20-F: Unilever 2025: Strong Growth, Ice Cream Demerger Complete

Unilever reports solid 2025 performance with 3.5% underlying sales growth, 20.0% underlying operating margin, and successful demerger of its Ice Cream business.

Summary

• Turnover for 2025 was €50.5 billion, a 3.8% decrease from the prior year, primarily due to adverse currency movements of 5.9% and net disposals of 1.2%.
• Underlying sales growth (USG) was 3.5%, comprising 1.5% underlying volume growth (UVG) and 2.0% underlying price growth (UPG), marking 12 consecutive quarters of UVG.
• Operating profit increased by 2.4% to €9.0 billion, while underlying operating profit decreased by 1.1% to €10.1 billion, mainly due to adverse currency impacts.
• Underlying operating margin improved by 60 basis points to 20.0%, driven by a 20 basis point increase in gross margin to 46.9% and a 50 basis point improvement in overheads.
• Free cash flow was €5.9 billion, representing 100% cash conversion, a slight decrease from €6.3 billion in 2024 due to higher taxes related to the Ice Cream demerger.
• Underlying earnings per share (EPS) rose 0.7% to €3.08, and diluted EPS increased 6.2% to €2.59.
• The demerger of the Ice Cream business was completed on December 6, 2025, with The Magnum Ice Cream Company (TMICC) listed as a standalone entity. Unilever retained a 19.85% stake in TMICC.
• Power Brands, accounting for 78% of turnover, delivered strong underlying sales growth of 4.3% and volume growth of 2.2%.
• Strategic acquisitions in 2025 included Dr. Squatch, Minimalist, and Wild, while non-core brands like The Vegetarian Butcher and Kate Somerville were disposed of.
• Net debt at December 31, 2025, was €23.1 billion, resulting in a net debt/underlying EBITDA ratio of 2.0x.

Sentiment

Score: 8

Explanation: StockSavvy.ai views this as a strong performance, particularly in underlying metrics and strategic execution, despite currency headwinds. The successful demerger and clear future strategy are positive indicators.

Positives

• Achieved solid 3.5% underlying sales growth and 1.5% underlying volume growth in a challenging market, marking 12 consecutive quarters of volume growth.
• Expanded gross margin by 20 basis points to 46.9% and underlying operating margin by 60 basis points to 20.0%.
• Delivered strong cash conversion of 100% with €5.9 billion in free cash flow.
• Successfully completed the demerger of the Ice Cream business, simplifying the portfolio and sharpening strategic focus.
• Power Brands, representing 78% of turnover, showed strong performance with 4.3% underlying sales growth and 2.2% volume growth.
• Reported significant improvement in Total Shareholder Return (TSR) over two years, up 26.8%, outperforming peers.
• Increased brand and marketing investment to 16.1% of turnover, supporting brand strength and premium innovations.
• Achieved sustainability goals for 2025, including 25% post-consumer recycled plastic use and collecting/processing more plastic packaging than sold.
• Implemented 12 new regenerative agriculture projects, bringing the total to 34 across 17 countries.

Negatives

• Total turnover decreased by 3.8% due to significant adverse currency headwinds of 5.9% and net disposals of 1.2%.
• Underlying operating profit declined by 1.1%, primarily due to adverse currency movements.
• Latin America experienced a challenging year with volume declines, impacted by economic and political uncertainty.
• Underlying operating margin for the Beauty & Wellbeing business group decreased by 20 basis points to 19.2% due to increased brand and marketing investment.
• Employee turnover rate increased to 17.2% in 2025 from 14.5% in 2024, mainly attributed to the company-wide productivity program.
• Unilever's Total Shareholder Return significantly underperformed its peers in the five years leading up to the end of 2023.

Risks

• Consumer and Channel: Failure to anticipate and respond to rapidly evolving consumer behaviors, digital adoption, and technological disruption could impact brand equity, portfolio competitiveness, and market share.
• Portfolio Management: Sub-optimal strategic investment choices across Business Groups, markets, and channels may result in missed opportunities to strengthen margins or accelerate growth. (Level of risk: Increased)
• Climate and Nature: Physical risks from climate change (e.g., extreme weather) and transition risks (e.g., carbon pricing, regulations) could affect supply security, cost structures, and consumer demand. Ecosystem degradation, reduced crop yields, and water scarcity are also concerns.
• Plastic Packaging: Challenges in meeting consumer and regulatory expectations for sustainable packaging, dependence on industry partners and waste management infrastructure, and compliance with emerging regulations (e.g., Extended Producer Responsibility schemes) pose risks.
• Talent: Inability to attract and retain talent with future-fit skills and to embed a high-performance culture could affect the company's ability to compete, innovate, and deliver sustained business results.
• Business Operations: Exposure to geopolitical tensions, physical disruptions, trade restrictions, tariffs, and issues at key suppliers could impact the supply chain, manufacturing sites, distribution networks, and product costs.
• Safe and high-quality products: Evolving laws and regulations concerning product formulation, nutritional standards, and ingredient use may restrict product sales. Risks include raw material contamination, product defects, and labeling errors.
• Information and Cyber Security: Increasing sophistication of ransomware, phishing, and AI-driven threats, coupled with the growing digital footprint and reliance on third parties, could affect core operations, financial performance, reputation, and regulatory compliance. (Level of risk: Increased)
• Business Transformation: Insufficiently robust planning or design choices in major transformation projects (e.g., productivity program, AI adoption) could embed future complexity, constrain efficiency gains, and lead to higher long-term costs. (Level of risk: Decreased)
• Economic and Geopolitical: Adverse economic conditions, political instability, foreign exchange volatility, and price controls, particularly in emerging markets, could impact consumer demand, sales, and profitability. (Level of risk: Increased)
• Legal and Compliance: Non-compliance with diverse laws (e.g., product safety, intellectual property, competition, anti-bribery, data privacy, human rights) by employees or business partners could result in financial penalties, regulatory sanctions, litigation, and reputational damage.

Future Outlook

Unilever anticipates that markets will remain subdued in 2026. The company expects underlying growth for the full year 2026 to be within its multi-year guidance range of 4% to 6%, with at least 2% underlying volume growth, with growth expected at the bottom end of the USG range. A modest improvement in underlying operating margin is also anticipated for the full year. The company will continue to focus on its three fundamental shifts: building 'Desire at Scale' with its brands, reinforcing a 'Play to Win' culture, and rewiring the organization for digital and AI. Capital allocation will prioritize growth and productivity, capacity and margin expansion, brand investment, and portfolio reshaping through bolt-on M&A, while avoiding transformational M&A. Capital returns will include a 60% dividend payout ratio and share buybacks with surplus cash. The scope and baselines of sustainability goals will be reviewed in 2026 following the Ice Cream demerger.

Management Comments

• Ian Meakins (Chair): "Many of the building blocks are now in place. We have the resources, plans and teams necessary to take our performance to the next level."
• Ian Meakins (Chair): "The Board is looking forward to supporting all our teams in 2026 and over the longer term, as we look to meet our value creation ambition of being a consistently great company with volume growth, positive mix and gross margin expansion driving top-third TSR."
• Fernando Fernandez (CEO): "In 2025, we became a simpler, sharper and faster Unilever. We are moving at speed to build a business that drives Desire at Scale in our brands and execution excellence across all channels."
• Fernando Fernandez (CEO): "The progress we have made and the momentum we have built are early evidence of a clear and compelling long-term strategic framework."
• Fernando Fernandez (CEO): "We still have a long way to go, but by enabling us to accelerate volume growth and drive gross margin expansion, we believe we can cement Unilever's position in the top third of peer companies in the delivery of total shareholder return."
• Srinivas Phatak (CFO): "Competitive performance driven through a sharper portfolio, elevated brands and improved execution."
• Mairad Nayager (Chief People Officer): "This year, we have taken decisive steps towards building a winning culture to enable sustained higher performance."
• Leandro Barreto (Chief Marketing Officer, Beauty & Wellbeing): "Our Power Brands delivered a good performance, with many achieving double-digit growth, supported by science-led, premium innovation and social-first marketing."
• Fabian Garcia (Business Group President, Personal Care): "We drove strong growth in hard currency, delivered through our Power Brand premiumisation and category-disrupting innovation."
• Eduardo Campanella (Business Group President, Home Care): "While we accelerated volume growth in challenging market conditions, we continue to focus on stepping up performance in some of our key countries."
• Heiko Schipper (Business Group President, Foods): "We delivered a solid performance despite slow markets, driven by innovation in our Power Brands and by stepping up gross margin through a simplified and sharpened portfolio."
• Michael Stewart (Chief Corporate Affairs and Communications Officer): "Rapid changes in societal expectations, consumer preferences and regulation underline the continued importance of Unilever's sustainability agenda."

Industry Context

StockSavvy.ai notes that Unilever's strategic focus on premiumization, digital commerce, and high-growth categories like Beauty, Wellbeing, and Personal Care aligns with broader consumer goods industry trends. The emphasis on leveraging AI and advanced technology across R&D, marketing, and supply chain reflects an industry-wide push for digital transformation and efficiency. The demerger of the Ice Cream business is a significant portfolio simplification move, consistent with a trend among large conglomerates to divest non-core assets and focus on higher-growth, higher-margin segments. Furthermore, Unilever's commitment to ambitious sustainability goals (climate, nature, plastics, livelihoods) is in line with increasing consumer and regulatory pressures for robust ESG performance across the sector. The challenges in attracting and retaining high-caliber talent in competitive global markets, particularly the US, are also a common theme for multinational corporations.

Comparison to Industry Standards

• Unilever's Total Shareholder Return (TSR) improved by 26.8% over the past two years, significantly outperforming its peer group, which saw an average TSR decline of 8% over the same period.
• In the five years leading up to the end of 2023, Unilever's TSR significantly underperformed its peers.
• Unilever is ranked as the 5th largest company by revenue among its global pay benchmarking peer group of 21 companies, which includes Nestlé, PepsiCo, LVMH, Procter & Gamble, Coca-Cola, L'Oréal, and Reckitt Benckiser.
• The company is the 4th largest by market capitalization among FTSE 100 listed companies.
• In the US, Unilever was ranked second overall among suppliers in the prestigious Advantage Group Survey of retailers, and achieved the number one ranking in both Foods and Personal Care categories in the same survey, indicating strong execution compared to competitors.
• The Performance Share Plan (PSP) underlying sales growth (USG) target range of 3% to 6.3% is considered stretching, with the threshold (3%) set above the median actual USG performance of peers in 2025, and the maximum (6.3%) exceeding the highest consensus forecast (average 3%) within its peer group.
• The PSP's underlying return on invested capital (ROIC) targets of 18.5% to 19.5% are in line with the company's ambition for high-teens ROIC.
• The PSP's relative TSR measure, with threshold vesting at median and maximum at upper quartile versus its peer group, is more challenging than many global peers, where approximately half set their threshold below the median.

Management Changes

Corporate Governance

Legal Proceedings

• Ongoing investigations by national competition authorities in various product markets.
• Litigation arising from alleged asbestos contamination in talcum powder products manufactured and sold decades ago, with financial impact unquantified where not reliably estimable.
• Contingent liabilities for indirect taxes in Brazil totaling €3,557 million as of December 31, 2025, related to a 2001 corporate reorganization, with a possibility of further material tax assessments for unassessed periods.
• Approximately 500 other tax assessments in Brazil, with a total contingent liability of €771 million as of December 31, 2025.

Related Party Transactions

• Sales to joint ventures amounted to €1,018 million in 2025.
• Purchases from joint ventures amounted to €128 million in 2025.
• Receivables from joint ventures were €90 million in 2025.
• Payables to joint ventures were €149 million in 2025.
• Loans to joint ventures amounted to €205 million in 2025.
• Royalties and service fees from joint ventures were €23 million in 2025.
• Principal joint ventures include Unilever FIMA LDA, Gallo Worldwide LDA, Binzagr Unilever Distribution, the Pepsi Lipton Tea Partnership, and Pepsi Lipton International Ltd.
• Nelson Peltz, a Non-Executive Director, is the Chief Executive and founding partner of Trian Fund Management, LP, which held approximately 1.3% of Unilever's issued share capital as of March 2, 2026.

Stakeholder Impact

• Shareholders: The company aims to deliver top-third Total Shareholder Return (TSR) through volume growth, positive mix, and gross margin expansion. The demerger of the Ice Cream business and a €1.5 billion share buyback in 2025, with another planned for 2026, are intended to enhance shareholder value. Dividends of €4.5 billion were paid in 2025.
• Employees: The 'Play to Win' culture and productivity program are designed to improve efficiency and performance, though they contributed to an increased employee turnover rate of 17.2% in 2025. The company is committed to attracting and developing talent, providing a living wage, and ensuring a healthy, safe, and inclusive workplace.
• Customers: Improved execution, particularly in North America, and initiatives like the 'Perfect Store' program aim to strengthen customer relationships and drive category growth. The company was ranked highly in the Advantage Group Survey of retailers.
• Suppliers & Partners: The Responsible Partner Policy (RPP) sets ethical standards for suppliers, promoting integrity, human rights, and environmental responsibility across the value chain. Engagement with suppliers is ongoing to ensure compliance and resilience.
• Planet & Society: Unilever's sustainability agenda focuses on climate, nature, plastics, and livelihoods, aiming to reduce environmental impact (e.g., 100% operational GHG emissions reduction by 2030, 25% PCR plastic use by 2025 achieved) and promote human rights and fair livelihoods in its supply chain.
• Creditors: The company maintains a competitive balance sheet with an A+/A1 credit rating and manages liquidity through diverse debt programs and committed credit facilities, ensuring its ability to meet financial obligations.

Next Steps

• Execute a further share buyback program of €1.5 billion during 2026.
• Continue to focus on the 'Desire at Scale' model, 'Play to Win' culture, and building a 'Fit for AI Age' organization.
• Prioritize investment and resources in Beauty, Wellbeing, Personal Care, digital commerce, premium offerings, and anchor geographies (US and India).
• Review the scope and baselines of sustainability goals in 2026 following the Ice Cream demerger.
• Implement a top-down program in 2026 to address employee challenges related to competing business priorities and process efficiency.
• Deploy the 'Perfect Store' program in key countries during 2026.
• Plan further roll-outs of the Personal Care AI Studio in 2026.
• Open new distribution sites in Thailand and the UK in 2026.
• Complete the pending sales of Graze, Unox, and Zwan, subject to closing conditions and regulatory approvals.
• Close the agreement to sell Home Care businesses in Colombia and Ecuador during 2026.
• Present proposals for a new remuneration policy at the 2026 Annual General Meeting (AGM).
• Submit Srinivas Phatak's appointment as a director for shareholder approval at the 2026 AGM.
• Beln Garijo López's appointment to the Board is expected during 2027.
• An external evaluation of the Internal Audit function is planned for 2027.
• Jonathan Downer will succeed Jonathan Mills as the lead engagement partner for the external audit from the 2026 financial year.
• The Climate Transition Action Plan (CTAP) will be reviewed in 2026 to consider impacts beyond 2030.
• Increase focus on transitioning to paper-based flexible packaging from 2026.
• Conduct annual reviews of direct employees' pay and benefits against an independent living wage benchmark.

Key Dates

Recommendation

Unilever's 2025 results demonstrate strong underlying operational performance, significant margin expansion, and robust cash generation, despite currency headwinds. The successful demerger of the Ice Cream business and a clear strategic focus on high-growth categories, digital commerce, and key markets (US, India) position the company for sustained future growth. The commitment to a 'Play to Win' culture and leveraging AI for productivity further enhances its competitive edge. While some market conditions remain subdued, the company's proactive measures and ambitious targets for underlying sales growth and total shareholder return make it an attractive investment.

Keywords

Unilever, Annual Report, SEC Filing, Consumer Goods, Financial Results, Underlying Sales Growth, Operating Profit, Cash Flow, Ice Cream Demerger, Strategic Priorities, Brand Investment, Sustainability, Risk Management, Corporate Governance, Debt Issuance, Unilever PLC