Unilever hikes prices despite turnover increasing 14.9% in H1

Consumer goods giant Unilever has upped its sales guidance as it passes on rising costs to customers around the world.

The business said that the cost of what it buys will increase by billions of pounds this year but it is helping this pressure by putting up prices.

The business, which owns brands including Vaseline, Dove and Lifebuoy, had previously expected underlying sales to rise by between 4.5% and 6.5% this year but is now expecting this to be higher as it passes on costs.

Unilever's Chief Financial Officer Graeme Pitkethly said that Unilever has hiked prices enough to offset around 70% to 75% of the increases in its costs. However, he added that the company has further to go to catch up with the full cost rises.

On a call with reporters on Tuesday morning, he said that price hikes have lagged behind in the UK. The business expects a £3.9 billion hit from inflation this year.

Over the first half of the financial year, Unilever reported the following results:

• Underlying sales growth of 8.1%
• Turnover increased 14.9% to £25.1 billion, including a currency impact of 5.6%
• Underlying operating margin of 17.%, a decrease of 180bps driven by input cost inflation
• Underlying earnings per share were up 1.0%, including a currency impact of 4.9%
• The billion+ Euro brands, accounting for more than 50% of Group turnover, grew 9.4%
• Beauty and Personal Care category sales grew 7.5%.

Meanwhile, the higher prices were not enough to turn customers away in serious numbers. Volumes across Unilever, which measure the number of products that the company sells rather than the amount it sells them for, dropped by only 1.6%.

But the company promised investors that it will continue to grow and improve the amount of profit it makes in every sale. It will do so by increasing prices for customers and saving money, among other things.

It comes as consumers around the world face massive hits to their bank accounts. Inflation is rampant and ran at 9.4% in the year to June in the UK.

Unilever CEO, Alan Jope, commented: “Unilever has delivered a first half performance which builds on our momentum of 2021, despite the challenges of high inflation and slower global growth. We are now raising our sales guidance for the year.

“We have made further progress against our strategic priorities. We are maintaining strong investment in our brands, supporting 9.4% underlying sales growth in our billion+ Euro brands. eCommerce sales now represent 14% of turnover, up from 6% in 2019. Of our three priority markets, the USA and India again grew strongly, while sales in China were affected by the lockdowns in the second quarter. Prestige Beauty and Health & Wellbeing, now 4% of Group turnover, again grew double-digit.

“Our simpler, more category-focused organisation came into effect as planned on 1 July. This major change to Unilever’s operating model is an important further step that will underpin the delivery of consistent growth, which remains our first priority. The challenges of inflation persist and the global macroeconomic outlook is uncertain, but we remain intensely focused on operational excellence and delivery in 2022 and beyond.”