Unilever PLC (NYSE:UL) Q2 2025 Earnings Call Transcript

Unilever PLC (NYSE:UL) Q2 2025 Earnings Call Transcript July 31, 2025

Unilever PLC beats earnings expectations. Reported EPS is $1.82, expectations were $1.71.

Fernando Fernandez: Good morning, and welcome to Unilever’s second quarter trading statement for 2025. Thank you for joining us. I am joined today by Srinivas Phatak, our acting Chief Financial Officer. In a moment, Srini will take you through the details of the second quarter and first half results. I will then come back to talk more broadly about the continuing transformation of the business and how we see the remainder of this year and beyond. First of all, let me set out what I see to be the key elements of our solid performance in the first half and, importantly, why these give us real confidence when it comes to delivery in the full year. There are 5 elements in particular that I would like to highlight. First, the balance of our growth.

We delivered underlying sales growth for the half of 3.4% and we did it with a good balance of volume and price. Volumes improved sequentially over the course of the half despite subdued markets with first half market volume growth at around 1.3%. Importantly, volume growth was broad-based and positive across all business groups. Second, the continued structural strengthening of our gross margin that allowed further increase in the support of our brands with brand marketing investment highly competitive in the first half at 15.5% of turnover. Third, we continue to outperform markets in the developed economies. In North America, we delivered underlying sales growth for the half of 5.4% with volumes up 3.7%, while Europe remains strong, up 3.4% for the half.

Fourth, at the same time as outperforming in developed markets, we are also seeing a steadily improving picture when it comes to performance in emerging markets. This has been driven by our largest region, Asia Pacific Africa, which was up 3.5% in the first half and accelerated to over 5% growth in the second quarter. India, our second largest market, improved sequentially during the half. And as a direct consequence of the operational interventions made, we see improvements in both China and Indonesia and confidently expect both markets to accelerate further in the second half of the year. Volume performance in Latin America was poor in the second quarter with the slowing markets and the need to increase prices to cover currency appreciation, but we are confident in the strength of our portfolio and operations in the region, and we expect recovery later in the year.

And fifth, it was a good half for Ice Cream both in terms of a strong competitive performance, but also in terms of getting the business ready for demerger later in the year. Srini will cover the final stages towards demerger a little later. Our first half results with a sustained strong developed market performance and emerging markets starting to improve give us real grounds for confidence for the second half of the year and beyond. With that, let me hand over to Srini to take you through the detail of the results. Srini?

Srinivas Phatak: Thank you, Fernando. Underlying sales growth in the second quarter was 3.8%, a sequential improvement versus the first quarter. USG was balanced across volume and price with volume growth contributing 1.8%, a 50 basis point step-up versus quarter 1 and price growth of 2%. As a result underlying sales growth for the first half was 3.4% with volumes of 1.5% and price 1.9%. Price growth continued to step up as we responded to ongoing input cost inflation and currency movements. All our business groups delivered positive volume growth on a 2-year CAGR basis. We delivered our multiyear objective of volumes of at least 2%. Our Power Brands, which contribute over 75% of the group turnover, grew 3.8% in the first half, including 1.6% from volume.

Q&A Session

Growth improved in the second quarter up to 4.4% with volumes above 2%. Strong performances included double-digit growth from Vaseline, Liquid IV, Nutrafol and Magnum and high single-digit growth from Dove and Comfort. Before turning to the business groups, let me first provide some color on our performance across different geographies. Developed markets, which represented 44% of group turnover, continued to perform strongly with first half USG of 4.3%, driven by 3.4% volume and 0.9% price. We have now delivered 4 consecutive quarters of growth of about 4% in developed markets. North America underlying sales grew 5.4% with 3.7% from volume. This reflects the ongoing impact of our multiyear portfolio transformation with standout performances from our Wellbeing brands and Personal Care, which is back to competitive growth.

Share gains across key categories were supported by premium innovations, such as the ongoing success of sugar-free Liquid IV, whole body deodorants, and Hellmann’s flavored mayonnaise and underpinned by a continued step-up to brand investment. Europe grew underlying sales by 3.4% with 2.8% from volume. Growth was broad-based across markets, and we are winning share across the geography, including share gain in all of our top 5 markets. Performance was driven by Home Care, where the rollout of Wonder Wash and Cif Infinite Clean showcased the strength of our multiyear premium innovation strategy. And Ice Cream, which saw standout results from the new Magnum Utopia range. Personal Care delivered solid results with the successful launch of whole body deodorants.

Asia Pacific Africa, which represents 43% of group turnover, delivered underlying first half sales growth of 3.5% with 1.9% from volume and 1.6% from price. Growth strengthened in the second quarter, reflecting a step-up in performance across key markets. India performed well with 5% USG in second quarter largely driven by volume and continued share gains in a gradually improving market. Growth was led by our premium portfolio in Beauty & Wellbeing and Personal Care, while Home Care continued to deliver strong volume growth. In Indonesia, which declined by around 5%, and China, we saw a low single-digit decline. We are seeing improvements to run rates as a result of our significant interventions in our key brand innovation plans, in channel distribution and in pricing execution.

We expect further acceleration in Asia Pacific and Africa in the second half. Latin America, which represents 13% of the group turnover, grew 0.5% with a 4.6% decline in volume. There are 3 important points to note here. First, pricing actions to offset currency movements weighed on volumes. While Argentina delivered growth, this was offset by a single-digit decline in Brazil and Mexico. Market growth across the region remains subdued significantly below the prior year levels, reflecting a challenging macroeconomic environment. We are also lapping a high base as Latin America delivered high single-digit growth in the same period last year. However, it is important to highlight that our growth in Latin America remains competitive with continued share gains across the region.

Let me now turn to our business groups. Beauty & Wellbeing underlying sales growth was 3.7% in the first half, driven by 1.7% volume and 2% price. Volume growth remains resilient with a 2-year CAGR of 3.2%. Sustained strong momentum in our Wellbeing business led the growth. Core Skin Care delivered low single-digit growth and Hair Care and Prestige Beauty were flat. Beauty & Wellbeing volumes were also impacted by our ongoing corrective actions in Indonesia and China. We remain confident in delivering sequential volume improvements in the second half. Wellbeing has now delivered strong double-digit growth for 21 consecutive quarters. Power Brands, Liquid IV and Nutrafol, continue to deliver exceptional performances fueled by a strong pipeline of innovations, high levels of brand investment and expansion of their global presence.

Hair Care was flat. Dove grew mid-single digits, supported by a significant relaunch featuring cutting-edge fiber repair technology and a complete packaging redesign. This was partially offset by a decline in Clear, which was impacted by market conditions in China and by a volume decline in TRESemmé, where pricing actions are being implemented to restore desired price relativity. Core Skin Care delivered low single-digit growth. Dove and Vaseline grew double digit led by premium innovations and a strong modern reach and persuasion programs, such as Vaseline’s social-first Verified campaign where our scientists test and verify viral Vaseline hacks. Prestige Beauty was flat in the first half. Our most premium brands, Hourglass in color cosmetics; Tatcha, a luxury Japanese skincare brand; and K18, our biotech haircare brand continued to grow double digit.

While the continued softness in the U.S. market weighed on the performance of brands like Dermalogica and Paula’s Choice. Underlying operating margin was 19.4%, down 60 basis points versus the prior year as we increased in marketing investment behind key innovations and market development. Personal Care delivered a good first half with 4.8% underlying sales growth driven by 1.4% volume and 3.3% price. Our 2-year volume CAGR was 2.3% despite a softening of volumes in the second quarter, which reflected subdued macro conditions in Latin America and recent pricing actions to offset currency movements. Dove, our largest brand, grew high single digit as premium innovations continued to perform strongly, driving both growth and consumer engagement.

Deodorants grew low single digit. Dove and Dove Men+Care grew double digits, supported by the continued success of whole body deodorants, while Rexona was impacted by a weaker Latin America market despite significant share gains in the region. Skin Cleansing grew low single digit with strong contributions from North America and India offsetting declines in Indonesia and China. Dove led our growth with a further rollout of its premium body wash, including new variants and new markets. The relaunch of Lifebuoy in India has slowed its decline, though further work is required to be done to return the brand to growth. Oral Care delivered a mid-single-digit growth with growth in both Close-Up and Pepsodent, our 2 Power Brands, in the category. Underlying operating margin was 22.1%, down 90 basis points as gross margin improvement was offset by a step-up in brand investment focused on the U.S. and in the premium segments.

In the first half of the year, we announced a further strengthening of our Personal Care portfolio through bolt-on acquisitions. We acquired Wild, the refillable deodorant brand, and we signed an agreement to acquire Dr. Squatch, a high-performing male grooming brand with a loyal following and a standout digital engagement, particularly in North America. Both brands are highly complementary to our existing portfolio, filling gaps in the natural space and in the super premium segments. Home Care underlying sales grew 1.3% with 1.1% from volume and 0.2% from price. Underlying sales growth stepped up to 1.8% in quarter 2 driven by a sequential improvement in Asia and continued momentum of our premium innovations in Europe. This was partially offset by a decline in Latin America.

Fabric Cleaning declined low single digit with modest decreases in both volume and price. Performance was impacted by a high single-digit decline in Brazil, Home Care’s second largest market, where we suffered some competitive pressures in the laundry powders following pricing actions. Despite these headwinds, innovation continues to drive momentum. Our short-cycle Wonder Wash laundry liquid continues to perform strongly and has now been rolled out to 22 markets and recently launched 2 new variants: Sensitive and Dazzling White. Home & Hygiene performed well with Cif and Domestos both delivering strong growth driven by continued innovation in formats such as sprays and power foams. Fabric enhancers grew high single digits, supported by the success of Comfort CrystalFresh technology, which contributed to the brand’s high single-digit volume growth.

Underlying operating margin was 15.5%, a decline of 80 basis points, due to a lower gross margin as we lapped a particularly strong prior year comparator, which benefited from carryover pricing and easing commodity costs. Foods delivered competitive sales of 2.2% with 0.3% from volume and 1.9% from price. Growth improved in the second quarter led by continued momentum in Hellmann’s, where the flavored mayonnaise ranges remain a key growth driver. Cooking aids grew low single digit driven by price. Volumes turned positive in the second quarter led by the largest brand, Knorr, which continues to lead in bouillon and seasonings. Unilever Food Solutions was flat with positive volume offset by negative price. Growth in North America was partially offset by a decline in China.

In China, out-of-home eating showed some improvement in the second quarter, but the overall market remains soft. Underlying operating margins improved by 100 basis points to 23.3%, reflecting disciplined execution of pricing, mix management and productivity. Ice Cream underlying sales grew 5.9%, driven by a 3.8% increase in volume and 2% price growth. This was supported by the actions we have taken over the last 18 months to enhance our innovations of pricing and promotions and our operations. Both In-home and Out-of-home ice cream segments grew mid-single digits with positive contributions from both volume and price. Double-digit growth in Magnum led the performance, supported by the successful launch of its Utopia range and the continued momentum of snacking format, Bon Bons.

Cornetto also performed well, growing high single digits. Underlying operating margin declined by 40 basis points due to a gross margin decline; however, our operational improvements and pricing have offset most of the continued cost inflation of key commodities, particularly cocoa. Over the past 18 months, we have been laying the foundations for the Ice Cream’s future success as an independent company. The complex process of separation has progressed well, and today, we are pleased to confirm that, as of the first of July, Ice Cream began operating as a stand-alone business. The demerger of the Ice Cream will take place in mid-November. Ahead of the demerger, on the 9th ninth of September in London, The Magnum Ice Cream Company will be holding a Capital Markets Day presenting the strategy and the value creation plan for the business.

In October, shareholders can expect to receive Unilever’s circular, which will set out further information on the demerger and the prospectuses will then be available around a week before the demerger. We continue to believe that this business has an exciting future as a pure-play global ice cream business, and which brings me to the next steps by Unilever. We are announcing today our intention to retain a stake of just below 20% in The Magnum Ice Cream Company for a period of up to 5 years subject to necessary regulatory approval. Over time, the retained stake will be sold in an orderly and considered manner to pay for the separation costs and maintain capital flexibility through a reduction in net debt. The retained stake demonstrates our support and belief in the future of The Magnum Ice Cream Company.

As a part of the demerger process, we will be allocating debt between Unilever and The Magnum Ice Cream company. This is expected to result in a net debt- to-EBITDA ratio of approximately 2x for Unilever and a solid investment-grade profile of around 2.4x for The Magnum Ice Cream Company. Subject to shareholder approval, Unilever intends to consolidate its share capital post the demerger of the ice cream company. This will be a technical adjustment and in line with market practice following similar situations, to preserve the comparability of our share price, EPS and DPS before and after the demerger. We will share further details in early October. Let me now return to Unilever’s performance at the group level. Turnover for the first half was EUR 30.1 billion, down 3.2% year- on-year.

Underlying sales growth of 3.4% was more than offset by a negative currency impact of 4%. If currencies remain where they were on 28th of July, the currency impact on full year turnover would be between 5% and 6% and around 20 basis points on underlying operating margin. While several currencies contribute to this outlook, it is worth noting that in quarter 2, the currency impact increased primarily due to the depreciation of the U.S. dollar versus the euro. We expect this euro-dollar dynamic to remain the largest contributor in the second half. We will continue to update you on this as the year unfolds. Portfolio changes also reduced reported turnover with an impact of 2.5% from net disposals. Acquisitions contributed 0.2%, led by strong double-digit growth from K18 and the addition of Wild.

This was more than offset by a 2.7% impact from disposals, including the sale of Elida Beauty completed in June 2024 and the exits of Unilever Russia and our water purification business both completed in October 2024. In first half of 2025, we faced inflationary pressures from both commodities and currency, most notably in Ice Cream, Personal Care, and in Latin America. This stands in sharp contrast to the same period in 2024, where we experienced deflation and we benefited from carryover pricing. As indicated earlier, we have implemented calibrated price increases across our portfolio in response. Our continued margin progression reflects the impact of several levers: volume leverage as we scale efficiently across categories. Superior mix driven by brand portfolio and channel optimization.

Significant buying efficiencies unlocked through our advanced net productivity models and targeted value chain interventions across the supply chain. Cost-to-serve optimization underpinned by disciplined cost control and consistent execution across our supply chain and commercial operations. We have maintained a sharp focus on allocating at least 55% of our capital expenditure towards margin-accretive initiatives, and we are seeing the benefits in both production and logistics costs. This positions us well for continued margin resilience and supports our ambition to deliver quality growth over the medium term. Underlying operating margin was 19.3%, down 30 basis points, reflecting a step-up in brand and marketing investments. We have leveraged our strong gross margins and productivity gains to reinvest behind our brands.

Brand and marketing investment increased by 40 basis points to 15.5% of turnover reflecting our continued commitment to competitive brand and innovation support. Notably, 100% of the incremental BMI as a percentage of turnover was directed towards our power brands with over 80% of that increase focused on Beauty and Personal Care. Overheads improved by 10 basis points as productivity gains and tighter cost control more than offset inflationary pressures and the costs associated with the setting up and running Ice Cream as a stand-alone business. Our productivity program is significantly ahead of expectations, and we now expect to realize approximately EUR 650 million in cumulative savings by year-end. This is EUR 100 million above the guidance we shared with our quarter 1 results.

Underlying operating profit was EUR 5.8 billion, a decline of 4.8% versus the prior year. Underlying earnings per share was EUR 1.59, a decline of 2.1%. Lower year-on-year net finance costs were driven by reduced cost of debt and increased pension income. Net finance cost as a percentage of average net debt was 2.5%, and we continue to expect this to be around 3% for the full year. Tax contributed 1.4%. The underlying effective tax rate for the first half decreased to 25.2% from 26% in the prior year. This was primarily due to lower unrecognized losses and other one-off items. Our full year guidance remains unchanged at around 26%. We completed our latest round of share buyback of EUR 1.5 billion at the end of May. Share buybacks contributed 1.5% to the earnings in the first half.

Lower tax and finance costs and the benefit of share buyback was more than offset by a 5.1% adverse impact from currency movement. Free cash flow for the first half of 2025 was EUR 1.1 billion compared to EUR 2.2 billion in the prior year due to lower operating profit, Ice Cream separation costs and higher working capital to support supply chain resilience during the period of tariffs uncertainty. Capital expenditure and income tax remained broadly flat. We are confident in our full year free cash flow delivery and continue to expect free cash flow conversion of around 100%. With more certainty about tariffs, the increases in the stockholding in the first half will be reversed during the second half. As a part of our capital allocation priorities, we continue to pursue targeted acquisitions to sharpen our portfolio focus and capture growth opportunities in attractive segments.

In April, we completed the acquisition of Minimalist, a premium actives-led beauty brand that supports the evolution of our Beauty & Wellbeing portfolio in India. As mentioned earlier, we also acquired Wild in April and signed an agreement in June to acquire Dr. Squatch, both aligned with our strategy to strengthen our presence in high-growth premium segments and channels. In March, we also announced the sale of nonstrategic asset, The Vegetarian Butcher, reflecting our focus on businesses with potential to be scaled. And finally, we continue to deliver capital returns to our shareholders, both through dividends and share buybacks. The quarterly interim dividend for second quarter is up 3% versus quarter 2 2024 and in line with quarter 1 2025 dividend.

And as I mentioned earlier, we’ve completed our EUR 1.5 billion share buyback program announced in February at the end of May. With that, over to you, Fernando.

Fernando Fernandez: Thank you, Srini. As I said at the outset, this results put us on track to deliver our full year outlook for 2025 on both the top and bottom line. On growth, we expect underlying sales growth to be within the range of 3% to 5%. Our growth in the second half will outpace the first despite subdued market conditions, supported by continued outperformance in developed markets and already a stronger momentum in emerging markets, particularly Asia. On the bottom line, we anticipate an improvement in underlying operating margin for the full year with second half margins of at least 18.5%, a significant improvement versus the second half of 2024, which can be explained by volume growth leverage, higher productivity and interventions in the value chain of key materials.

Of course, we remain agile as we expect that the macro and currency environment will remain uncertain. However, we are confident in the outlook we are sharing today, first, because our performance in the developed markets is built on increasingly strong foundations and is being sustained. We have just delivered our fourth consecutive quarter of underlying sales growth in excess of 4%. This outperformance is not happening by chance. It is a direct consequence of the focus in our Power Brands and the investments we have made. In North America, for example, our performance is driven by the continuous transformation of the portfolio with Beauty & Wellbeing and Personal Care representing more than 75% of our U.S. business after the demerger of Ice Cream.

The pruning of nonstrategic brands or brands in the value segment of our portfolio has supported our growing presence in premium, high-growth spaces with a strong digital commerce footprint. And in Europe, we are seeing the benefits of our increased focus with our performance led by premium innovations from Persil Wonder Wash to Cif Infinite Clean to whole body deodorants. Second, at the same time, as we have momentum in the developed markets, we see clear signs of pickup in the emerging markets. This has been led by our biggest region, Asia Pacific Africa. The actions we have taken in both China and Indonesia are yielding improvements, which we expect to accelerate further in the second half. And momentum is building in India, where we have recently appointed a new head of the business, Priya Nair, who takes over on 1st of August after having successfully led our global Beauty & Wellbeing business.

Priya combines a deep understanding of our Home and Personal Care business in India that she successfully ran for many years with the knowledge of international markets that is necessary to keep our portfolio in tune with a significant consumer needs and channel shifts already visible in the market. Weakening economic conditions are impacting our business in Latin America and, in particular in our 2 biggest markets: Brazil and Mexico. While conditions will remain challenging, we expect to see some improvement during the second half. Taken overall, however, the momentum in the developed markets and the improvement we are seeing in emerging markets give us confidence that growth will accelerate in the second half of the year. This acceleration is part of the work we are doing for 2025, but also to set the foundations as we look further ahead.

And as we do that, we are very clear of the 2 overriding objectives, namely that we run the company for multiyear volume growth of at least 2% and to consistently expand our gross margin. The delivery of these 2 objectives translate into expected mid-single- digit underlying sales growth and modest margin improvement that we believe will provide top third returns to our shareholders. And as we pursue these metrics, we will do so as a simpler, more focused company, one with stronger fundamentals and a clearer strategic direction. Post demerger with Ice Cream, Unilever will be a EUR 52 billion business with a structurally higher margin profile, improved returns and strong cash generation. On 2024 financials, our gross margin will be 46.7%, up 160 basis points; underlying operating margins of 19.4%, up 100 basis points; and return on invested capital, 19.1%, up 100 basis points with cash conversion of around 100%.

In half 1 2025, Unilever, excluding Ice Cream, sustained this growth momentum with a 2-year compound annual volume growth of over 2%, 3% in the case of Power Brands. The strategic shift that we are making position us very well to deliver consistent high-quality growth with greater agility and sharper execution. Let me now share a bit on the transformation journey I am leading to turn Unilever into a consistently high-performing business. It is a transformation founded on 6 principles: first, continuing to shift the portfolio towards Beauty & Wellbeing and Personal Care. And in that context, you have Srini in talk about the recent acquisitions of Minimalist, Wild and Dr. Squatch. Second, we are increasingly set up for success in our 2 biggest markets, the United States and India.

We will invest disproportionately to ensure we get the full benefits of Unilever’s scale and advantaged portfolio footprint in these markets, delivering above group average volume growth. Third, we are shifting resources decisively in the direction of premium science-based innovation, responding to the consumers’ increasingly insatiable desire for brands that are premium, whether in the experience they provide, the indulgence they grant or the convenience they offer. Fourth, the concept of desire at scale is so core now to the way we think about elevating our brands and innovations that we intend to make it central to every brand in every geography, all part of putting our brands to the service of making new markets, new segments, new benefits, new formats.

Fifth, we are bringing operational excellence back to the heart of the business in our determination to make Unilever a marketing and sales machine both online and off-line. And sixth, under this transformation, we will play to win because winning is habit forming. We will invest in the development of our people to help make this happen while, at the same time, being uncompromising when it comes to appointing the best talent and ensuring accountability for performance. These are the principles that are guiding our transformation, and the benefits are already evident in our first half performance. We look forward to sharing further details with you in the months ahead. In the meantime, let me just set out briefly today how many of these principles come together in the features and performance of one particular brand, Vaseline, as it really does encapsulate how we see the future.

No brand is more emblematic of our core than Vaseline. After all, it has been around for 155 years. Yet in recent years, it has been on a remarkable journey, pioneering the kind of desire at scale thinking we want now to replicate across all our brands. And you see the results of this journey on the screen here: 11% compounded annual growth rate over the last 4 years, growing volumes over 10% both in 2024 and in the first half of 2025. Its biggest market, the U.S. Its biggest expansion plan, India. From a tired and dated-looking brand just 10 years ago, it is becoming a true global power brand. This journey has been highly instructive when we talk about desire at scale. First, it has put breakthrough science at the heart of its proposition.

As for example, with the use of cutting-edge serum technologies and invisible sun protection factor in products like Gluta-Hya. Second, the aesthetics of the brand have been significantly stepped up, from the packaging to the performance to advertising, everything screams premium. And it scores equally high on another dimension that today’s increasingly discerning consumers regard as key sensorials, which are evident in the brand’s light instantly absorbable lotions. From a tired and fragmented design platform a few years back, the brand now has a cohesive and distinctive health and beauty look across all platforms. And we are also using a modern approach to scale the brand with more focus on content at scale in what others say and influencers.

Whether it is Vaseline Verified social-first hacks campaign, which won recently 9 awards at Cannes or culturally relevant tie-ups such as with the hit series, The White Lotus, Vaseline is leading the way when it comes to new models of reach and persuasion. More on this to come as we are steadily bring desire at scale to every brand in every geography. But from what I have shared today, I hope you can see that. The principles guiding our transformation are clear and so too are our objectives: to deliver multiyear volume growth of at least 2% and consistent gross margin expansion. Our financial profile post demerger is well placed to support this ambition with improvements anticipated in profitability and returns. With that, let me briefly recap before taking questions.

We delivered a resilient performance in the first half of this year. Moreover, we are confident that growth will accelerate in the second half. The building blocks are in place to ensure this happens. As a result, we are on track for our full year outlook for 2025. We are confirming today that the demerger of Ice Cream will take place in the middle of November as well as our intention to retain a stake of just below 20% in the business. And finally, the transformation of Unilever is not just on track, it is accelerating. We are very clear on the desire at scale principles that underpin this journey, and we are equally clear on what we must deliver: sustained volume growth and consistent gross margin expansion. The next phase is about execution in the front line, sharpening our focus on becoming a true marketing and sales machine.

And with that, we look forward to taking your questions.

Operator: [Operator Instructions]

Fernando Fernandez: Good morning, everyone, and thank you for being with us today. I’m here with Srini. We have delivered a solid set of results in the first half and would like to reinforce our confidence in delivering our 3% to 5% top line growth outlook for 2025. We take good balance between volume and price and operating margin for the second half of at least 18.5%, more than 100 basis points up versus the operating margin of second half last year. Just as a reminder, our full year outlook includes Ice Cream; however, I would like to highlight that the top line outlook holds also for the remaining company excluding Ice Cream, and that both our gross margin and operating margin will be higher and will increase more in the remaining company when excluding Ice Cream. With that, Jemma, we can take questions.

Jemma Spalton: Thanks, Fernando. Our first question comes from Celine at JPMorgan.

Celine A.H. Pannuti: Well, Fernando, since you mentioned the ex Ice Cream performance, so ex Ice Cream H1 was growing at 3% with 1% volume. Do you expect to see the ex Ice Cream acceleration — the acceleration you mentioned in volume showing into the ex Ice Cream portfolio in the second half of the year, i.e., could we be in the 4% to 6% range? And if you could talk about the H2 volume acceleration that you are — that you flagged in the presentation on both Personal Care and Health and Wellbeing division. That would be my first question.

Fernando Fernandez: Yes. We run the business with the intention of delivering volume growth about 2% for our remaining company, and we are very confident that we will achieve that in the second half. Our intention is to do that. There are several factors that give us confidence to acceleration of growth in the second half. The market volume growth has slightly improved from quarter 1 to quarter 2. It was 1.2% in quarter 1, went to 1.4%. We don’t expect a reversal of a trend. All the regions with the exception of China and Latin America show higher market volume growth in the quarter 2 versus quarter 1. I feel the second point is our UBS, our unmissable brand superiority scores are improving. We have close to 60% of our portfolio strengthening brand power.

We are outperforming in developed markets. We see an acceleration of markets in India, where we’re also gaining shares and growing extremely fast in the fast-growing channels like quick commerce. We have increased investments in our brands, and we will sustain highly competitive BMI levels between 15%, 16% of our revenue at the time in which we have seen some of our competitors slashing investment down. As you could see in the quarter 2 SGA of many competitors. We have a strong progress in gross margin that allow us to increase the delivery — to increase fuel for increase the BMI. And finally, we have a very, very strong innovation plan, one of the best in many years. It’s hitting markets between April and September in most of our regions, I can call, whole body deodorants, the geographical expansion of Wonder Wash in laundry, Cif Infinite Clean, Dove hair relaunch between many, many others.

So I would like to highlight also that our run rates today, our sales run rates, the current run rates could allow us to deliver this acceleration of growth in the second half. We expect significant contributions to growth from Indonesia, China that have been significant drags in the past. So we are confident in this higher volume growth in the second half, particularly in the remaining company. We are not complacent about it. We will remain agile. We will adjust our plans if necessary. But we believe really that we have the right place — the right tools in place to perform.

Celine A.H. Pannuti: Could you allow me a second question?

Jemma Spalton: Yes. Please, go ahead.

Celine A.H. Pannuti: Yes. So I will leave — I just wanted to go on M&A. You did a few deals, including Dr. Squatch. So if you could explain to us what you saw in that brand and what you think is the resilience of that brand in the long run. And then we know whether now that the — you feel that you have enough on your plate in terms of the acquisition you’ve made? Or you think that with the disposal of Ice Cream, you are willing to step up the M&A agenda?

Fernando Fernandez: We are convinced of our strategy of bolt-on M&A. We continue piling assets in the Beauty and Personal Care space and the Wellbeing space particularly in the U.S. with the intention of really building a portfolio of American brands with great potential to travel internationally. We have very clear criteria of what type of brands we look for. We look at digitally native brands, alternative brands with superior functionality, with strong clinicals, with a strong presence in digital commerce. And Dr. Squatch fits all these kind of criteria. It’s a brand that is growing fast. It will fill a gap that we had in our portfolio in the premium segment in deos in the U.S. and in skin cleansing in the U.S., despite the fact that we have made significant progress and we are back to share gain both in skin cleansing and deos in the U.S. and also in the premium segment.

But we believe that this brand really provides us with a significant weapon in the male grooming space. And we are very happy in the announcement of acquisition that, as you know, is subject to regulatory approval. We have also acquired Wild in the natural space, a refillable deodorant. That brand is based in U.K., but making a strong entry in U.S. also. And it’s another way of really protecting our portfolio in categories in which we have global leadership and leadership in the U.S. also.

Jemma Spalton: Our next question comes from Warren at Barclays.

Warren Lester Ackerman: So yes, 2 for me. First one is, Fernando, can you dive a bit more into emerging markets? Clearly, what we’ve got here today, Latin America a bit worse, Asia a bit better. So on Latin America, volume is down 6%. But what’s happening in Mexico and Brazil? It looks like you’re taking pricing ahead of competition. Previously, you talked about destocking in Brazil. How should we think about the outlook for Latin America in the second half of the year? What’s happening on the whole powders liquids transition? Just to understand a bit on the ground, what you’re seeing. And then the second one is really on the Asia recovery. It’s good to see India picking up in the second quarter versus the first quarter. Can you maybe do a little tour of India, Indonesia and China?

I mean, would you expect, for example, India to continue to step up growth in the second half compared to the second quarter, which is already a step-up compared to the first quarter? So a little bit on the kind of EM piece Lat Am versus Asia. And then the second one, I guess, is just on the performance of the U.S. There’s obviously a lot of moving pieces in the U.S. with channel shift, consumers, some destocking. I mean I’m quite interested to know what you’re seeing particularly in Personal Care. Are we seeing — we’re clearly seeing a slowdown in prestige in the U.S. Do you expect that to continue into the second half? What’s happening to kind of the market share competitiveness in the U.S.?

Fernando Fernandez: Good. Let me start, Warren, with Lat Am, and then I will give the word to Srini that will cover Asia in detail. It has been a weak quarter in Lat Am for us. We have been lapping very, very strong comparators and markets are under pressure at the time in which we had to increase prices to cope with a sizable devaluation of currencies. The Brazilian and Mexico economies are experiencing a significant slowdown, extremely high interest rates in Brazil, remittances into Mexico down after 11 years of growth, tariffs uncertainty in both countries that — all these have not been helping. As a result of all this, the market volume growth to which Unilever is exposed in the region, our turnover-weighted market volume growth moved from 7% growth in half 1 2024, 3% in half 2 2024 to flat in half 1 ’25 and negative in the quarter 2.

I feel important point to highlight that as our shares are strong in the region, we have had gains in shares in Lat Am in the last 6 quarters at an aggregated level. There is only one significant exception in the short term, is Laundry Brazil. I have to recognize that we have scored some own goals there. We went too far with our pricing in the powder format. We lost competitiveness. This has led to some share loss and to some excess of stock in the trade. We have already corrected our pricing in powders. And in a market where there is a fast transition from powders to liquids, we are rolling out our very successful European Wonder Wash mix in quarter 3. So we expect a quick return to competitiveness in Laundry in Brazil and overall a significant improvement in South America.

I would like to highlight also probably the other 2 largest business in the regions that are Deodorants and Foods. In Deodorants and Foods, our shares has been extremely strong part in deos across the whole region. In Foods, particularly in condiments Brazil, where Hellmann’s is going from strength to strength, but we have seen a sharp deceleration of the deos market growth. And we have seen also some slowdown of the Cooking Aids market in Mexico, where, as you know, Knorr has close to 75% share. So in aggregate, this is not something we have not seen in Lat Am before. Markets in Lat Am, given the volatility of the economy there, tend to operate outside the long-term potential growth range, sometimes above, sometimes below. We will do what we have done always, that is focus on protecting our leadership positions.

We will restore our strategic pricing relativity where necessary, like the case of laundry powder, and we will keep innovating in our brands. So the markets will turn. Our expectation is that markets will get better by the end of the year. But let’s see. Srini, India, Indonesia and China?

Srinivas Phatak: Thanks, Warren. I think it’s — we’ve been calling about our emerging markets being a strength for us, notably the Asia Pac. And we’ve also told you earlier that we will see positive growth coming up in half 2. Actually, quarter 2 is a good proof point of it, where our growth rates are actually in excess of 5% in the Asia Pac region. And that starts to give us a good flavor in terms of the trajectory that we are on. If I pick up India. In our last call, we had told you that, look, we don’t see any more additional headwinds. There is tailwinds coming through given the macros, disposable income, various measures taken by the government, that has really started to play. On a MAT basis, we see volume stability. And if you’ve actually seen the market growth in the last 12 weeks, we see an improvement.

There has also been a big work, which has happened in terms of the portfolio transformation, where we are actually investing behind the market makers, beyond the core portfolio. When we add up all of this, we’ve started to see a step-up in volume. We are also investing behind both core and in the future formats. And then now you start to see that India has actually got into volumes of upwards of 4. It’s broad-based. The important element is that we see good performance in Home Care, where we see high single-digit volumes. We have seen the headline growth rates pick up both in Beauty and in Personal Care, and some of the drag in Foods is sequentially actually getting better. From a channel perspective, very strong plans, not just on the general trade but on quick commerce and e-commerce.

In e-commerce, our sales are growing in double digit. In quick commerce, we have actually doubled our business, and that’s becoming a larger contribution. That again starts to become a tailwind for us as we look at this growth opportunity. So at an aggregate, we feel quite confident and comfortable with the India growth trajectory, and we will expect this to do well. So we will gain shares, we are gaining shares. So there’s a lot of confidence in India. If I come to Indonesia, you have also seen that today they published their results. Again, this is where we said we are making good progress on fundamentals as well as on the brand measures. On the fundamentals, if you really see, we made all the stock corrections. Our service levels are up by about 26%.

We have price stability, which is enabling us to increase actually direct coverage in general trade and improving assortment. We’ve also reset our cost base through multiple programs, which is actually giving us the fuel to start to invest behind these businesses. You start to see that the sequential trajectory of volumes is getting better. Our volumes are slightly negative in quarter 2 better than half — quarter 1. And we are confident that in half 2, we will come into positive trajectory just by holding our run rates. But more important, there is reason for us to be excited. When you look at some of the future formats such as Beauty & Wellbeing, there is 11% of that business, which is all about future formats, skin, serums. And business is actually growing 36%.

So this is just not a fundamental reset of the operational metrics, but we have now started to see some green shoots in terms of real brand measures coming through and brand growth coming through. And a quick one on China. We’ve always said that in the sequence, we will start to see Indonesia go much faster and better than China. We are comfortable with how China is progressing. On a RemainCo basis, we are close to flat volumes in quarter 2. A lot of fundamental work in terms of go-to-market has already been done, and we are getting good confidence in terms of run rates and, therefore, growth in China. We have to admit that the China market is slightly challenging. And I think, Fernando will touch upon it. If there are 2 places where the market growths are a little under pressure, it’s Latin America and China.

Notwithstanding that, given the fundamentals and given the run rates, we are confident of China also returning to growth in half 2.

Fernando Fernandez: Good. And regarding U.S., Warren, I feel the performance we have been having in North America, we have already 4 consecutive quarters of volume growth above 4% at a time in which markets have been visibly tougher. I believe it’s a reflection of the profound transformation we have done in our portfolio. The setup of what we call a U.S. for U.S. innovation model and a huge focus in strengthening relations with the retailers, showing them our ability to grow markets. After the separation of Ice Cream, our Beauty & Wellbeing, our Personal Care business will represent more than 75% of our revenue in the U.S. It is an advantaged growth footprint. And as I mentioned to Celine before, we will keep investing organically and through M&A to go deeper in that direction.

In the first half of the year, Beauty & Wellbeing, we have had some exceptional performance in Wellbeing. Double-digit growth in both Liquid IV and Nutrafol. Both brands are approaching the $1 billion revenue mark for the year. In Personal Care, as I mentioned before, we have regained market share. We are gaining share again in skin cleansing and in deos. And very importantly, we have had a significant improvement in our position in the super premium segment that, as you know, has been a long-standing issue. There are issues also in the U.S. We have a weak quarter in Hair Care. We made an unsuccessful attempt to reposition pricing TRESemmé shampoos in the U.S. This has already been corrected. And we also take the decision, a conscious decision to focus our portfolio behind our Power Brands: Dove, TRESemmé, Nexxus and SheaMoisture.

And this has basically triggered the delisting — the initiation of a listing of some unprofitable Dove Hair Care brands in the U.S. like Axe Hair or Love Beauty and Planet. I would like to highlight also the impact of our focus in partnership with customers. We have just received the results of the most popular annual retailer survey, it’s called Advantage Survey. We are run #1 supplier in Personal Care, #1 in Foods, #3 in Beauty. We have never achieved that before. This is a very different U.S. business to the one we used to have years ago, and we are very confident in our prospects there.

Jemma Spalton: Our next question comes from Callum at Bernstein.

Callum Elliott: Firstly, I wanted to talk to you about the organizational kind of redesign that you announced last November with the sort of segmentation of the business into top 24 markets and One Unilever markets. I don’t think you spoke about that at all today on the presentation. So my question is, how is that process progressing? Is the new structure now fully in place? Or are you still implementing that? And have you started to see any of the benefits yet? Just hoping you can give us a little bit of an update there. And then my second question, if that’s okay. I just wanted to build on Celine’s question about M&A. I guess, more broadly, my question, rather than being specific to Dr. Squatch or Wild, et cetera, is there’s obviously a huge amount going on in the business today; from new leadership, organizational redesign, the Ice Cream spin, food divestitures and now these new acquisitions as well.

So my question here is what would you say, Fernando, to investors who are concerned that there’s a risk of too many plates spinning, I guess, in the business today?

Fernando Fernandez: Thank you. Let me start by organization. It’s true. We have organized ourselves in top 24 markets, and from market 25 onwards, we run it in a One Unilever basis. We believe that the biggest markets deserve the focus and specialization of a category-led organization. And for market 25 onwards, we don’t have enough critical mass to make that happen. We have landed the divisionalization of our sales force in the top 24 markets. We have 63 different sales force now. This is a key, key priority in the business. We initiated that in January 1. It is completed. I cannot say that I’m absolutely happy with that. There is significant progress that have to be made. I believe that in the last 3 years, we have made significant, significant improvement in our product development and in the management of our category strategies and our brands’ innovation plan.

But execution has to improve in the markets, and this is the reason that we have decided on this divisionalization. In the One Unilever markets, it’s going very, very well. We have grown both in quarter 2 and in half 1 in this market close to 5%, more precisely, 4.9% with 3.2% under — sorry, with 1.6% underlying volume growth and 3.2% pricing. We are running these markets now with an organization that is 35% smaller. So this business has become accretive in profit to Unilever also and it’s a taker of innovation from the category-led organization that runs our top 24 markets. Regarding M&A, our responsibility is to keep doing a rotation in our portfolio that fundamentally expose us to higher growth. I believe the most important metric of any business is a turnover weighted market volume growth, the market volume growth at which business is exposed.

We want to consolidate our market volume growth exposure in the U.S. And also, I believe that one of the fundamental strategic issues of Unilever is the fact that we are in certain way a federation of local and regional brands. And building a strong portfolio in the U.S. give us the possibility of building a portfolio that is more cohesive and more consistent globally with American brands that travel internationally into the premium segment, into the digital commerce channel. So in fast-moving consumer goods, you have to do many things and you have to do all them fast. So we are taking on that challenge and we are confident that we can manage that.

Jemma Spalton: Our next question comes from Olivier at Goldman Sachs.

Jean-Olivier Nicolai: Just 2 questions first. First one, going back to the margin guidance, and the implied a strong progression that you are going to have in H2. Is there any particular divisions or regions where it’s going to be more pronounced? And then secondly, on — just coming back on Ice Cream and on the demerger, the fact that you will retain a 20% stake, which you will sell over time, will the proceeds be helping essentially to reduce Unilever debt? Or is there any tax liabilities arising from the spin-off that you will have to pay?

Fernando Fernandez: Yes, Srini?

Srinivas Phatak: Olivier, I think first, it’s important to highlight the quality of margins and quality of profitability. I think that’s the more important element for me. This is coming through from the right levers that we exercise, which is really volume, superior mix, absolute world- class savings coming through from our procurement organization and a cost discipline end-to-end and cost to serve, and really our repositioning of our capital expenditure, which has happened towards savings. Along with that, there has been an enhanced focus around productivity. We are actually now cumulatively talking about our organization productivity savings at EUR 650 million, which is EUR 100 million over and above what we achieved or what we told you earlier.

This is actually giving us, and most important element for us is that we are investing competitively behind our businesses, between 15% and 16%. And we will keep this going into half 2. What gives us confidence into half 2 to at least from the reason for us calling out an 18.5%? The levers and drivers that I spoke about remain intact. Commodity outlook is relatively stable notwithstanding some variations to ForEx. We have good covers, physical as well as financial instruments. Having said that, there is a bit of an uptick when it comes to the cost in half 2 versus half 1. So when we take both of these and continue to invest behind our business, we will improve margins. We should also say that our half 2 guidance actually includes Ice Cream’s.

And therefore, there is a mix effect, which has played out slightly adverse. Coming back to your question, so therefore, there is enough ammunition for us to do the right things for the business, invest behind the business, invest behind our growth and enhance margins. Will this play out very differently across the business groups? Nothing material that we would like to call because the profile of the margins is different in each of the business groups. There are some dynamics which are slightly different, investments levels which are different, and we will do that with agility. At this stage, I don’t believe we need to make the distinction between business groups, but appropriate to say that we are adequately invested behind each of them and delivering the expansion.

On the second part, there is a strategic element to the stake, which Fernando can touch upon. As far as we are concerned on the stake, this will be a little below 20%. We will have to hold this at a maximum period of 5 years as per the U.S. IRS guidelines, and we will stick to that. We have said that we will look to reducing the stake in an orderly fashion. The purpose for the reduction of the stake is clear. The costs which are coming or the on costs which are coming from the demerger, that will be first element. There will be on cost, which is separation, some tax costs or the second element would be really to pay down our debt. These are the 2 objectives, and that is what we intend to do with the proceeds.

Fernando Fernandez: Yes. And just to say that the retention of our stake just below 20% shows the confidence we have in the potential of the ice cream company as an independent business. That was exactly what we said in March last year when we decided the demerger of the company, that we saw that the ice cream company could thrive as an independent company with a tailor-made business model to develop. And we believe that, that will happen and the results that we are having in the first half of the year show that we are increasing competitiveness that the business has made significant progress in terms of innovation and execution. Coming back to the margin, I would just like to highlight something. The times of Unilever trading off lower and competitive investment in our brands to deliver some more profit are gone.

We will protect the investment behind our brands, and we consider gross margin expansion, consistent gross margin expansion the backbone of our financial plan to provide us with the fuel to allow us for that competitive investment. We will keep investing competitively. We believe that the levers that we have achieved now of around 15% to 16% are the right one. But we will not compromise on that.

Jemma Spalton: Our next question comes from Guillaume at UBS.

Guillaume Gerard Vincent Delmas: I mean, for my first question, maybe to follow up on what you’ve just said, Fernando. Your BMI levels, because they increased again in the first half, 15.5%, more than 200 basis points above the levels of 2022. So do you think you currently have the right share of voice and that the current level of BMI gives you a material competitive advantage? Or maybe given how competitive the environment is and also your ambition to drive desire at scale, should BMI continue to grow ahead of sales and continuing in the second half of 2025 in particular? And maybe related to that, I mean, we hear a lot of your competitors talk about an increase in the number of new product launches this year, particularly in the second half.

Is it something that you will also do? Or are you still more focused on fewer but bigger and better innovations? And then my second question is on the Foods division. Because of your 5 global business units in the first half, Foods was the only one to achieve some improvement in underlying operating margin, and it was quite significant. I think it was around 100 basis points. So can you maybe touch on the main drivers behind this strong uptick? And maybe whether going forward, we should view Foods as a key margin improvement engine for Unilever because you’ve got strong productivity programs there trying to simplify the portfolio and maybe less of a need of a step-up in BMI in that business?

Fernando Fernandez: Cool. Thank you, Guillaume. Let me start with the Foods question. It’s true. We have had a significant acceleration of volume growth and of margin in Foods. And I believe when you look with the prints of most food companies, I believe that is a very, very competitive performance. I believe that our food business has an advantaged growth footprint. It’s a very concentrated business. Hellmann’s and Knorr represents 60% of our business in Foods, 2 very big brands. And foodservice is a very strong business even if this year, we are having a more flattish performance in foodservice, particularly because it is a business that has close to 30% exposure to China and the market there has been a bit softer. So it’s a good performance in Foods.

We are happy with that. Hellmann’s is going from strength to strength. We mentioned significant, very significant share gains in Brazil and in the U.S. We have very, very strong leading positions there. These are the 2 biggest markets of Hellmann’s. And in Knorr, we are really — we have more work to do in Knorr. I believe the brand doesn’t have the level of coherence and consistency that we need. But we are making significant improvements there. So it’s a business that provides accretive margin to Unilever, significant cash, has very, very high return on invested capital. So it’s the reasons that we are very happy, and we believe it’s one of the best food business in the world even if it’s not one of the largest. In the case of your first question regarding the BMI levels, the level of investment.

We have really increased our investment level significantly from 2022 onwards. There is an implicit recognition that the levels at which we were investing 3 years ago were absolutely uncompetitive. We feel much more comfortable now with the level of investment between 15% and 16%. Of course, part of that increase is mix related. Our Beauty & Wellbeing and our Personal Care business has been growing faster than the rest of the portfolio, and they are more demanding in terms of the level of investment behind the brands that you need. Measuring share of voice now is very difficult, particularly in the context of explosion of digital media. But I believe that the most important metric for us is the strengthening of our UBS, our unmissable brand superiority scores.

We have now 60% of our revenue, improving UBS. In terms of product launches, we continue focus in doing stuff with impact. So we prefer to really focus in our Power Brands that you have seen grown above the average of the group in the quarter 2. We are doing big, big initiatives and, fundamentally, we are rolling it out faster. The best example probably is Wonder Wash in Home Care, in which we will be in close to 50 countries by the end of this year after initiating the process in Europe with a lot of success. So that’s basically what I can say about BMI levels, good levels of support. We feel comfortable with that, somewhere between 15% and 16%. As a result of that kind of increased investment and more quality in the innovation and in the brand management that we are having, we see our brands strengthening, we see our shares improving.

Jemma Spalton: The next question comes from Jeremy at HSBC.

Jeremy David Fialko: So 2 from me. The first one is could you just give us a bit more of a kind of a wrap up of your market shares across the business and where you think you are relative to your end markets, something on the — sort of percent gaining and then just where you are relative to end markets? And then the second one is, could you go to a bit more detail on the volume performance in Personal Care? So obviously, it was quite robust growth for the division in the quarter, but pretty much all of that gain came from pricing. So what was it that led to the volume slowdown in PC, so kind of all Lat Am? Or was there some slowdown in other elements of the business and what you’d expect for the second half there?

Fernando Fernandez: Thank you, Jeremy. Market shares, the picture I can give you is that we are gaining — I feel you look at the same numbers I look at. I feel many of you publish Nielsen data. And I believe it’s very clear that our performance in U.S. and Europe is significantly above the market, so we are gaining shares in U.S. We are gaining shares in Europe and we are gaining shares in India. So these are 3 of our most important markets, and we are with a positive trajectory in share there. I would highlight again the fact that we came back to share gain in deos and in skin cleansing in U.S. This has been a long-standing issue. We have put a lot of focus there in developing our presence in the premium segment, and we are very pleased with the development that we are having with our business there.

In Latin America, as I mentioned before, we have in the short term some decline in laundry powders, but in the rest of the categories we are in a positive momentum. And aggregated shares has been positive in Latin America for 6 quarters now. Of course, we have been losing share in Indonesia. We have been losing some share in China. And Southeast Asia is relatively flat, slightly down in a category like Hair Care, but nothing significant. Regarding the volume performance in Personal Care; again, our sales in Personal Care are very, very strong. We have significant grades growth across most markets. Dove performance that you know is close to 40% of our Personal Care business is very, very robust, 8% growth. I think we have now close to 7, 8 quarters with more than 8% growth in that.

However, I believe Personal Care is very exposed to Latin America, and there was a sharp deceleration of the deos market in the last few quarters. The last quarter was something like minus 5% in volume. That is completely an outlier. We expect that to recover. And also, I would say that the price increases that we put both in Latin America and in skin cleanse in India, in the case of Latin America, to deal with significant depreciation of currency; and in the case of skin cleanse in India, to deal with a significant palm oil inflation, put some kind of a break in our volumes. But we believe this is a short-term thing, we are confident in the power of our portfolio in Personal Care, and we expect Latin America in Personal care, the markets to really come back, if not in the quarter 3, probably in quarter 4.

So that’s basically the picture we have in performance in Personal Care.

Jemma Spalton: Our next question comes from Jeff at BNP.

Jeffrey Patrick Stent: Just one question, if I may. On retaining the 20% stake, I’m just a little bit confused as to why you’re doing this. You talk about costs, et cetera, but I can’t see the RemainCo would have any great issue shouldering any cost. So could you just kind of flesh out a little bit why exactly you’re going to retain this 20% stake?

Fernando Fernandez: Jeff, we are very, very confident in the trajectory of the Ice Cream business as an independent company. We wanted to provide some stability also for the business in the beginning. We have decided net debt levels for both Ice Cream and the remaining company, and this will be communicated in the Capital Markets Day later in the year. And the retention of the stake is fundamentally related with that. And as Srini said before, we will dispose that before 5 years, this regulatory constraint we have, and we will do it in an orderly manner to fundamentally pay for some of the separation costs, some of the tax leakage and, of course, to reduce debt also. So that’s everything we can say. But as I mentioned before, very, very confident in the potential of the Ice Cream company, significant growth opportunity and also a significant expansion of EBITDA possible in that business. I will definitely keep my shares.

Jemma Spalton: Our next question comes from Sarah at Morgan Stanley.

Sarah Simon: I’ve got 2. The first one was on tariffs. You highlighted some inventory builds for supply chain management and tariffs and so on at the half year stage. Can you just give us an update on how you think you’re going to be affected by tariffs and whether — what impact that’s having on your second half margin guide? And the second one, Fernando, struck by your comments about wanting to shift more into Beauty & Personal Care and so on. And obviously, you’ve been doing M&A to sort of further that and the organic growth much. I guess the question would be, to what extent are you considering more disposals to kind of further accelerate that shift?

Srinivas Phatak: So on the tariffs part, it’s good to clarify that most of our supply chain is actually localized. But we did have items of packaging material and some critical raw material coming out of various markets, which are subject to tariff. While at an overall aggregate level, tariffs was absolutely a manageable number for us and still is and, therefore, we don’t have to specifically call it out. It’s in the realms of what we manage is inflation. The important element for us was to really ensure supply resilience. When we had this lot of macroeconomic uncertainty coming from tariffs, where we wanted to protect ourselves was really supply security so that we could have enough stocks to produce and sell and distribute.

So our stocking up was predominantly led by having that stock flexibility and not so much from a cost angle. That’s the reason we took upon inventory. Now having experienced this volatile world for a few months, we’re reasonably confident to really bring down and optimize the inventory, and we’ll do that. But on the tariffs question, yes, it’s not something which is really material for us at an aggregate and well within our margin guidance for half 2.

Fernando Fernandez: Yes. And regarding M&A and disposals, I have been very clear about our priorities I call it more Beauty, more Personal Care, more U.S., more India, more premium, more e-commerce. That’s the way we want to shift our portfolio. And disposals play a role in accelerating that shift. We have a plan of around EUR 1.5 billion to EUR 2 billion of disposals. It’s a combination of fundamentally local brands in Europe Foods and around EUR 0.5 billion of laundry and sustainable competitive positions in One Unilever markets, small markets in which we don’t have leading positions in laundry. . We have already announced several disposals in the last year or so, Unox, Zwan, Conimex, The Vegetarian Butcher, and we have many, many process in play now. But we will dispose this business, protecting value for our shareholders. And they are not in a fire sale and we will ensure that we get enough value for that.

Jemma Spalton: Our next question comes from David at Jefferies.

David Hayes: Two from us. One more broader, one more detailed, I guess. Just the broad one, just on pricing levels, are there any categories or markets where you feel that prices are too high? And I’m just thinking that a lot of competitors in the U.S. are talking about consumer revolt on pricing levels given the rise in the last couple of years. India, you seem to be taking pricing down a little bit to stimulate volumes. Indonesia, you’re resetting as well. So with margin now looking like over 20% ex Ice Cream, that’s a pretty high level versus the past, is there any way where you feel like there is a risk that, that margin needs to come down and/or pricing needs to come down to be more competitive and restimulate volumes? And then the more detailed question was just on the spin again. The tax leakage, I think you talked before about there is a tax leakage even with a spin setup. Can you quantify that today what the actual tax payment will be?

Fernando Fernandez: David, thank you. On pricing, I have mentioned before, there are a couple of, I would say, category country sales in which we probably have gone too far. In the case of Laundry Brazil, we increased pricing. We have close to 65% share there in laundry powders. When there is significant cost and significant currency devaluation, we usually lead with pricing in the market. It usually takes 8, 12 weeks for competition to follow. That’s a kind of historic norm. It has not been the case. And when competition don’t follow, we reset the strategy in pricing to this higher level because we will never allow people to take volume on pricing from us. In the case of U.S., we have 2 different situations. One, we’ve tried to reposition pricing in Dove Hair and in TRESemmé with significant relaunches.

In the case of Dove Hair, has been very, very successful, a significant uplift in our pricing, elevation of the quality of our brand. In the case of TRESemmé where we have done that with success in styling. In the case of shampoo and conditioner, we have not been so successful and we have rolled back our pricing to ensure competitiveness and protect our volumes. So these are the places in which, I would say, there has been correction in pricing down. In the case of India also, not triggered by us but triggered by a competitor, there was a decrease of liquids of around 17% that we already commented in the quarter 1. Volume reaction to that has been very, very significant. We landed that pricing even before our competition and we have seen a significant increase in our volumes in Home Care in India.

Regarding the spin and the tax leakage, we will not give details at this stage. I feel we have given all the information that is necessary. And of course, there will be more information coming along the year, particularly in the Capital Markets Day of Ice Cream on September 9.

Jemma Spalton: Our next question comes from Vika at Bank of America.

Victoria Petrova: I’ll be quick. First of all, are you still targeting hard currency EPS growth in 2025? And could you help us think about your return on invested capital improvement? You are talking about 100 basis points coming from Ice Cream. At the same time, in Ice Cream presentation, if I recall correctly, management was talking about 23% return on invested capital for Ice Cream itself. How should we add up those 2 numbers, please?

Srinivas Phatak: Vika, thank you for that. Listen, the commitment to hard currency earnings for us is a multiyear priority. It’s a strategic priority, and we are absolutely committed to that. There should be no debate on that. From a 2025 perspective, look, we said in quarter 2, 60% of the impact of currency is coming from a translation effect. It’s really how euro-dollars is playing out. If we were a dollar reporting company, it wouldn’t have been there. But we do know that, that will get also higher into half 2. Having said that, you’ve heard us talk about our margins. You’ve talked about the gross margins, the investments, the overheads. We’ve also spoken about growth. And growth is actually a big leverage to really drive the right financial shape.

When we look at all of these elements, if we don’t see a further deterioration in the translation effects of euro-dollar, our intention is to aim and deliver positive hard currency earnings even in 2025. But we will not do anything which is going to jeopardize our business model. We will not under-invest just to hit a number, but we will do the right things. But our intention and aim will be to really look at hard currency earnings. On the return on invested capital, this is what I will call, it’s either an accountant’s delight or a nightmare. It really comes down to how we are really looking at some of the intangibles treatment when it comes to Unilever and when it comes to the Ice Cream company. The accounting standards dictate for us to have goodwill or intangibles looked at between Ice Cream and Foods because that was a combined segment for us.

So when we did that, the ROIC, you see what you see. Therefore, when we carve out Ice Cream, our ROIC improves. Ice Cream has the flexibility to go back historically and actually start to look at only those acquisitions, which were pure-play. They have taken that flexibility. And as a consequence of that, they are reporting a higher number. If you see net addition, and this is the accounting work, but both views are right. But from an economic perspective, if we look forward, I don’t think it really materially makes a difference. Unilever ROIC goes up by about 100 basis points. Ice Cream will start their story with a revised asset base, and they have, therefore, indicated somewhere around 21%, 22%. We’re very happy to do a follow-up because it’s slightly technical, but be rest assured, economically it’s absolutely fine.

Jemma Spalton: Next question comes from Tom at Deutsche.

Thomas Richard Sykes: Fernando, I hope, the knee is feeling better. Just on the channel shifts in the U.S., I mean, Amazon is, by far and away, the fastest- growing channel for you for most people. How are you allocating A&P differently to grow on Amazon versus growing on Walmart? What’s the sort of lineage or linkage between your A&P and growing on Amazon? And then just on the productivity side, sorry if I missed it earlier, but are you in a position now that you are actually getting the 100 basis points productivity benefit over COGS this year and going forward, is that something to rely on now, please?

Fernando Fernandez: Clear. Thank you, Tom. Regarding channel shifts, there is a big evolution in how to reach consumers. And I talk a lot about the new models of reach and persuasion. And retail media plays a very important role. Amazon today is not only an important channel of sales for us, but it’s also an important channel of discovery for our brands. The same with Walmart and the same with our retailers in the U.S. We are having a good run in Amazon, in Walmart. We are investing heavily in key retailers in the U.S. And our performance in U.S. is showing that also the model of deploying our investment is really working well. We — our exposure to e-commerce in the U.S. is very high because close to 50% of our prestige Wellbeing business in the U.S. is e- commerce, a combination of direct-to-consumer like Nutrafol, a significant presence in Amazon or in Walmart.com or in the other sites of the retailer.

So we see the platforms of a retailer a significant source of awareness, a significant source of recommendation in which your exposure to ratings and reviews has to be very, very strong. And that requires a good exposure of your brands. And when we talk about perfect execution, we talk about perfect execution online and off-line. Regarding productivity, Srini, do you want to cover that?

Srinivas Phatak: So there are 2 elements, Tom, if we understood the question correct. In one way, we had always said that from a buying and a procurement perspective, our intention and our teams are really trying to beat the market by at least 100 basis points when it comes to buying efficiencies. That is something which is absolutely going on track, and we are delivering to that. And that’s also, therefore, becoming a good source of gross margin expansion for us. When you look at it from an angle of some of our fixed cost in the supply chain, there, we have a mindset of really having an absolute cost budget, volume leverage, and we aim and intend to really drive 2% to 3% reduction in absolute cost that gives us leverage. When you talked about overheads line, because productivity is an end-to-end phenomenon, there we have already spoken to you about how we are increasing our savings from about EUR 550 million to EUR 650 million.

Suffice to say, between all the 3 levers progressing very well, and that actually is giving us the right margin structures and, therefore, our financial shape.

Fernando Fernandez: I would like to add, Srini, on this, that I believe that the improvement we are having — a structural improvement in gross margin with a significant focus in our what we call supply chain, controlled costs, manufacturing and logistics and the progress we have done in delivering our productivity savings at overheads level after announcing the separation of Ice Cream is fundamentally showing a different culture in the company. So it’s just — this is a new Unilever when it comes to cost discipline. We have a real, real discipline in place, and we are very pleased with the development of our cost control both at product level and overhead level. Jemma, I probably can wrap with a few messages. We delivered a solid first half, good levels of growth, balance between volume and price, all which is in positive volume growth.

Our gross margin is structurally improving. It give us fuel to keep increasing investment in our brands. And as a result of that, our Power Brands are strengthening, and we are outperforming markets in regions like U.S. and Europe with the most demanding retailers and the most demanding consumers. We see an acceleration of growth in the second half with sustained performance in developed markets and improvement in emerging markets, particularly in India, Indonesia and China. And I want to highlight again what Srini mentioned, we will not take operational decisions in a rush based on big currency swings. But if the euro-dollar exchange rate remains at current levels, our intention is to deliver earnings growth in hard currency for the year. With that, thank you very much.

I’m looking forward to seeing you soon.

Srinivas Phatak: Thank you.