Unilever shares were up over 5% in early trade on Tuesday after the consumer giant reported better-than-expected revenue due to sale price growth in the second quarter.
The company reported their second quarter trading statement alongside first-half results.
Unilever’s second-quarter revenue was €15.74bn versus analyst expectations of €15.54bn. Top-line growth was driven by 7.9% underlying sales growth in the second quarter, mitigated marginally by a 0.3% volume decline.
Robust first-half
Underlying sales grew 9.1% in the first half of 2023 for Unilever, driven by 9.4% price growth. Rising sales prices were offset slightly by a 0.2% volume decline for the first half. Unilever’s market share declined to 41% as the company reduced SKUs by 17% and saw volume drops in some markets like India tea and Brazil laundry.
However, beauty and wellbeing sales rose 9.1% led by double-digit prestige beauty and health growth. Emerging markets grew 10.6% though growth in SE Asia was muted. These were key to Unilever’s robust first half.
Developed markets rose 6.9%, with higher pricing in Europe. Turnover increased 2.7% despite currency and acquisition headwinds. Underlying operating profit was up 3.3% as gross margin rose on pricing though it remains below 2019 levels.
“These results from Unilever are solid but uninspiring,” said Charlie Huggins, Manager of the Quality Shares Portfolio at Wealth Club.
“Despite significant price increases, Unilever has managed to maintain broadly flat volumes. This is a clear positive and suggests Unilever’s brands continue to attract a loyal following. The other piece of good news is Unilever upping its full-year sales guidance to “above 5%” and reiterating that operating margins will improve slightly, despite cost pressures.
“The question is – should Unilever be doing better? The answer is almost certainly yes. Margins remain well below pre-pandemic levels and below the bonnet of that robust underlying sales growth there are problems. Only 41% of Unilever’s business is winning market share which means more than half the portfolio is losing out to competitors. And performance in Europe is exceptionally poor, with volumes falling 10% in the second quarter.”
Despite these failings, investors clearly liked Unilever’s top-line growth and shares were very well bid early on Tuesday.