Higher costs threaten Unilever exit from pandemic

Unilever rode out Covid as consumers kept buying staples like shampoo and food seasonings during lockdowns. Now higher costs threaten to tarnish the Tresemme and Knorr brand owner's exit from the pandemic.

Raw material prices will probably rise more in 2021, chief financial officer Graeme Pitkethly said on a conference call with reporters. The shares fell as much as 4.4 per cent.

Concern about higher costs overshadowed the return of a previous sales target for annual underlying growth of 3 per cent to 5 per cent. Chief executive Alan Jope’s job has gotten harder after the pandemic led to the weakest revenue growth in almost two decades last year. The results were “underwhelming” and Unilever’s margins missed estimates on restructuring charges, wrote Bruno Monteyne, an analyst at Sanford C. Bernstein.

The company also anticipates a weakening of currencies in emerging markets that have been worst hit by Covid-19, further crimping revenue growth, CFO Pitkethly said. “We’re going to have to be at the top of our game on pricing going into 2021,” Pitkethly said.

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Unilever also forecast €1 billion in restructuring costs this year and next.

Mr Jope said an initial public offering for its tea business is a “highly likely outcome,” though Unilever is open to talks with private-equity companies that may be interested in buying it. – Bloomberg