Unilever lifts sales guidance after beating forecasts

London — Unilever raised its full-year sales guidance after beating first-half underlying sales forecasts as the maker of Dove soap and Knorr stock cubes hiked prices to counter soaring costs, sending its shares up 2.7% on Tuesday.

One of the biggest consumer companies in the world, making everything from laundry detergent to ice cream, Unilever’s costs have surged since the start of the Covid-19 pandemic created global supply chain logjams.

War in Ukraine has since boosted energy costs and sent prices of raw materials such as wheat, sunflower oil and pulp used in packaging to record highs.

Its first-half operating profit margin fell to 17% from 18.8% a year earlier, even as Unilever raised prices 9.8%.

The price hikes come despite retailers pushing back against consumer product suppliers, worried about ceding margins and alienating shoppers.

US giant Walmart, the world’s biggest retailer, on Monday slashed its profit forecast as surging prices for food and fuel prompted customers to cut back on spending.

“We did see their news this morning, but I think there are many, many aspects to that don't fully connect with Unilever,” the British firm’s CFO Graeme Pitkethly said on a call with journalists, noting that Walmart's announcement was related more to general merchandise and clothing, and that inflation would vary by region.

However, Pitkethly added: “We expect peak inflation to come in the second half of the year. I don't think we'll be able to catch up in the current quarter.”

Costs pressure

Bernstein analysts in a note described the results as “good”, with pricing better than expected and volumes in line, boding well for the company's ability to keep investing in growth.

Underlying sales grew 8.1%, beating analyst expectations of 7.2% growth, according to a company-provided consensus for the half to June 30.

Unilever said on Tuesday it expected to beat its previous forecast for full-year underlying sales growth of 4.5% to 6.5%.

Its shares cheered the results, lifting 2.7% as of 7.42am GMT.

“Underlying sales growth of 8.1% was driven by strong pricing to mitigate input cost inflation, which, as expected, had some impact on volume,” CEO Alan Jope said. “The challenges of inflation persist and the global macroeconomic outlook is uncertain.”

Its half-year turnover rose 14.9% to €29.6bn even as sales volumes declined 1.6%.

CFO Pitkethly said Unilever had raised spending on advertising and branded marketing by €200m in the first half to prevent shoppers from trading down to private-label products.

The company kept its quarterly dividend steady at €0.4268 per share and said it had completed a €750m share buyback tranche on July 22, part of a €3bn plan announced in 2021.

Reuters