Release Date: February 27, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Haleon PLC (HLN, Financial) reported strong momentum in emerging markets, particularly in India and China, contributing to overall growth.
- The oral health division is performing well, with plans to expand distribution and geographical rollout, supported by strong innovation.
- The company is confident in achieving 4% to 6% growth for the full year, driven by innovation and market expansion strategies.
- Haleon PLC (HLN) has increased A&P investment by 10.2% to support growth, particularly in expert coverage and sampling.
- The company has a clear capital allocation strategy, including a GBP500 million share buyback, while maintaining headroom for bolt-on M&A opportunities.
Negative Points
- The company experienced a low cold and flu season, leading to higher inventory levels and impacting respiratory health and pain relief categories.
- FX headwinds are expected to continue in 2025, affecting both top-line and margin, with emerging markets contributing to currency fluctuations.
- The Eroxon brand launch has been slower than expected, impacting initial trial and results, though it is incorporated in the full-year guidance.
- There is pressure on inventory levels in the US drug channel due to struggling retailers, affecting cash management and inventory dynamics.
- The company faces challenges in working capital optimization, particularly in inventory management, which remains a significant opportunity for improvement.
Q & A Highlights
Q: Given the strong momentum in emerging markets like India and China, and the oral health sector, is the soft start to 2025 mainly due to mature markets like the US and the OTC divisions? What underpins your confidence in a second-half reacceleration?
A: The soft start is partly due to a low cold and flu season, impacting inventory levels. We are confident in achieving 4% to 6% growth due to strong business performance, innovation, and market share gains. The oral health division, particularly the clinical platform, is expanding into more markets, supporting our growth outlook. - Brian McNamara, CEO
Q: Can you explain the FX headwind expected in 2025 and its impact on your financials? Also, how does the GBP500 million share buyback affect your M&A strategy?
A: The FX headwind is due to geographical diversification and emerging market currency fluctuations. We use Bloomberg forward rates for forecasting. Despite the share buyback, we have the capacity for bolt-on M&A if opportunities arise that strengthen our portfolio. - Dawn Allen, CFO
Q: How do you view the VMS category's growth, and what is the innovation pipeline like? Also, can you elaborate on the inventory revaluation's impact on profit growth?
A: The VMS category is stabilizing, with Centrum as a key global brand. Innovation continues to drive growth. Inventory revaluation, a benefit last year, impacts first-half profit phasing but is accounted for in our full-year guidance. - Brian McNamara, CEO and Dawn Allen, CFO
Q: Could you provide insights into the US retail landscape and its impact on your business? Also, what are the opportunities for working capital efficiencies?
A: Some US retailers are struggling, affecting inventory levels, but the main impact is seasonal. We see significant opportunities in working capital, particularly in inventory management and supply chain optimization. - Brian McNamara, CEO and Dawn Allen, CFO
Q: With increased ownership of the China JV, are there any changes in accounting or oversight? How does this relate to your M&A and innovation strategy?
A: Full ownership of the China JV allows for more efficient operations and strategic alignment. While we won't comment on specific M&A targets, we focus on strategic and financially sound opportunities that enhance our portfolio. - Brian McNamara, CEO and Dawn Allen, CFO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
