figures shouldn’t be looked at on their own – it’s important to understand the big picture.
This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. It was correct as at the date of publication, and our views may have changed since then. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by LSEG. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.
This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment.