Consumer goods giant Unilever (LON:ULVR) rallied after delivering forecast-beating sales for Q2. This marked the Anglo-Dutch conglomerate’s best volume quarter in over a decade.
Drawing confidence from a robust H1 performance, the Sunsilk-to-Vaseline maker also raised its FY26 outlook.
Unilever now expects annual underlying sales growth to be within its 4% to 6% multi-year guidance range with around 3% underlying volume growth. Previously, the Dove-to-Domestos brands owner anticipated growth at the lower end of this range.
Investors can also expect a ‘modest improvement’ in underlying operating margin versus the 20% delivered in FY25.
Q2 sales beat
Underlying sales grew 5.8% in Q2, ahead of the 4.3% consensus estimate and marking an acceleration from 3.8% in Q1. Encouragingly, this was led by 5.5% volume growth.
In H1, Beauty & Wellbeing sales grew 5.9%, Personal Care revenue rose 4.8% and Home Care sales skipped 7.6% higher.
Foods proved the laggard with growth of just 1.2%. This helps explain why Unilever is determined to press on with its controversial deal to combine its foods business with spices-to-sauces maker McCormick (NYSE:MKC).
Power Brands outperform
CEO Fernando Fernandez said: ‘Our Power Brands continued to outperform, with all business groups delivering volume-led growth. Emerging markets showed momentum – India, Indonesia and Latin America all delivered strong growth – while North America again outperformed its market.’
Fernandez added: ‘Our combination of Foods with McCormick is progressing well and will unlock significant value, making Unilever a focused pureplay HPC company, while giving Foods the platform to thrive as part of a global powerhouse in flavour.’
Under the leadership of Fernandez, Unilever has sharpened its focus on faster-growing beauty and personal care brands. At the same time, Unilever has implemented a major cost-cutting drive. Impressively, its €800 million productivity programme has been completed ahead of schedule.
Today’s solid H1 results and Q2 beat give Fernandez something to shout about. Unilever’s growth is finally being driven by consumers purchasing more products, not just through price increases which risk alienating cash-strapped shoppers.
Not everyone is convinced by the decision to separate the foods business. Sceptics include Terry Smith, who has sold Unilever from the Fundsmith Equity Fund, having previously held the stock since the fund’s inception in 2010.
However, the reality is Unilever has been retreating from the slower-growing foods industry for years. Today’s Q2 sales beat was driven by the core business and has probably strengthened the case for the McCormick combination. Unilever expects the separation to complete by mid-2027 at the latest.
Read the press release here: https://www.unilever.com/investors/
