Unilever Plc Q4 FY2023 earnings call

Management Statement and Operational Highlights

• Five shifts already made: positive volume growth in Q4, gross margin expansion, tightened operations/working capital, increased brand/marketing investment on Power Brands, changes in Ice Cream and portfolio.
• Growth Action Plan focus: 30 Power Brands as growth drivers, superior brand superiority framework, multiyear scalable innovation programs, productivity and simplicity initiatives (including network optimization, vertical integration, sustainability focus on 4 key platforms), refreshed performance culture with new leadership and remuneration changes.

Segment Performance

• Beauty & Wellbeing: Full year underlying sales growth 8.3%, with 7.9% in Q4 driven by 6.3% volume growth. Health & Wellbeing and Prestige Beauty (27% of turnover) had double-digit volume-led growth. Hair had positive volume growth, while Carver's performance in China was weak.
• Personal Care: Underlying sales growth 8.9% for the year, 6.4% in Q4. Deodorants had mid-teens growth. Dove and Rexona/Axe benefited from 72-hour protection tech, but competitiveness in U.S. was an issue.
• Home Care: Volumes positive in second half, price growth decelerated. Exposed to emerging markets, impacted by commodity prices. Fabric enhancers and Home & Hygiene grew in some regions.
• Nutrition: Price-led growth 7.7% in year, 4.7% in Q4. Europe had volume drag from private label. Knorr and Hellmann's grew, Professional Food Solutions had double-digit growth.
• Ice Cream: Grew 2.3% with 8.8% price growth, 6% volume decline. Disappointing with consumer down-trading. New leadership team working on competitiveness.

Guidance

• Underlying sales growth expected 3%-5% with improved volume contribution.
• Modest improvement in underlying operating margin driven by gross margin expansion.
• Capital returns: attractive dividend with EUR 1.5 billion share buyback starting Q2, coinciding with Elida Beauty disposal proceeds.

Risks

• Currency impact on turnover and earnings.
• Competitiveness issues with 75 basis point share decline.
• Ice Cream underperformance with consumer down-trading.
• Commodity cycles affecting markets like India and Indonesia.

Question and Answer

Q: On the guidance of 3%-5% growth and cultural change, what's the mix of price and volume growth and cultural momentum?

A: Hein states guidance balances mix, price, and volume, with volumes playing a part in growth. Cultural momentum improved with renewed energy from Growth Action Plan.

Q: On pricing outlook and operating margin, how is pricing expected and margin improvement planned?

A: Hein and Fernando discuss inflation, pricing adjustments in markets like India, and margin improvement through gross margin expansion and productivity initiatives.

Q: On Prestige brands and their global expansion, what's the plan?

A: Fernando mentions Prestige brands like Liquid I.V. and Dermalogica have strong growth, with plans for global rollout after solidifying in North America.

Q: On SKU rationalization and divisional heads, what's the progress?

A: Hein talks about significant SKU rationalization, and divisional heads are aligned with Growth Action Plan, with progress on new roles and leadership appointments.