Unilever 2025: volume-led growth, fatter margins, and a fresh €1.5 billion buyback
Unilever has posted a clean, volume-led year with margin expansion and more cash heading back to shareholders. Underlying sales growth (USG) rose 3.5% in 2025, with 1.5% coming from volume and 2.0% from price. The fourth quarter was stronger at 4.2% USG with 2.1% volume – a healthy sign given softer markets.
Note: Following the Ice Cream demerger in December, all figures below refer to continuing operations unless stated.
Quick jargon check:
- USG – underlying sales growth: excludes currency and M&A, showing like-for-like growth.
- UVG – underlying volume growth: the volume piece of USG.
- UPG – underlying price growth: the price/mix piece of USG.
Key numbers investors should note
| Metric | 2025 |
|---|---|
| Turnover | €50.5 billion, down (3.8)% (currency (5.9)%, net disposals (1.2)%) |
| Underlying sales growth (USG) | 3.5% (UVG 1.5%, UPG 2.0%) |
| Q4 USG | 4.2% (UVG 2.1%) |
| Power Brands (78% of turnover) | USG 4.3%, volume up 2.2% |
| Underlying operating profit (UOP) | €10.1 billion, down (1.1)% |
| Underlying operating margin (UOM) | 20.0%, up 60bps |
| Gross margin | 46.9%, up 20bps |
| Underlying EPS | €3.08, up 0.7% |
| Diluted EPS | €2.59, up 6.2% |
| Free cash flow (FCF) | €5.9 billion; 100% cash conversion |
| Net debt | €23.1 billion (2.0x net debt/UEBITDA) |
| Dividend (Q4 interim) | €0.4664 per share, up 3% vs Q3 2025 |
| Share buyback | New €1.5 billion programme to start in Q2 2026 |
What drove the year: margins and mix doing the heavy lifting
The big picture is encouraging: Unilever protected and extended margins while nudging volumes up. Underlying operating margin rose 60bps to 20.0% thanks to a 20bps gross margin increase (productivity, volume leverage and mix) and a 50bps improvement in overheads. Brand and marketing investment also went up, to 16.1% of turnover (+10bps), which is what you want to see when you’re leaning into Power Brands.
Underlying operating profit dipped (1.1)% to €10.1 billion, but that’s currency doing the damage. Operationally, the engine is running better. Currency knocked turnover by (5.9)% too, with hits from Latin America, the Indian Rupee, the US dollar, and the Turkish Lira versus the euro.
Divisions: Personal Care leads; Beauty & Wellbeing strong; Foods and Home Care steady
- Personal Care: USG 4.7% (UVG 1.1%, UPG 3.6%). UOM up 50bps to 22.6%. Premium innovation and price helped; Dove deodorants continued to shine.
- Beauty & Wellbeing: USG 4.3% (UVG 2.2%). UOM 19.2% down (20)bps as Unilever leaned into brand investment. Standouts included double-digit growth in Wellbeing, Vaseline and Dove.
- Home Care: USG 2.6% (UVG 2.2%). UOM up 40bps to 14.9%. Q4 accelerated to 4.7% USG helped by a Brazil recovery and strong India volumes; Wonder Wash is now in 30 markets.
- Foods: USG 2.5% (UVG 0.8%). UOM up a chunky 130bps to 22.6%. Hellmann’s remains the dependable growth engine; developed market growth was flat amid subdued categories.
Power Brands – now a weighty 78% of turnover – grew 4.3% with volume up 2.2%. That’s exactly where investors want the growth concentrated.
Geography: North America and India underpin; Latin America mixed; Europe subdued
- North America: USG 5.3%, with 3.8% volume – a clear positive and ahead of market. Q4 slowed as category growth cooled, but share gains persisted.
- Asia Pacific Africa: USG 4.6% (UVG 3.0%). India up 4% with 3% volume; Indonesia grew 4% with a strong second-half recovery; China flat for the year but grew mid-single digit in Q4.
- Europe: USG 1.5% (UVG 1.2%). Home Care innovation offset weaker Foods; Q4 dipped to 0.1% amid subdued markets.
- Latin America: USG 0.5% with volume down (5.1)% and price up 5.9%. Q4 improved to 3.2% as Brazil stabilised, but it remains the patch to watch.
Portfolio reshaping and Ice Cream demerger: a simpler, sharper Unilever
The Ice Cream demerger completed in December 2025, with The Magnum Ice Cream Company listed and Unilever retaining a 19.85% stake to be sold down in an orderly way. The break-up simplifies Unilever, tightens strategic focus, and removes stranded costs over time – the productivity programme has already delivered about €670 million of the planned €800 million savings (the remaining €130 million is slated for 2026).
Targeted M&A kept the portfolio tilting to higher growth, premium segments: Wild and Dr. Squatch in Personal Care, and Minimalist in India. On the flip side, non-core disposals included Conimex, The Vegetarian Butcher and Kate Somerville, plus post-year-end actions to sell the Indonesia Tea business and Home Care in Colombia and Ecuador, and completion of Graze’s sale.
Cash, debt and shareholder returns
Free cash flow was €5.9 billion, with 100% cash conversion, only slightly down year-on-year due to Ice Cream demerger-related tax on disposals. Net debt reduced to €23.1 billion, with leverage at 2.0x net debt/UEBITDA. In 2025 Unilever returned €6.0 billion via dividends and buybacks, lifted the quarterly dividend to €0.4664 per share, and announced a new share buyback of up to €1.5 billion commencing in Q2 2026.
There was also an 8-for-9 share consolidation in December to maintain comparability post demerger, which has been reflected in per-share figures.
2026 outlook: guidance trimmed to the low end, but margins still edging up
Management expects 2026 USG within 4% to 6%, at the bottom end given slower markets, with at least 2% volume growth and a modest improvement in underlying operating margin versus 20.0% in 2025.
My take: why this matters and what to watch
This is a solid set of results that does the hard – and arguably more durable – bit: growing volume while expanding margins and investing more in brands. Q4 acceleration matters; it suggests the innovation pipeline and execution changes are landing even as markets slow. The focus on the US and India looks sensible given the growth prints.
Less rosy: headline turnover fell on currency, underlying operating profit dipped with FX headwinds, Latin America remains choppy, and Beauty & Wellbeing took a modest margin step back as brand spend increased. None of these are deal-breakers, but they’re the pressure points.
The Ice Cream separation and a string of disposals/acquisitions have made Unilever simpler and more premium-leaning. With net debt down, cash conversion at 100%, a 3% dividend uplift, and a new €1.5 billion buyback, capital returns remain firmly on the agenda.
Key watchlist for 2026
- Volumes in developed markets – can North America keep leading while Europe stabilises?
- Latin America recovery – especially Brazil in Home Care and deodorants after format/pricing resets.
- China and Indonesia momentum – second-half recovery continued, but comps toughen.
- Margin discipline – further modest UOM expansion while maintaining higher brand investment.
- Orderly sell-down of the 19.85% TMICC stake and any redeployment of proceeds.
- Execution of premium Personal Care and Wellbeing acquisitions (Wild, Dr. Squatch, Minimalist) at scale.
Bottom line for investors
Unilever is delivering on the essentials: volume growth, higher margins, disciplined costs, and robust cash returns – with its biggest brands doing the heavy lifting. FX has muddied the optics, but the underlying engine looks stronger. With guidance set prudently at the low end and another buyback on deck, the setup for 2026 is constructive, provided execution in Latin America and Europe improves and premium innovation keeps pulling its weight.
