Unilever has raised its full-year sales guidance after beating forecasts with a 8.1% increase in first-half underlying sales as the maker of Dove soap and Knorr stock cubes hiked prices to counter soaring costs.
Analysts had expected growth of 7.2%, a company-provided consensus for the six months ended June 30 showed.
Unilever had previously forecast full-year underlying sales growth at the top end of a range of 4.5% to 6.5%. It said on Tuesday it now expects underlying sales growth to be above that range, driven by prices with some further pressure on volume.
Its half-year turnover rose 14.9% to 29.6 billion euros ($30.25 billion).
'Mitigate Input Cost Inflation'
"Underlying sales growth of 8.1% was driven by strong pricing to mitigate input cost inflation, which, as expected, had some impact on volume," CEO Alan Jope said on Tuesday. "The challenges of inflation persist and the global macroeconomic outlook is uncertain, but we remain intensely focused on operational excellence and delivery in 2022."
Bernstein analysts in a note deemed them a good set of results, with pricing better than expected and volumes in line and boding well for Unilever's ability to keep investing in growth.
Costs Pressure
One of the biggest consumer companies in the world, making everything from laundry detergent to ice cream, Unilever's costs have surged since the start of the COVID-19 pandemic created global supply chain logjams.
War in Ukraine has since boosted energy costs and sent prices of raw materials such as wheat, sunflower oil and pulp used in packaging to record highs.
Its first-half operating profit margin fell to 17% from 18.8% a year earlier.
It said it expects its a full-year underlying operating margin of 16%, having earlier guided to a range of 16% to 17%.
"We expect peak inflation to come in the second half of the year. I don't think we'll be able to catch up in the current quarter," the British firm's chief financial officer Graeme Pitkethly said on a call with journalists, noting that inflation would vary by region.
Read More: Unilever's India Unit Beats Quarterly Profit Estimates
Advertising Spend
Retailers are pushing back against consumer product suppliers in pricing negotiations, worried about ceding margins and alienating shoppers.
U.S. giant Walmart Inc, the world's biggest retailer, on Monday was forced to slash its profit forecast as surging prices for food and fuel prompted customers to cut back on spending.
"We did see their news this morning, but I think there are many, many aspects to that don't fully connect with Unilever," CFO Pitkethly said.
He said Unilever had raised spending on advertising and branded marketing by 200 million euros in the first half to prevent shoppers from trading down to private label products.
The company kept its quarterly dividend steady at 0.4268 euro per share and said it had completed a €750 million share buyback tranche on July 22, part of a €3 billion plan announced last year.
Read More: Activist Investor Peltz Set To Focus Minds At Unilever: Analysis
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