Unilever sales surge as it ramps up prices
UniLEvER shares hit a tenmonth high as it clocked up its fastest sales growth in more than a decade on the back of huge price rises.
the Dove soap and Marmite maker said it is grappling with ‘truly unprecedented’ inflation and had put up prices across the group by 11.2pc.
it led to overall sales growth of 8.8pc in the three months to the end of June, its highest in at least ten years, as customers largely stayed loyal despite rising prices.
Unilever said full- year sales would grow by more than the 4.5pc to 6.5pc previously expected.
shares rose 2.9pc, or 115.5p, to 4032p.
the consumer goods giant, which also owns Hellmann’s and Ben & Jerry’s, has for years been criticised for slow sales growth and a sluggish share price performance.
in response, Unilever has simplified its structure and offloaded slow-growing divisions such as its tea business that includes PG tips, which it sold last november. it has also handed activist investor nelson Peltz a seat on its board after the billionaire took a stake in the company.
Peltz has a reputation for spearheading turnarounds at consumer goods giants such as Gillette owner Procter & Gamble and is expected to spark life back into the business.
He built a 1.5pc stake in Unilever through his investment vehicle trian Fund Management and joined the board last Wednesday.
aJ Bell investment director Russ Mould said: ‘it is early days but perhaps the Peltz effect is already at play.’
Mould said Peltz’s involvement appears to be helping the firm get ‘a better hearing’ from investors. the 8.8pc rise in second quarter sales came as the 11.2pc price hikes more than offset a 2.1pc slide in sales volumes, leading to overall turnover of £13.3bn.
across the first half of the year, sales hit £25bn while profits rose 1.7pc to £3.8bn.
Unilever warned price increases would continue as it has yet to pass on the full impact of inflation to customers. its extra costs this year will total £3.9bn.
Chief executive alan Jope ( pictured) said: ‘Have we put through all the pricing yet? no. and have we seen all the cost flow through so far? no.’ Unilever has passed on around 70pc of the increase in costs. it has also ploughed an extra £168m into advertising to keep customers loyal to its brands as some are switching to own-brand options for products such as ice cream, yoghurt and coffee. Jope said he expected inflation to peak in the second half of the year and some products including vegetable oils had already seen prices fall back slightly. third Bridge consumer analyst alex smith said Unilever’s profit margins were being squeezed by inflation, but price increases had helped to offset the pressure.
Jope said Unilever warned it will not offer pay rises to its 148,000 staff in line with inflation. Despite Unilever being sued by Ben & Jerry’s over a decision to sell its business in israel, Jope said the future of the ice cream maker was ‘ as part of Unilever’.