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Unilever Cautions On Higher Costs in H2

Sam Boughedda trader
Updated 28 Apr 2022

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Unilever (LON: ULVR) reported its first-quarter earnings on Thursday, explaining that it sees higher cost inflation in the second half.

Turnover increased by 11.8% compared to 2021, reaching €13.8 billion. Meanwhile, underlying sales growth grew by 7.3%, and the company maintained its quarterly dividend of €0.4268 per share. The most substantial price rises were seen in the Home Care division.

The consumer goods company stated that the crisis in Ukraine has disrupted global markets and caused a rise in the price of raw materials and commodities. Therefore, they expect their expenses will be greater than planned in the second half of this year. They continue to expect input cost inflation of around €2.1 billion in the first half but expect input cost inflation for H2 to be around €2.7 billion.

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As a result, Unilever plans to raise its prices to mitigate against the higher costs of goods. However, the action is expected to have an impact on sales volume.

“The delivery of another solid quarter of sales growth builds on the improved growth momentum that we achieved in 2021 and is underpinned by Unilever's increased focus on operational excellence as well as disciplined adherence to our chosen strategic priorities,” said Alan Jope, Chief Executive Officer of Unilever.

The company expects underlying sales growth for 2022 to be towards the top end of its previous range of 4.5% and 6.5%.

It expects the underlying operating margin for the first half to be within the guided 2022 range of 16% – 17%. However, due to the forecast increase in costs in the second half, it sees the full-year underlying operating margin to be at the bottom end of that range.

Furthermore, Unilever expects to restore margin through pricing, mix, and savings delivery during 2023 and 2024 as market conditions normalise.

Unilever's share price remained relatively unmoved following the report.

Sam is a trader and lead stock market writer at AskTraders. After starting his career in the forex market, Sam now focuses on stocks, specifically consumer staples.