Unilever shares gained 2.5% to 4,016.5p in early morning trading on Tuesday following a 14.9% climb in turnover to €29.6 billion in HY1 2022 compared to the last year.
The consumer care firm announced a 1.7% uptick in operating profit to €4.5 billion, with an operating margin fall of 200 basis points to 15.2% from HY1 2021.
Unilever reported an underlying sales growth of 8.1%, with an underlying operating profit rise of 4.1% to €5 billion and an underlying operating margin decrease of 180 basis points to 17%, driven by cost input inflation.
“It’s no surprise to see inflation and global uncertainty called out as headwinds, but importantly for Unilever work done raising prices is keeping sales and profits moving in the right direction,” said Hargreaves Lansdown equity analyst Matt Britzman.
“Having a host of strong brands is essential if any business wants to pass on rising costs, and Unilever has those up its sleeve – the ability to raise prices just shy of 10% and only have a 1.6% drop in volumes is a good place to be.”
“There’s a limit to how much someone will pay for a Magnum though, and we’ve heard from supermarkets that shoppers are now starting to slide down the value chain in an attempt to keep shopping lists intact. Juggling higher prices and weaker consumers is a tough act to nail, so far Unilever looks to be doing a decent job.”
The firm noted a diluted EPS reduction of 4.7% to €1.1, alongside an underlying EPS uptick of 1% to €1.3 compared to the year before.
The company highlighted the completion of its €750 million share buyback tranche on 22 July 2022, with the intention to launch its second tranche in Q3.
FY 2022 guidance
Unilever revised its underlying sales growth guidance for FY 2022 to above its previous guidance range of 4.5% to 6.5% as a result of higher prices with some additional pressure on volume.
The firm said it expected net material inflation for FY 2022 to remain high at approximately €4.6 billion, with its forecast for HY2 unchanged at €2.6 billion.
It also expects its FY operating margin to remain at 16%, within its guidance range of 16% to 17%.
Unilever added that it would strategise its operations to counteract the volatile market environment, and work to improve its margin in 2023 and 2024 through pricing, mix and savings.
“Unilever has delivered a first half performance which builds on our momentum of 2021, despite the challenges of high inflation and slower global growth,” said Unilever CEO Alan Jope.
“Underlying sales growth of 8.1% was driven by strong pricing to mitigate input cost inflation, which, as expected, had some impact on volume. We are now raising our sales guidance for the year. Underlying operating margin was on track at 17% for the first half.”