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Unilever Sees 5% Growth In Underlying Sales In Second Quarter

By Dayeeta Das
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Unilever Sees 5% Growth In Underlying Sales In Second Quarter

Unilever reported higher-than-expected underlying sales growth for the second quarter and first half as consumers cooked more meals at home, but it reduced its full-year operating margin forecast due to surging commodity costs.

Underlying sales for the maker of Dove soap and Hellmann's mayonnaise rose 5% in the three months that ended 30 June, beating the 4.8% analysts had expected, according to a company supplied consensus.

Half-year sales came in 5.4% higher, above the 4.3% forecast and ahead of the group's mid-term target of 3-5% growth.

The company said it now expected full-year underlying operating margins to be flat compared to slightly up earlier.

'A Strong First Half'

"Unilever has delivered a strong first half, with underlying sales growth of 5.4% driven by our continued focus on operational excellence," chief executive officer Alan Jope said in a statement, noting growing cost inflation pressure.

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The $112 billion company's results come at a time of a controversy over its US subsidiary Ben & Jerry's move to end ice-cream sales in occupied Palestinian territories that has caused a backlash against the brand in Israel.

The roll-out of COVID-19 vaccinations, the re-opening of developed economies and nearly $6 trillion in US government relief since the pandemic's outbreak are fuelling demand for everything from cars to restaurant meals, straining the supply chain, creating labour shortages and driving up commodity prices.

Underlying earnings per share for the company that counts Lipton teas and TreSemme shampoo among the 400 brands it sells, came in at €1.33 for the first half, also beating the €1.24 ($1.46) average estimate.

Underlying operating margin fell 1 percentage point, less than the 1.2 percentage point drop analysts had been expecting.

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Overall, first-half turnover came in at €25.8 billion, a touch above the €25.7 billion analysts had expected.

Analyst Viewpoint

Commenting on its performance, analyst Russ Mould of AJ Bell said, “Consumer goods giant Unilever’s first half results followed a similar pattern to a lot of recent corporate updates. Yes they are enjoying a surge in demand but their ability to fully benefit from this surge in terms of profit is being compromised by rising costs.

“This also demonstrates some limitations on the pricing power of the company’s brands given it has not been able to pass on all of this extra cost to the consumer. The best Unilever can hope for is that it can keep operating margins flat for the remainder of the year."

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

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