Unilever PLC (NYSE:UL) Q2 2024 Earnings Conference Call July 25, 2024 3:00 AM ET

Company Participants

Hein Schumacher - CEO & Director
Fernando Fernandez - CFO & Director
Gemma S. - Global Head of Media Relations

Conference Call Participants

Celine Pannuti - JPMorgan Chase & Co.
Jean-Olivier Nicolai - Goldman Sachs Group
James Edward Jones - RBC
Thomas Sykes - Deutsche Bank
Jeffrey Stent - BNP Paribas Exane
Guillaume Delmas - UBS
Bruno Monteyne - Sanford C. Bernstein & Co.
David Hayes - Jefferies
Sarah Simon - Morgan Stanley
Fulvio Cazzol - Berenberg

Hein Schumacher

Good morning, and welcome to Unilever's Half One Results Announcement. We expect prepared remarks today to take about 25 minutes, leaving around 30 minutes for Q&A.

All of today's webcast is available live, transcribed on the screen. And in a moment, I will hand over to Fernando, to take you through the details of the results. I will then return to give a brief update on the Growth Action Plan and some of our key priorities as we move into the second half of the year. After that, we will take questions.

First, though, let me set out some of the performance highlights from the first half as I see them. Our focus has been and remains on delivering high-quality sales growth and expanding gross margin, and thereby enabling a step-up in investment behind our brands.

With that in mind, we made progress over the first half. Our underlying sales grew 4.1%. Volume growth was broad-based and accelerated to 2.6%, with four of five business groups delivering positive volumes in quarter two. Growth was led by our Power Brands, with underlying sales growth of 5.7% and volumes up 4%. Focusing on these 30 brands is a core part of our plans, and so we are encouraged by the progress here.

Gross margin expansion was strong, up 420 basis points to 45.7%. We recorded lower material costs, which helped, but we are also on track to achieve net cost productivity through tight cost control in our operations. Both these impacts supported the gross margin development in the first half.

This allowed for nearly €700 million in extra brand and marketing investment, which went behind an increasingly strong and focused innovation program. Gross margin expansion also resulted in accelerated profit growth. Underlying operating profit increased 17.1% to €6.1 billion, with underlying operating margin up 250 basis points to 19.6%. Over the last quarter, we have continued to implement our growth action plan at pace. As well as stepping up financial performance, the plan also incorporates sustainability leadership in our four priority areas, climate, plastics, nature and livelihoods. And we made progress against all of these in the first half.