Unilever lifts FY guidance as first-half sales rise

First-half underlying sales rose 8.1%, driven by strong pricing to mitigate input cost inflation, which had some impact on volume, which fell 1.6%.

Unilever said growth was broad-based across all divisions. It said price has sequentially stepped up over the past two quarters, reaching 11.2% in the second quarter, which had some negative impact on volume, as expected.

This was more pronounced in Home Care, which was particularly exposed to rising input costs and took the highest pricing action, leading to underlying sales growth of 10.7%. Sales in Beauty & Personal Care grew 7.5%, driven by price and continued strong growth in Prestige Beauty and Health & Wellbeing, which is Unilever's vitamins, minerals and supplements business. Foods & Refreshment sales grew 7.3%.

The company said it now expects underlying sales growth for 2022 to exceed the previous guidance range of 4.5% to 6.5%, "driven by price with some further pressure on volume".

Meanwhile, the company’s full-year underlying operating margin expectation remains at 16%, within its guided range of 16% to 17%.

"The medium-term macroeconomic and cost inflation outlooks are uncertain and volatile, but delivering growth remains our first priority. Against this backdrop, we continue to expect to improve margin in 2023 and 2024, through pricing, mix and savings," it said.

At 0835 BST, the shares were up 2.9% at 4,029p.

Matt Britzman, equity analyst at Hargreaves Lansdown, said: "It’s no surprise to see inflation and global uncertainty called out as headwinds, but importantly for Unilever work done raising prices is keeping sales and profits moving in the right direction. The operation’s becoming less efficient as inflation pushes a host of costs higher, and that comes through in the lower margins, but crucially they’re staying in line with guidance.

"Having a host of strong brands is essential if any business wants to pass on rising costs, and Unilever has those up its sleeve - the ability to raise prices just shy of 10% and only have a 1.6% drop in volumes is a good place to be.

"There’s a limit to how much someone will pay for a Magnum though, and we’ve heard from supermarkets that shoppers are now starting to slide down the value chain in an attempt to keep shopping lists intact. Juggling higher prices and weaker consumers is a tough act to nail, so far Unilever looks to be doing a decent job and if restructuring savings of around €600m can materialise, that’ll take some pressure off."