London (Reuters) – Unilever (NYSE:UL) Plc raised its full-year sales forecast after beating underlying sales forecasts for the first half of the year. The company that makes Dove soap and Knorr stock cubes also raised prices to keep up with rising costs, which sent its shares up 2.9% on Tuesday.
Unilever is one of the biggest consumer companies in the world. It has more than 400 brands, from detergent to ice cream, and its costs have gone up since the COVID-19 pandemic started and slowed down the global supply chain.
Since then, the war in Ukraine has made energy more expensive and sent the prices of raw materials like wheat, sunflower oil, and packaging pulp to record highs. Unilever said it expects net material inflation to be about 4.6 billion euros this year, including 2.6 billion euros in the second half.
Even though Unilever raised prices by 9.8%, its operating profit margin for the first half of the year fell from 18.8% to 17%.
Even though retailers are fighting back against consumer product suppliers because they don’t want to lose profit margins or turn off customers, prices are going up.
Walmart (NYSE:WMT), which is based in the United States and is the world’s largest retailer, cut its profit forecast on Monday because customers are spending less because food and fuel prices are going up.
“We did see their news this morning, but I think there are many, many parts that don’t fully connect with Unilever,” the British company’s chief financial officer, Graeme Pitkethly, said on a call with journalists. He pointed out that Walmart’s announcement was more about general merchandise and clothing, and that inflation would vary by region.
But Pitkethly went on to say: “We think that inflation will reach its highest point in the second half of the year. I don’t think we’ll be able to make up for lost time in this quarter. “
Andy Searle, a partner at the consulting firm Alix Partners, said, “We won’t go back to the low inflation environment we had before. We’re going to be stuck in this environment for a long time.“
Unilever H1 results: H1 2022, H1 2021
Turnover Euros 29.6 billionEuros 25.8 billion
14,90% 0.30% increase in sales
8.10% growth in underlying sales 5.40% growth in underlying sales
17.0% 18.80% underlying operating margin
1.34 euro underlying EPS 1.33 euro
Underlying earnings per share (EPS) growth of 1% minus 2%
Closing net debt Euros 27.1 billionEUR 22.4 billion
Year on year change in net debt: 20.98 percent minus 1.75 percent
SALES OUTLOOK IMPROVED
According to a consensus from the company for the half to June 30, underlying sales grew by 8.1%, which was better than what analysts had expected, which was a growth of 7.2%.
Unilever announced on Tuesday that it now expects to exceed its previous forecast for underlying sales growth of 4.5 percent to 6.5 percent for the entire year.
Bernstein analysts wrote in a note that the results were “good,” with pricing that was better than expected and volumes that were about the same. This shows that the company should be able to keep investing in growth.
Investors liked the news, and as of 8:50 GMT, Unilever shares were up 2.9%.
“Strong pricing to offset rising input costs led to underlying sales growth of 8.1%, which, as expected, had some effect on volume,” CEO Alan Jope said. “Inflation remains a problem, and the outlook for the global economy as a whole is uncertain.”
Its revenue for the first half of the year went up 14.9% to 29.6 billion euros ($30.25 billion), even though the number of sales went down by 1.6%.
CFO Pitkethly said that Unilever had spent 200 million euros more on advertising and brand marketing in the first half of the year to keep people from buying cheaper private-label products.
The company kept its quarterly dividend at 0.4268 euros per share and said on July 22 that it had finished buying back 750 million euros worth of shares as part of a 3 billion euro plan that was announced last year.
Lindt & Spruengli, a Swiss chocolate company, also raised its sales forecast on Tuesday after its first-half net profit went up by 36%.
But Compass Group (LON:CPG) Plc, the biggest caterer in the world, gave a warning about its margins for the fourth quarter. It said that rising costs and less spending by businesses and consumers were to blame.
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