Unilever PLC's (LSE:ULVR) third-quarter numbers showed a much higher benefit from price increases than the market expected, making up for a decline in sales volumes, according to City analysts.
The Persil, Ben & Jerry's, and Hellman's owner raised its full-year sales forecast after what it said was “strong” growth in a challenging economic climate, with organic sales growth of 10.6% that beat the analyst consensus of 8.6%.
A volume decline of 1.6% was, said analysts at Barclays, “still a resilient performance given the strong pricing”.
The FTSE 100 group's hike in 2022 overall sales growth guidance to “above 8%” from 4.5-6.5% before was widely expected, the Barclays analysts added, noting that the 2023 analyst consensus is currently 7.7% “so a small upgrade to organic growth”.
Pricing increases were higher than expected, with 12.5% price growth in the quarter “a record”, the analysts said, with Homecare pricing standing out with pricing up 17.8%. Price growth increased from 11.2%% in the second quarter and 8.3% in the first.
Unilever said it expects costs pressure to carry forward into 2023, driven by currency devaluation, higher raw material costs and higher supplier processing costs from energy and labour inflation.
The current estimate for net material inflation (NMI) in the first half of next year stands at €2bn, the same as in the first half of this year, though Unilever said there was "a range of possible outcomes".
While the Marmite and Vaseline maker is expected to be a beneficiary of cost of goods sold inflation rolling over, “this doesn’t seem to be the case from company comments," said the Barclays analysts.
“Although Unilever is maintaining its margin guidance and will increase reinvestment we think this [...] could take some of the gloss from a resilient trading performance," they concluded.