Business

Unilever price hike more than offsets fall in sales

Consumer goods giant warns that more price increases are on the way as cost inflation forecast nearly doubles

Unilever beat first-quarter sales forecasts as the maker of Ben & Jerry’s ice cream hiked prices by over 8 per cent to offset higher supply chain and energy costs. Photograph: Ahmad Gharabli/AFP via Getty Images

Thu Apr 28 2022 - 15:44

Unilever beat first-quarter sales forecasts as the maker of Dove soap and Ben & Jerry's ice cream hiked prices by over 8 per cent to offset higher supply chain and energy costs, more than outweighing a dip in sales volumes.

Consumer goods makers around the world have been raising prices to make up for soaring energy, commodities, labour and transportation costs, with the Ukraine conflict exacerbating inflationary pressures already building in the recovery from the Covid-19 pandemic.

Unilever warned on Thursday it expected to raise prices further, increasing its forecast for cost inflation in the second half of the year to €2.7 billion due to “the outbreak of war in Ukraine and the related increase in raw material inflation”. The company had previously forecast €1.5 billion of cost inflation in the second half.

"Their (full-year) costs are going to quadruple versus a year ago. That's why the pricing needs to be so high, and that's why the price is gonna go much higher," Barclays analyst Warren Ackerman said. "This is not the peak."

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It now expects full-year underlying sales growth to be towards the top end of its 4.5-6.5 per cent guidance range, but the full-year underlying operating margin towards the bottom end of its 16-17 per cent range.

Rivals Procter & Gamble and Nestlé have also reported strong sales growth in recent days after lifting prices, but some analysts are concerned consumers may increasingly switch to cheaper own-brand products as their incomes are squeezed.

Unilever’s first-quarter underlying sales rose 7.3 per cent, beating analysts’ average forecast of 4.4 per cent in a company-supplied poll.

The company raised prices by 8.3 per cent but its sales volumes fell by 1 per cent, dragged down by its home care business, which makes Comfort fabric softener and Cif disinfectants. Analysts had expected a 6.3 per cent rise in prices and a 1.7 per cent decline in volumes. – Reuters

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