ii view: Unilever's cautious outlook holds back shares

Full-year results to 31 December

• Revenue down 3.8% to €50.5 billion (£43.9 billion).
• Adjusted operating profit down 1.1% to €10.1 billion (£8.8 billion)
• Fourth quarter dividend of 40.52p, up 3% from Q3 

Guidance:

• Now expects full year 2026 underlying sales growth towards the lower end of its multi-year guidance range of 4% to 6%
• Plans share buybacks of €1.5 billion in 2026

Chief executive Fernando Fernandez said: 

"In 2025 we became a simpler, sharper, and faster Unilever. Our underlying sales growth improved throughout the year as we landed a strong innovation plan, drove improvements in key emerging markets and successfully completed the Ice Cream demerger. 

“We have set clear priorities for growth - building a brand portfolio for the future, with more Beauty, Wellbeing and Personal Care, prioritising premium segments and digital commerce, and anchoring our growth in the US and India.

“Despite slowing markets, our sharper focus and disciplined execution underpin our confidence for 2026 and beyond."

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ii round-up:

Unilever (LSE:ULVR) today reported annual 2025 sales and profits that broadly matched City forecasts, but with the owner of brands including Dove, Sunsilk and Hellmann’s mayonnaise offering a cautious outlook. 

Unilever predicts adjusted sales for the 2026 year ahead within its multi-year target range of 4-6%, but with performance likely to be at the lower end of the scale due to soft market conditions. A planned share buyback for the year ahead of €1.5 billion (£1.3 billion) remains unchanged from 2025. 

Shares in the FTSE 100 company fell 2% in UK trading having come into these latest results up by 7% during 2025. The FTSE 100 rose by just over a fifth last year. US headquartered rival Procter & Gamble Co (NYSE:PG) and maker of brands including Head & Shoulders, Fairy and Gillette, fell 14% last year. 

In December, and in a move to increase focus, Unilever demerged its The Magnum Ice Cream Co NV (LSE:MICC) business, providing it with its own share listing.   

Unilever 2025 revenues, excluding Magnum, fell 3.8% to €50.5 billion. Adjusted operating profit retreated 1.1% to €10.1 billion.

Group adjusted sales for the latest fourth quarter to 31 December rose 4.2%, up from a gain of 4% in the prior third quarter, although still towards the lower end of its 4% to 6% multi-year guidance range.

Geographically, improving sales for markets Brazil, India and Indonesia countered slower growth for North America and Europe. 

A fourth quarter dividend of 40.52p, and payable to eligible shareholders on 10 April, is up 3% from the prior third quarter. 

Broker Morgan Stanley reiterated its ‘overweight’ stance on Unilever shares post the results. A first quarter trading update is scheduled for 30 April.  

ii view:

Unilever is major provider of consumer goods across the four areas of Beauty and Wellbeing, Personal Care, Home Care and Foods. Other group brands include Cif, Comfort, Horlicks and Knorr.
Sold in more than 190 countries, Unilever products are estimated to be used by around 3.4 billion people every day. 

Pushed by activist investor Nelson Peltz, Unilever has been pursuing a growth action plan, simplifying activities and the number of products sold, as well as pushing improvements in productivity.   

For investors, pressured consumer incomes globally will likely be seeing many of its customers looking towards lower-cost non-branded goods as alternatives. A forecast price/earnings (PE) ratio above the three-year average may suggest the shares are not obviously cheap. Competitors such as Proctor and Gamble are not standing still, while currency movements can hinder performance.  

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More favourably, CEO Fernando Fernandez was previously appointed with a remit to make changes quickly, with ice cream now demerged and ten other transactions closed or announced since the start of 2025. Cost savings of €670 million have been made to the end of 2025, with a further €130 million targeted over 2026. A diversity of products and geographical regions exist including emerging markets, while the shares currently offer an estimated future dividend yield of around 3%.

In all, and despite ongoing risks, strong brands and a self-help programme continue to leave this consumer goods giant worthy of its place in many investor portfolios.  

Positives: 

• Diversity of products and geographical regions
• Cost saving programme

Negatives:

• Pressured consumer incomes
• Discount retailers often only stock their own branded labels

The average rating of stock market analysts:

Cautious buy