Unilever PLC (LSE:ULVR) said its costs will be higher than previously expected in the second half of this year as the war in Ukraine has impacted global markets and accelerated increases in the price of raw materials and commodities.
The FTSE 100 consumer goods group said it will raise its prices to mitigate against the higher input costs, a move that is expected to impact sales volumes.
It still expects cost inflation of around €2.1bn for the first half of 2022 but has raised its forecast for the second half of the year to €2.7bn.
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Underlying sales growth for 2022 is expected to be towards the top end of the previously guided range of 4.5%-6.5%, the company said in a trading statement, but operating margins for the year are now predicted to be at the bottom end of its guided range of 16%-17%.
It said it plans to restore margin in 2023 and 2024 “through pricing, mix and savings delivery” as market conditions normalise.
Trading in the first quarter of 2022 was impacted by inflation and the war in Ukraine as well as the Covid-19 pandemic after some countries implemented new restrictions and lockdowns.
First-quarter sales growth was driven by price rises, as volumes fell slightly. Underlying sales were 7.3% higher in the quarter, with prices rising 8.3% but volume decreasing 1%. Turnover increased by 11.8% to €13.8bn.
"We are executing well in a very challenging input cost environment,” commented chief executive Alan Jope. “This performance was delivered against the backdrop of significant rises in input costs that have further accelerated through the first three months of the year, and the human tragedy of the war in Ukraine.”
The strongest price rises were seen in the Home Care division, where sales rose by 9.2%.
eCommerce sales now represent 14% of group turnover following strong double-digit growth in the first quarter.
Meanwhile, Unilever’s priority markets of the US, India and China all grew competitively during the period.
“There is more to do as we navigate our business through unprecedented cost inflation, but we are making good progress. We are committed to sustaining this step-up in our growth and competitiveness," Jope concluded.
The company maintained its quarterly dividend at €0.4268 per share.
The group said it is on track to launch its new, simpler, category-focused organisation in the middle of the year. The new structure, organised around five business categories, is expected to generate around €600mln cost savings over two years.