Unilever | Q3 2026 Trading Statement | Results | Webcast & Q&A - UNILEVER PLC

Explicit Guidance:

• Full Year 2026: Underlying sales growth expected within the 4–6% multi-year range; underlying volume growth expected to be at least 3% (upgraded from prior expectations).
• Second Half 2026: Underlying sales growth expected to be around 5%.
• Full Year 2026 Operating Margin: Modest improvement in underlying operating margin versus 2025, despite a tougher cost environment.
• 2027 Cost Inflation: Expect inflation for HPC to be lower than 2026 levels, while Foods inflation will be higher; aggregate group inflation expected in the range of €700m–€1bn (approx. 2.5%–3.5% of the cost base).
• 2027 Pricing: Pricing contribution expected to be higher in 2027 compared to the 2026 average to cover existing and new inflationary pressures.
• Currency Impact: Full-year currency impact on turnover expected to be approximately -2%; impact on underlying operating margin expected to be -30 basis points.
• Net Interest Cost: Guided to be around 3% for the next 12 months (reflecting refinancing in H2 and proceeds from the Foods transaction to pay down debt).

Business-Segment Outlook:

• HPC (Home & Personal Care): Expected to drive continued volume growth; Home Care growing at 9.1% in Q3 with 5.4% volume; Personal Care growing at 6.3%.
• Foods Business: Performance expected to improve in 2027 versus 2026; U.S. condiment performance remains below expectations due to competition in premium (avocado oil) and discount segments, with corrective pricing and innovation actions rolling out through 2027.
• Well-being: Expected to show sequential improvement in Q4; projected to grow ahead of the market in the second half of next year following channel rebalancing (reducing exposure to club channels and optimizing DTC).
• Emerging Markets: Expected to continue outperforming developed markets; specific momentum anticipated in India (15% growth in Q3), Brazil (accelerating volume share), and China (improving volume growth via social commerce).
• Developed Markets: Europe remains subdued; North America expected to return to growth in Q4 (Q3 was an outlier) with momentum in personal care and beauty offsetting weakness in foods and well-being.

Market and Competitive Outlook:

• Pricing & Inflation: Pricing will accelerate in Q4 2026 to offset input costs (kerosene, logistics, FX); a calibrated approach to balance volume retention vs. price increases.
• Competition: Notable increase in competition in U.S. condiments from discount brands gaining national distribution; local competitors in Home Care in emerging markets have reduced investment, allowing Unilever to gain share.
• Volume Strategy: Core ambition remains to deliver at least 2% volume growth consistently; pricing will not be used as a primary tool for margin management but to ensure competitiveness.
• Product Mix: Home Care growth is strong but has lower gross margins (~35%) compared to the group average (~47%), creating a structural headwind on gross margin despite volume gains.

Macro / Industry Outlook:

• Commodity Costs: Global crude supply normalized to ~80 million barrels/day (pre-war levels), but high risk premiums and geopolitical instability in the Middle East sustain price volatility.
• Vegetable Oils: Palm oil and other key commodities at historical highs; El Niño expected to impact vegetable oil supplies in the second half of 2027, potentially driving higher inflation in that period.
• FX: Currency headwinds have eased; future FX volatility remains a risk, particularly in emerging markets (e.g., Brazil's recent devaluation).
• Cost Environment: 2027 inflation is expected to be broader than 2026 (Foods inflation higher due to soy), though HPC inflation is expected to be lower.

Strategic Initiatives:

• Foods Separation (McCormick): Transaction progressing well; antitrust filings and TSA arrangements on track; internal ambition remains to close the separation prior to the first half of 2027.
• Portfolio Transformation: Unilever transforming into a focused HPC pure-play company; "Desired Scale" strategy continuing to concentrate investment behind Power Brands (now ~79% of turnover).
• Innovation Rollouts: "Wonder Wash" now in 40+ markets; "SIF Infinite Clean" available in 8 markets; new variants for Omo and Comfort rolling out in Southeast Asia and China.
• Channel Optimization: Active rebalancing of Well-being portfolio away from high-discount cloud channels (Amazon/Club) toward mass retail and DTC to improve net revenue realization.
• Financial Discipline: Capital savings and overhead controls deployed to manage the P&L; proceeds from Foods transaction to be used for debt paydown, avoiding long-term bond refinancing until 2028.

Risks and Headwinds to Outlook:

• Geopolitical & Logistics: Potential disruptions to logistics and geopolitical tensions in the Middle East could sustain crude oil price volatility and risk premiums.
• U.S. Condiments: Continued pressure from value players and discount brands expanding nationally; premium avocado oil segment growth driven by competitors.
• Brazil Tax Changes: Potential tax changes effective January 1st are being monitored; current guidance factors in some elements, but final implementation details are pending.
• Input Cost Volatility: Inflation estimates for 2027 are wide ranges (€700m–€1bn) due to uncertainty in energy, vegetable oils (El Niño), and FX.
• Competitive Reaction: Local competitors in emerging markets may eventually adapt supply chain issues and resume investment, potentially slowing Unilever's share gains.

Management Tone on the Future:

• Confidence: High confidence in delivering the upgraded guidance despite a "volatile cost environment" and "mixed consumer conditions."
• Strategy: Strong conviction in the "perform and transform" approach; emphasis on volume growth as the true measure of demand and the primary KPI.
• Hedges: Management repeatedly hedges inflation estimates for 2027 with "wide ranges" and notes that "blowout" geopolitical scenarios would significantly alter dynamics.
• Forward-Looking: Positive outlook for 2027, expecting a "modest margin improvement" and volume growth above 2%, driven by productivity and brand equity rather than pure pricing.

Miscellaneous:

• Capital Markets Day: Scheduled for next week in New York to detail the transformation roadmap, "Desired Scale" strategy, and specific 2027 cost/inflation initiatives.
• Board Changes: Director Ruby Liu resigned for personal reasons; no structural change to the board's oversight capability.
• Acquisitions: Grunz and Dr. Squatch acquisitions contributing to turnover; Grunz to enter underlying sales growth measure in June 2027.
• KPIs: Underlying sales growth is the primary growth metric; volume growth is the key indicator of demand strength.