Unilever PLC Reports Strong Performance, Predicts Growth in 2023
By Unilever PLC (LSE:ULVR) reported underlying sales growth of 9% for 2022, higher than the 8.2% increase that analysts had expected. The strong performance was attributed to disciplined pricing action in response to high input cost inflation in the middle of challenging economic conditions.[0] Furthermore, underlying price growth will remain high in the first half of 2023, with volume growth expected to be negative.[1] Unilever predicts 2023 underlying sales growth to be at least in the upper half of its multi-year range of 3 – 5%.
Beauty & Wellbeing grew underlying sales by 7.8%, driven by price.[2] Volume levels showed a slight increase, due in part to another successful year of growth in Prestige Beauty and Health & Wellbeing categories, resulting in over €2.5 billion in revenue.[3] The underlying sales for Personal Care rose 7.9%, which was driven by strong pricing.[3] Deodorant sales increased, whereas other categories saw a decrease.[3] Home Care, being especially vulnerable to increasing input expenses, saw the most significant price increase and a slight decrease in volume, resulting in underlying sales increasing by 11.8%.[3]
Unilever has systematically raised prices for eight consecutive quarters, taking the full-year underlying price growth to 11.3%.[4] However, in order to protect consumers, Unilever has chosen not to fully offset the cost of inflation through pricing. This has resulted in a turnover increase of 14.5% to €60.1 billion, with 6.2% attributed to currency and (1.0)% from disposals net of acquisitions.[5]
Unilever also announced that they will deliver only a modest improvement in underlying operating margin in the full year as they plan for another year of increased investment.[6] Given the continued high cost inflation, the underlying operating margin is anticipated to be roughly 16 percent during the initial half of the period.[7]
Outgoing CEO Alan Jope is set to be replaced by Hein Schumacher in July, who will be leading Unilever’s simpler, more category-focused operating model for Unilever, which is expected to generate around €600 million of cost savings over the first two years after 1 July 2022.[8]
Brand and marketing investment was stepped up by €0.5 billion in constant exchange rates, which equated to a 10bps contribution to the margin in current exchange rates.[3]
0. “Higher prices help boost sales at Unilever” ShareCast, 9 Feb. 2023, https://www.sharecast.com/news/news-and-announcements/higher-prices-help-boost-sales-at-unilever–12266666.html
1. “Cost of living: Consumer goods giant Unilever expects price growth throughout 2023” Sky News, 9 Feb. 2023, https://news.sky.com/story/cost-of-living-consumer-goods-giant-unilever-expects-price-growth-throughout-2023-12806567
2. “Unilever's record price hikes bolster 2022 results” Cosmetics Business, 9 Feb. 2023, https://cosmeticsbusiness.com/news/article_page/Unilevers_record_price_hikes_bolster_2022_results/206725
3. “Unilever posts strong sales growth and continued progress against strategy” Asia Food Journal, 9 Feb. 2023, https://asiafoodjournal.com/unilever-posts-strong-sales-growth-progress-strategy/
4. “Unilever Upped Marketing Spend By €500m In 2022 To Justify Price Hikes” The Drum, 9 Feb. 2023, https://www.thedrum.com/news/2023/02/09/unilever-upped-marketing-spend-500m-2022-justify-price-hikes
5. “Unilever Q4 sales narrowly miss estimates amid inflation pressures By Investing.com” Investing.com Canada, 9 Feb. 2023, https://ca.investing.com/news/stock-market-news/unilever-q4-sales-narrowly-miss-estimates-amid-inflation-pressures-2897764
6. “Marmite and Dove maker Unilever warns of more price rises this year” Business MattersBusiness Matters, 9 Feb. 2023, https://bmmagazine.co.uk/news/marmite-and-dove-maker-unilever-warns-of-more-price-rises-this-year/
7. “Unilever warns price hikes not yet past their peak” The Independent, 9 Feb. 2023, https://www.independent.co.uk/business/unilever-warns-price-hikes-not-yet-past-their-peak-b2278812.html
8. “Earnings: why Unilever shares just keep on going” Motley Fool UK, 9 Feb. 2023, https://www.fool.co.uk/2023/02/09/earnings-why-unilever-shares-just-keep-on-going
