Unilever upgrades 2026 outlook as volume growth accelerates

Unilever PLC has upgraded its full-year outlook after reporting a strong, volume-led performance for the first half of 2026.

Underlying sales growth reached 4.8%, driven mainly by customers buying more products rather than Unilever relying on price rises. The pace accelerated during the second quarter, when underlying sales grew 5.8% and volumes increased 5.5%.

That second-quarter volume performance was Unilever's best in more than a decade. The key question for investors is whether this momentum can continue as pricing becomes a bigger part of growth during the second half.

Unilever's first-half results at a glance

Metric	First half 2026	Change
Turnover	€25.6 billion	0.5%
Underlying sales growth	4.8%	Not applicable
Underlying volume growth	4.2%	Not applicable
Underlying price growth	0.6%	Not applicable
Underlying operating profit	€5.2 billion	0.9%
Underlying operating margin	20.3%	Up 10 basis points
Underlying EPS	€1.61	2.4%
Diluted EPS	€1.38	Down 2.5%
Free cash flow	€1.5 billion	Up from €1.1 billion
Net debt	€26.0 billion	Up from €23.1 billion

Underlying sales growth strips out acquisitions, disposals and currency movements to provide a clearer view of trading performance. Volume growth measures the contribution from the amount and mix of products sold.

The 4.2% first-half volume increase is therefore encouraging. It suggests Unilever's growth was supported by genuine consumer demand rather than being heavily dependent on raising prices.

Reported turnover rose just 0.5% to €25.6 billion because a 4.9% adverse currency impact offset much of the operational growth.

Power Brands drive the strongest growth

Unilever's Power Brands accounted for 78% of turnover and delivered underlying sales growth of 6.0%, including 5.4% volume growth.

These larger brands remain central to management's strategy of concentrating investment on fewer, more scalable products. Dove, Sunsilk and Vaseline each achieved double-digit, volume-led growth within Beauty & Wellbeing.

Performance across the four business groups was mixed, although each delivered volume-led growth during the half.

Business group	Underlying sales growth	Volume growth	Underlying margin
Beauty & Wellbeing	5.9%	4.5%	19.5%
Personal Care	4.8%	4.1%	22.2%
Home Care	7.6%	7.4%	15.8%
Foods	1.2%	1.2%	23.3%

Home Care was the fastest-growing division, helped by India and Brazil. Its underlying sales increased 7.6%, with nearly all of that coming from volume.

Beauty & Wellbeing also performed well. Growth accelerated to 8.1% in the second quarter, supported by Dove, Sunsilk, Vaseline and Unilever's prestige beauty brands.

Foods remains the weak spot

Foods was clearly the least impressive part of the update. First-half underlying sales growth was 1.2%, slowing to just 0.2% during the second quarter.

Management highlighted softer developed markets and increased competition in US condiments. Unilever is taking action to address lost market share in premium and avocado mayonnaise, with improved performance expected during the second half.

Foods underlying operating profit fell 4.3%, although its underlying margin remained flat at 23.3%. Commodity inflation and additional investment in the customer proposition put pressure on gross margin.

This matters because Unilever plans to combine Foods with McCormick. The separation work is progressing, but completion is not expected until mid-2027 at the latest and remains subject to shareholder and regulatory approvals.

The proposed transaction would leave Unilever as a more focused health and personal care business, but investors still need to account for execution, regulatory and integration risks.

Emerging markets provide the momentum

Emerging markets generated 60% of group turnover and delivered underlying sales growth of 7.0%, including 5.8% volume growth. Growth accelerated to 8.3% during the second quarter.

India grew 8% in the first half and 10% in the second quarter. Indonesia grew 7%, while Latin America delivered 7.6% growth. Brazil returned to double-digit growth during the second quarter following corrective actions taken during 2025.

Developed markets were more subdued, with underlying sales growth of 1.5%. North America grew 2.7%, supported by Personal Care and prestige beauty, but Europe declined 0.9% amid softer markets and weaker Foods pricing.

This geographical split is important. Emerging markets are providing meaningful volume growth, but they can also expose reported results to currency volatility. That was visible in the 4.9% currency headwind against first-half turnover.

Margins hold despite cost pressure

Underlying operating margin increased by 10 basis points to 20.3%. A basis point is one-hundredth of a percentage point.

Gross margin fell 70 basis points to 46.8%, reflecting commodity inflation, promotional spending and restrained pricing. However, lower overheads offset this pressure.

Unilever completed its €800 million productivity programme ahead of schedule. The programme was launched in 2024 to simplify the business and remove costs left behind following the Ice Cream separation.

Brand and marketing investment remained substantial at 16.1% of turnover. Maintaining investment while protecting the overall operating margin is a positive feature of the results, although gross-margin pressure remains worth watching.

Cash flow improves, but debt moves higher

Free cash flow increased to €1.5 billion from €1.1 billion. The improvement reflected slightly higher operating profit and better working capital, partly offset by increased tax payments and capital expenditure.

Net debt, however, rose to €26.0 billion from €23.1 billion at the end of 2025. This was driven by dividends and the €1.5 billion share buyback completed during the first half.

The net debt-to-underlying EBITDA ratio stood at 2.3 times. Unilever expects this to fall to around two times by the end of 2026, but delivery will depend on cash generation and capital allocation.

The quarterly dividend is €0.4664 per share, unchanged from the first quarter and 3.0% higher than the second-quarter dividend for 2025. Unilever also expects separation proceeds and operational performance to support total buybacks of €6 billion between 2026 and 2029.

Upgraded guidance raises the second-half test

Unilever now expects full-year underlying sales growth within its 4% to 6% multi-year range, with around 3% volume growth. Second-half underlying sales growth is expected to be 4% to 5%, led by pricing.

Management also anticipates a modest improvement in the full-year underlying operating margin from 20.0% in 2025.

The first half provides a solid starting point. Volumes are growing, Power Brands are outperforming and the productivity programme is complete. The main areas to monitor are the expected shift towards pricing, weaker Foods performance, commodity pressure, currency movements and the rise in net debt.

Investors can review the figures and full statutory disclosures in the original company announcement.

What investors should watch next

The next test is whether Unilever can maintain healthy volumes as price growth accelerates. Successful delivery would support margins and reinforce the strength of its brands, while a sharp volume slowdown would weaken the quality of the upgraded outlook.

Progress on the McCormick transaction will also remain important. For now, the half-year results show stronger operating momentum, but the balance between pricing, volumes, costs and debt will determine whether that momentum translates into sustained earnings and cash-flow growth.