Unilever achieved the fastest sales growth in nine years in 2021 but the impact of rising prices meany underlying operating profit margins were squeezed by 10 basis points.
Unilever recorded a 6.2% constant currency rates to €52.4bn, up from €50.7bn in 2020. The jump in revenue helped produce a 16% increase in net profit to €6.6bn, up from €6bn.
However, the market’s focus was on margin pressure and the impact of rising input prices.
“The promise of share buy backs and a softly-softly approach to acquisitions won’t give Alan Jope much of a break from the mounting criticism over the way the business has been run. Inflation is flashing as a big warning light in these results and the worst may be yet to come,” said Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown.
“Despite the fastest underlying sales growth in nine years, coming in at 4.5%, the fall in the underlying operating margin is already painful. Input costs are rising dramatically and prices are being pushed up as result by 4.9% in the fourth quarter.”
Although Unilever shares dipped over 3% in the initial market reaction, there were positives from Unilever’s results in the form of strong growth in emerging markets.
“Our thirteen billion-Euro brands grew 6.4%. Priority markets of China, India, and the US grew at 14.3%, 13.4%, and 3.7% respectively. Our growth in e-commerce was 44%, ahead of global channel growth and bringing e-commerce to 13% of turnover. We have continued to re-shape our portfolio into high growth spaces, acquiring in Prestige Beauty and Functional Nutrition, and agreeing the sale of our Tea business,” said Unilever, Chief Executive Officer, Alan Jope.
The Unilever CEO also addressed ongoing speculation around the revisiting of a bid for GlaxoSmithKline’s consumer business and said spare cash would be used on share buybacks instead.
“We have engaged extensively with our shareholders in recent weeks and received a strong message that the evolution of our portfolio needs to be measured. We therefore do not intend to pursue major acquisitions in the foreseeable future and will conduct a share buyback programme of up to €3 billion over the next two years,” said Jope.