Unilever’s half-year results have been met with positive sentiment among advisors, although margin concerns persist going into the third quarter.
To combat narrower margins, the British multinational stepped up prices by 11.2%, a move that inevitably had an effect on sales volumes.
But that didn’t stop the consumer goods giant from increasing turnover by 15% with a 4.1% bump in underlying profits.
Shares clearly outperformed in the last quarter, driven in part by a €648mln (£546mln) buyback tranche, while a quarterly dividend per share of 3.6p was also announced.
Chief executive officer Alan Jope said: “Unilever has delivered a first-half performance which builds on our momentum of 2021, despite the challenges of high inflation and slower global growth.Underlying sales growth of 8.1% was driven by strong pricing to mitigate input cost inflation, which, as expected, had some impact on volume.”
From the brokers
Tom Sykes at Deutsche Bank noted that commodity headwinds “are now turning to tailwinds”, offering the potential for margin increases in 2023.
As such, Sykes has upgraded his outlook to buy.
“To print 11.2% price growth in Q2 but for volumes to only fall 2.1% is better than we would have expected,” said the researchers at Barclays, with the caveat that “Unilever does
expect volumes to worsen in H2 as pricing continues to step up and consumer wallets get squeezed by higher food and household energy prices”.
On the other hand
Not everyone is as bullish- UBS maintains a sell rating due to a cautious view on margins and volumes going forward.
“Clear emphasis on reinvestments would be welcome but enhancing group's underlying sales growth prospects will take time and further portfolio rotation,” said equity researcher Guillaume Delmas.
Credit Suisse analysts disagree on the margin front, stating: “We believe management needs to take more radical action to address growth and market share issues. We believe they will. With strong pricing and a softening in input costs, a margin reset may now not be needed.”