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Unilever Warns Of Higher Inflation As Sales Rise 2.5% In Q3

Unilever has warned that inflation is likely to accelerate next year, keeping the pressure on consumer goods companies as they hike prices to try to offset surging energy and other costs.

The consumer goods giant beat third-quarter sales growth forecasts, and kept its full-year profit margin guidance, defying some analysts' fears of a cut.

“We have delivered a good quarter against strong comparators, with underlying sales growth of 2.5%," commented chief executive Alan Jope.

"The combination of our strategic choices and focus on operational excellence continue to drive competitive growth. Underlying sales growth is now at 4.4% for the year to date and we are confident that we will be well within our multi-year framework of 3–5% for the full year."

However, finance chief Graeme Pitkethly saw little let up in inflationary pressures, in a potential blow to central bankers who are hoping the current spike in prices will be transitory.

"We expect inflation to be higher next year than this year," he said on a media call.

Underlying Sales Gain

Unilever said its underlying sales gain in the three months ended September 30 was above the 2.2% forecast by analysts in a company supplied consensus.

Growth was helped by demand in the United States, India, China and Turkey, while a 4.1% increase in prices more than offset a 1.5% decline in volumes.

Consumer goods companies face soaring prices of raw materials such as energy, edible oils and packaging, as well as higher transport costs as economies recover from the pandemic.

Nestlé raised its full-year sales target on Wednesday as it also hiked prices to cope with the extra costs.

Inflation In Emerging Markets

But analysts say Unilever faces a tougher task as it makes about 60% of turnover in emerging markets, where inflationary pressures are fiercest. In July, the group cut its full-year operating margin forecast to "about flat" from "slightly up."

The company said on Thursday that, despite cost inflation remaining at "strongly elevated levels," it was sticking with that latest forecast.

Unilever's shares are down around 13% this year.

On Wednesday, the group's Hindustan Unilever Limited (HUL) business reported 9% year-on-year growth in profit for the second quarter of its financial year.

 


News by Reuters, additional reporting by ESM. For more A-Brands stores, click here. Click subscribe to sign up to ESM: European Supermarket Magazine.

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