Unilever PLC (LSE:ULVR) said underlying sales beat expectations but warned cost inflation, which drove prices higher, will continue into the second half.
The maker of Bovril and Dove reported an underlying sales increase of 8.1% in the first half of the year compared to guidance of between 4.5% to 6.5%.
Operating profit was up 1.7% to €4.5bn.
The growth was largely driven by an increase in prices to offset the rise in costs, although this impacted the volume of goods sold.
However, the operating margin fell by 2% to 15.2%, driven by higher input cost inflation.
Unilever will pay an unchanged quarterly dividend of €0.4268 in September.
The FTSE 100 company said that cost inflation is expected to remain elevated in the second half of 2022, while also lamenting COVID restrictions which impacted the Chinese market for much of the second quarter of the year.
In the face of macroeconomic and cost inflation outlooks which are “uncertain and volatile,” the company provided a fairly positive outlook, with underlying sales growth expected to remain above the previously set guidance of 4.5% to 6.5% for the year.
“Unilever has delivered a first half performance which builds on our momentum of 2021, despite the challenges of high inflation and slower global growth,” said chief executive Alan Jope.
As well as that, the group said it “will continue to invest in the health of our brands,” with money to be given into marketing, research & development and capital expenditure for the upcoming six months.
The underlying operating margin target for the year is 16%, which remains in line with its guided range of 16% to 17%, with further growth expected up until 2024.
“Our simpler, more category-focused organisation came into effect as planned on 1 July,” Jope added.
“This major change to Unilever’s operating model is an important further step that will underpin the delivery of consistent growth, which remains our first priority.”