Unilever warns price hikes not yet past their peak in latest results

Unilever has warned price hikes are not likely to peak until at least the second half of 2023, and said cost pressures would hold back profitability over the year ahead.

The group said that whilst inflation is set to ease back towards the end of 2023, price growth will “remain high” in the first half as it still looks to offset an extra £1.3 billion (€‎1.5 billion) of costs over the year.

Unilever reported annual underlying operating profits edging up 0.5% to £8.6 billion (€9.7 billion) in 2022, whilst it saw sales lift 9% as it hiked prices in the face of soaring costs.

It lifted prices by 11.3% over the year and by 13.3% in the final three months, which impacted sales by volume – down 2.1% in 2022.

Unilever said sales by volume will continue to fall over the first six months of 2023 before improving in the final half as price growth eases, but said “it is too early to say whether volume will turn positive in the second half”.

As a result, the group expects to deliver “only a modest improvement in underlying operating margin in the full year”. Sales on an underlying basis are expected to grow in the “upper half” of its long-term goal for 3% to 5%.

Graeme Pitkethly, CFO at Unilever, said: “We think we are past the peak of inflation, but not yet past peak pricing. If there’s a peak for pricing, it starts in the second half of this year. We all hope we get there as quickly as possible.”

The group’s results showed statutory pre-tax profits rose to £9.1 billion (€10.3 billion), up from £7.6 billion (€8.6 billion) in 2021.

Alan Jope. CEO of Unilever, said: “Unilever delivered a year of strong top-line growth in challenging macroeconomic conditions.

"Despite sharp rises in material costs, we have prioritised stepping up our brand and marketing investment. There is more to do, but the changes we have made mean that we start 2023 with momentum, setting us up well for delivering another year of higher growth, which remains our first priority.”

Last month, Unilever announced that former Heinz President Hein Schumacher will replace Jope as CEO. Schumacher will take over on 1 July 2023 after a one-month handover with Jope, who announced his plans to retire in September 2022.