Unilever’s Portfolio Shift Pays Off as Margins Rise and Sales Stabilize

Date of Call: Feb 12, 2026

Financials Results

• Revenue: EUR 50.5B, down 3.8% YOY (excluding Ice Cream); underlying sales growth 3.5%, with volumes 1.5% and price 2%
• EPS: EUR 3.08 per diluted share, up 0.7% YOY; currency negatively impacted EPS by 8.8%
• Gross Margin: 46.9%, at structurally higher level following Ice Cream demerger, up 20 basis points YOY
• Operating Margin: 20%, expanded by 60 basis points YOY; underlying operating margin for Foods increased 130 bps to 22.6%

Guidance:

• Underlying sales growth for 2026 expected at the bottom end of 4% to 6% range.
• Underlying volume growth expected to be at least 2%.
• Expect further modest improvement to underlying operating margin.
• Inflationary pressures in select commodities, with overall inflation lower than 2025.
• Announced new share buyback of EUR 1.5 billion.

Business Commentary:

Portfolio Transformation and Focus:

• Unilever PLC reported that they rotated 15% of their total portfolio in 2025, including the demerger of Ice Cream and 10 deals, such as acquisitions of Minimalist, Wild, and Dr. Squatch, along with the disposal of several non-strategic brands.
• The transformation aimed to elevate the offering of their brands and focus on high-growth premium segments, contributing to a significant improvement in brand superiority scores.

Emerging Markets Performance:

• Emerging markets delivered underlying sales growth of 3.5% for the year, with Asia Pacific Africa growing by 4.6% and Latin America by 0.5%.
• Growth was driven by improved execution, strategic actions, and an improving trading environment in key markets like India, Indonesia, and China.

Volume and Pricing Strategy:

• Unilever reported underlying sales growth of 3.5% in 2025, with volumes at 1.5% and price at 2%.
• The company focused on volume-led growth, supported by strategic pricing and a strong performance in developed markets, particularly in North America.

Profitability and Margin Expansion:

• The company's underlying operating margin expanded by 60 basis points to 20%, with a gross margin now at a structurally higher level of 46.9%.
• This was achieved through improvements in overhead efficiency, productivity gains, and disciplined brand investments.

Innovation and Brand Investment:

• Unilever increased brand and marketing investment by 10 basis points to 16.1% of turnover, prioritizing investment behind their strongest brands and innovations.
• This strategic focus on sustainable growth and long-term value creation is reflected in the improved performance of their Power Brands, which grew 4.3% in underlying sales.

Sentiment Analysis:

Overall Tone: Positive

• CEO stated 'we have delivered a solid year, fully in line with our commitments despite challenging conditions' and 'we enter 2026 as a simpler, sharper, more focused business, better able to capture growth opportunities.' Confidence in emerging markets, innovation pipeline, and margin expansion drives optimism.

Q&A:

• Question from Warren Ackerman (Barclays Bank PLC): Can you talk about the emerging market outlook for 2026, specifically Brazil, India, China, Indonesia, and the U.S.? Also, where did productivity savings land and what's the outlook for '26?
  Response: Emerging markets showing strength except LatAm; India, China, Indonesia improving; Brazil Deos expected to rebound from Q2. Productivity savings of EUR 670M delivered, with EUR 130M remaining of EUR 800M target for 2026.

• Question from Guillaume Gerard Delmas (UBS Investment Bank): What is the pricing outlook for 2026 and the key building blocks for the modest margin improvement?
  Response: Pricing expected around 2%; commodity inflation focused in palm, canola oil, surfactants. Margin improvement driven by gross margin expansion (330 bps over 3 years), disciplined overheads, and investing brand/marketing spend.

• Question from Jeremy Fialko (HSBC Global Investment Research): What was Europe's performance in Q4 and outlook for 2026? How do you manage the significant Power Brand vs. non-Power Brand growth gap?
  Response: Europe flat in Q4 due to soft Foods; confident in sustained performance. Focusing investment on Power Brands (78% of revenue); non-Power Brands (22%) underperforming but strategy is to concentrate on strongest assets.

• Question from Celine Pannuti (JPMorgan Chase & Co): How should we expect growth to sequence through 2026? What's the outlook for Wellbeing/Beauty and Hair Care?
  Response: Growth guided at least 4% with volume above 2%; no quarterly guidance. Beauty/Wellbeing/Personal Care delivered 4.9% growth in Q4; Wellbeing softening in Q4 but structural growth remains; Hair Care accelerating with Dove Hair relaunch rollout.

• Question from Jeff Stent (BNP Paribas): What are the big new innovations coming in 2026? Can you quantify TSA receipts from Magnum?
  Response: Key innovations include Dove UV repair, Vaseline lip care, Nexxus relaunch, Hellmann's protein caps. TSA costs not quantified externally; cost-plus with small markup, expected to taper off as Magnum takes over.

• Question from Jean-Olivier Nicolai (Goldman Sachs Group, Inc.): Update on Prestige Beauty strategy and margin drivers in Foods?
  Response: Prestige focusing on e-commerce, integrating with Skin/Hair Care; no recent acquisitions as assets didn't meet criteria. Foods margin improvement from portfolio rationalization, price architecture, and overhead savings; focus now is on volume-led growth.

• Question from Sarah Simon (Morgan Stanley): Impact of discontinuations on volume? Dr. Squatch growth in fiscal '25?
  Response: Discontinuations impact non-Power Brands; details in filings. Dr. Squatch performing well post-acquisition, growing double-digit, expected to contribute in 2026 but will count in underlying sales from September 2026.

• Question from David Hayes (Jefferies LLC): Latin America recovery quicker than expected? Did innovations/relaunches impact Q4 volumes?
  Response: LatAm market flattish; recovery driven by Food strength (Hellmann's) and Home Care pricing corrections; Deodrant actions to boost aerosol formats expected to gain traction in 2026.

• Question from Tom Sykes (Deutsche Bank AG): Channel shift in North America, Amazon share, and innovation cadence vs. smaller peers?
  Response: Strong double-digit growth in digital commerce (marketplaces, social, quick commerce); e-commerce not slowing in North America. Innovation accelerating with focus on scaling digitally-native brands acquired.

• Question from Edward Lewis (Rothschild & Co Redburn): Is 2026 the first year to see benefits of revamped innovation approach? CapEx allocation for margin-enhancing activities?
  Response: Heavy lifting done; 2026 should bear fruits of improved innovation and execution. CapEx around 3% of turnover, with 55-60% directed toward productivity/savings in 2026.

Contradiction Point 1

China Business Improvement Timeline

Confidence in 2026 improvement contradicts earlier H2 2025 guidance.

What are your thoughts on the recent financial performance? - Warren Ackerman (Barclays Bank PLC)

2025Q4: China is slowly getting better, with growth accelerating in the second half of 2025 and expected to improve further in 2026. - Fernando Fernandez(CEO)

Can you discuss the 2026 emerging market outlook for Brazil, India, China, and Indonesia, including Brazil's Deos, progress on China and Indonesia resets, and volume expectations? - Celine Pannuti (JPMorgan Chase & Co)

2025Q2: Unilever aims to deliver ≥2% volume growth for the remaining company in H2. Confidence stems from... accelerating momentum in India, increased brand investment... and expected improvements in China and Indonesia. - Fernando Fernandez(CEO)

Contradiction Point 2

Latin America Volume Performance and Outlook

Q4 growth contradicts Q2's characterization of a weak market needing H2 improvement.

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2025Q4: Latin America (excluding LatAm) is seeing growth, with a return to growth in Q4 led by Foods (Hellmann's) and Beauty & Wellbeing... Confidence is high for 2026, with expectations to deliver better results. - Fernando Fernandez(CEO)

What factors contributed to Latin America's faster-than-expected volume recovery compared to Q3, does Q4 volume include a relaunch benefit, and what is the volume outlook for H1 2026? - Warren Ackerman (Barclays Bank PLC)

2025Q2: LatAm faced weak Q2 due to high interest rates, remittance declines, tariff uncertainty... Market volume growth turned negative.... Markets are expected to improve by year-end. - Fernando Fernandez(CEO) & Srinivas Phatak(CFO)

Contradiction Point 3

Need for Continued Innovation and Productivity Focus

2025Q4 suggests benefits are materializing, while 2025Q2 emphasized the heavy lifting was still ahead.

Edward Lewis (Rothschild & Co Redburn), what are your key insights on the earnings report? - Edward Lewis (Rothschild & Co Redburn)

2025Q4: Significant heavy lifting (organization, portfolio changes, productivity) has been done. Innovation capabilities are much improved... 2026 is expected to bear more fruit from these efforts. - Fernando Fernandez(CEO)

Will 2026 mark the first year of benefits from the revamped innovation approach? - Callum Elliott (Sanford C. Bernstein & Co., LLC.)

2025Q2: Unilever’s... strategic focus is on portfolio rotation to higher-growth areas... Building a cohesive U.S. portfolio strengthens global premium and digital commerce offerings. Unilever is confident in managing multiple initiatives simultaneously. - Fernando Fernandez(CEO)

Contradiction Point 4

Pricing Outlook for the Upcoming Year

Contradiction on expected pricing rate for 2026 versus 2024 guidance.

What is Guillaume Gerard Delmas's question for the earnings call? - Guillaume Gerard Delmas (UBS Investment Bank)

2025Q4: For 2026, pricing is expected to be around 2%. - Fernando Fernandez(CEO)

What is the pricing outlook for 2026 given lower inflationary pressures and increased promotional activities? - Guillaume Delmas (UBS)

2023Q4: Overall, some inflation is still expected in 2024, likely in the 2.5%–3% range. - Hein Schumacher(CFO)

Contradiction Point 5

Phasing of Margin Progression

Contradiction on whether margin progression is expected to be balanced or weighted in a specific half of the year.

Guillaume Gerard Delmas (UBS Investment Bank), what are your thoughts on the recent earnings report? - Guillaume Gerard Delmas (UBS Investment Bank)

2025Q4: margin progression is expected to be fairly balanced between halves. - Srinivas Phatak(CFO)

What are the key factors and timeline for modest margin improvement in 2026? - Celine Pannuti (JPMorgan Chase & Co)

2021Q2: This issue will persist for several quarters. - Graeme Pitkethly(CFO)