Unilever revenues rise on double-digit price hikes

Unilever delivered strong sales growth last year as price increases offset significant cost inflation and declining volumes.

Annual underlying sales at the consumer products giant, which owns Domestos, Marmite and Ben & Jerry’s ice cream, rose 9 percent in 2022, doubling the previous year’s growth rate.

The London-listed company increased prices by 11.3 percent over the year in response to rising energy, salary and raw material costs, largely due to the war in Ukraine and supply chain disruptions.

This contributed to overall sales by volume falling 2.1 percent and underlying operating profit growing marginally to €9.7 billion (£8.6 billion).

However, all business divisions experienced growth during the period, with the home care business performing particularly well, in part due to increased demand for textile cleaning brands in countries such as Turkey, Brazil and Vietnam.

Sales were further supported by “billion dollar brands” such as Hellman’s, Magnum ice cream and hair care label Sunsilk.

On a regional basis, Latin America posted the largest increase in sales as customers purchased food from soup maker Knorr and bottles of Comfort fabric softener.

Unilever expects further underlying sales growth this year, supported by further price increases, to offset continued volume declines and an estimated €1.5 billion in additional costs in the first half of the year.

The company does expect inflationary pressures to ease in the second half of 2023, but “only a modest improvement” in its underlying operating margin.

The latter measurement fell by 2.3 percentage points last year, yet sales growth and favorable exchange rate fluctuations helped total sales exceed €60 billion.

Net profit also increased by about a quarter to €8.3 billion last year as the company posted a profit of €2.3 billion from the sale of tea company Ekaterra to CVC Capital Partners.

Outgoing CEO Alan Jope said the company delivered “a year of strong revenue growth in a challenging macroeconomic environment.”

He added: “Despite the sharp rise in material costs, we have prioritized ramping up our branding and marketing investments.

“There’s more to do, but the changes we’ve made mean we’re starting 2023 with momentum, putting us well prepared for another year of higher growth, which remains our number one priority.”

Jope, who was born in Scotland, will be replaced from the beginning of July by Hein Schumacher, the current head of the Dutch dairy cooperative Royal FrieslandCampina.

His decision to step down came after Unilever saw backlash from investors for pursuing a failed £50bn bit for GSK’s consumer healthcare division, which was eventually spun off into a standalone company called Haleon.

Shareholders have additionally criticized the company for its relatively prosaic financial results in recent years compared to rival consumer goods companies such as Nestlé and Procter & Gamble.

According to asset manager Bernstein, investor returns in the four years to the end of 2022 were just 14 percent, compared to 40 percent in the broader industry.

Unilever Shares Since Jope took over in January 2019, the level has risen and the number has more than doubled under his predecessor Paul Polman. They rose 0.6 percent to £41.25 on Thursday morning.

Charlie Huggins, head of equities at the Wealth Club investment service, compared Schumacher’s predicament to “an experienced manager taking over an underperforming football team and flirting with the relegation zone when it should be competing for European places.”

Huggins suggested that the former HJ Heinz executive could solve many of Unilever’s problems by “stopping doing things, rather than trying to do more.”

He said, “Stop recruiting, stop bogging employees down with bureaucracy, stop making empty promises, and stop corporate gobbledygook. Instead, focus on the basics, simplify and bring in much-needed dynamism.”