Unilever has posted better-than-expected first-half sales figures, boosted by higher prices to offset increased costs. However, the consumer goods giant backed recent statements by the UK’s leading supermarkets that food inflation has now peaked.
The group’s underlying sales in the first six months of 2023 climbed 9.1% to €30.4bn, driven by price growth of 9.4% which only led to volumes slipping 0.2%. The average hike in prices during the half compared to a 13.3% rise in the final three months of last year, with Unilever’s second-quarter sales growth slowing to 7.9% as a result.
Speaking to reporters this morning, Unilever’s outgoing Chief Financial Officer Graeme Pitkethly said: “We’re past peak inflation now, but there will continue to be a high level of pricing growth within our reported numbers. The majority of pricing you’ll see is carry forward pricing as we roll through the quarters.”
He added: “Where we’re really shifting the business in terms of focus is towards volume growth,” noting that it “remains quite volatile and uncertain, but we’re definitely trending in the right direction.”
Over the six-month period, there was robust growth in all of Unilever’s five divisions. Beauty & Wellbeing grew underlying sales by 9.1%, with volume growth of 3.8% driven by prestige beauty and hair care. Personal Care underlying sales were up 10.8%, driven by price and 3.2% volume growth with strong sales of deodorants. Home Care grew 8.4%, with volumes almost flat in emerging markets and down in Europe. Nutrition grew 10.4%, with strong growth of dressings, although volumes slipped 1.9% due to a “challenging” European market. Ice Cream sales grew 5.7%, but volumes were down 5.2% due to a weaker in-home segment.
Meanwhile, the group’s underlying operating profit improved 3.3% to €5.2bn, with a 10bps margin improvement to 17.1%. The increase comes at a time when the UK’s competition regulator is seeking evidence on whether shoppers are getting a raw deal at the tills. Last week, the Competition and Markets Authority (CMA) cleared supermarkets of making excessive profits. However, the regulator has now turned its attention to the supply chain, which includes companies such as Unilever.
The Anglo-Dutch company said today that it was raising its forecast for revenue growth for the year to over 5%, helping send shares in the company up over 5%. “What the market’s taking positively today is that you haven’t seen a sharp decline in volumes despite them pushing through pricing,” said Richard Saldanha, a fund manager at Unilever investor Aviva.
The results are the first since Unilever’s new Chief Executive Hein Schumacher took over this month. He takes the reins after a turbulent period in which the company has faced growing investor discontent over its disappointing trading performance and share price, as well as the unsuccessful attempt to buy the consumer health division of GSK for £50bn in late 2021.
Speaking today, Schumacher said his task ahead was to leverage Unilever’s “strong fundamentals” to drive improved performance and competitiveness.
He added: “This is our absolute priority, and it will mean bringing greater focus and sharper execution, with science-backed innovations and investment behind our brands. This opportunity to step up our performance and unlock our full potential makes it an exciting time to lead Unilever.”
Schumacher plans to outline his plans for Unilever when the group reports third-quarter results in October.
Charlie Huggins, portfolio manager at Wealth Club, said today’s results were “solid but uninspiring”, adding that investors would want to see a higher margin.
“The question is – should Unilever be doing better? The answer is almost certainly yes. Margins remain well below pre-pandemic levels, and below the bonnet of that robust underlying sales growth, there are problems.”
