Unilever Beats Forecasts To Post 5.7% Sales Growth In First Quarter
Unilever beat quarterly sales forecasts to record a 5.7% increase in underlying sales in Q1, boosted by a pick up in home cooking in coronavirus lockdowns and a strong economic recovery in China.
The group said it is to buy back up to €3 billion of shares from May.
The maker of Ben and Jerry's ice cream and Dove soap topped analysts' average forecast of a 3.9% increase in sales for the quarter, according to a company supplied consensus.
“Unilever has made a good start to the year," commented CEO Alan Jope. "Our focus on operational excellence, innovation and purposeful brands is continuing to strengthen competitiveness and has delivered underlying sales growth of 5.7% for the quarter.
“We are driving the evolution of our portfolio, with strong growth in Prestige Beauty and Functional Nutrition. The operational separation of our Tea business is on track. We are also making good progress in creating a new unit, Elida Beauty, comprising a number of our smaller beauty and personal care brands."
The group said it was confident of delivering full-year underlying sales growth within its mid-term target range of 3-5%, with the first half around the top of the range. Some analysts had doubted whether it would hit that goal this year.
Unilever also said it expected a slight increase in underlying operating margin this year, and that it was making good progress in separating its Elida beauty and tea businesses.
Underlying sales in the group's food and refreshments business, where brands include Hellmann's mayonnaise and Knorr soups, jumped 9.8% in the quarter, helped by strong demand for home consumption in North America and Europe.
Emerging markets saw growth of 9.4%, led by double-digit increases in China and India following strict lockdowns the previous year.
However, Unilever noted the surge in COVID-19 infections currently sweeping India, likely to affect business there.
“We are committed to delivering superior long-term financial performance through our sustainable business model, which we believe has never been more relevant than it is today," Jope added.
Commenting on its performance, Russ Mould of AJ Bell said, “Slow and steady wins the race, so the adage goes, and Unilever certainly fits the bill. Its goal of growing sales by 3% to 5% a year won’t excite a lot of people, given how there are technology companies adding one or even two zeros to the end of those figures for their annual sales progression. However, its resilience and stamina are often forgotten strengths.
“A year or two ago, the market was questioning whether Unilever could grow at all, yet now it is beating its sales growth target. Amid expectations of inflation accelerating this year, Unilever’s pricing power strengths will be put to the test.
"It has flagged additional supply chain costs and raw material inflation, which is putting pressure on margins, so the solution would be to pass on those costs to the end customer."