Consumer goods goliath Unilever (LON:ULVR) lifted its FY26 volume growth outlook after delivering better-than-expected underlying sales growth for Q3. Unilever’s Power Brands continued to lead growth and the beat also reflected strong demand for its products across emerging markets.
For FY26, the Dove-to-Dermalogica maker now expects underlying volume growth of ‘at least 3%’ and H2 underlying sales growth of ‘around 5%’.
The FTSE 100 company is sticking with previous guidance for FY26 underlying sales growth of 4% to 6% and a ‘modest’ uptick in underlying operating margin from FY25’s 20%.
Despite the beat, shares in the Anglo-Dutch conglomerate were down in early dealings with investors unimpressed by flat sales in the Foods business. And the broader London market was lower amid investor caution ahead of the UK Budget announcement.
Q3 sales beat
Unilever’s underlying sales rose 5.2% in Q3, ahead of the 4.8% analysts were expecting. The rise reflected encouraging volume growth of 2.9% and a 2.3% increase in prices in response to higher commodity costs.
Once again, emerging markets were a key growth driver, led by India and continued strength in Latin America and South East Asia.
| Q3 – Key figures | Underlying sales growth | Turnover (€bn) | versus FY25 |
| Unilever | 5.2% | 13.3 | 6.7% |
| Beauty & Wellbeing | 5.7% | 3.5 | 9.5% |
| Personal Care | 6.3% | 3.6 | 9.7% |
| Home Care | 9.1% | 3.1 | 7.5% |
| Foods | 0.1% | 3.1 | -% |
Source: Unilever, Q3 trading statement
Unilever’s Power Brands generated underlying sales growth of 5.8% and 3.3% volume growth. And its Beauty & Wellbeing, Personal Care and Home Care units all delivered strong volume-led growth.
Once again, the laggard was Foods, where sales were broadly flat as emerging market and Unilever Food Solutions growth was offset by softer retailer demand in developed markets.
Performing while transforming
‘We are performing while transforming Unilever,’ said CEO Fernando Fernandez. ‘We are becoming simpler and sharper, with greater focus and stronger execution as we drive Desire at Scale across our brands.
‘This progress gives us confidence that we will now deliver at least 3% volume growth for the full year.’
Foods separation on track
Unilever said its planned combination of the Foods business with US spices maker McCormick (NYSE:MKC) remains on track, with regulatory filings submitted and completion work progressing.
Management believes the separation will unlock value by shaping Unilever into a ‘leading pureplay HPC (Home and Personal Care) company’, whilst creating a ‘global flavour powerhouse in Foods’.
Under the stewardship of Fernandez, Unilever has sharpened its focus on faster-growing beauty and personal care brands while slashing costs. Judging by the latest forecast-beating quarter, the strategy is working. And Unilever’s income-hungry shareholders were treated to a 3% hike in the quarterly dividend to €0.4664 per share.
Sharesify is particularly pleased to see that the Hellmann’s to Horlicks maker’s growth is finally being driven by consumers purchasing more products. Price increases help to generate top-line growth. However, they also risk putting off shoppers grappling with cost-of-living pressures, who may trade down to cheaper brands as a result.
Though the market has yet to warm to the transaction, Foods’ continued sluggish performance in Q3 strengthens the case for the McCormick combination.
