The heat is on consumer goods firm Unilever (ULVR) after its failed bid for GlaxoSmithKline’s (GSK) consumer healthcare business and today’s results did not do enough to win the market over.
The shares dropped 2.9% to £37.19, with warnings of margin pressure taking away from the announcement of a €3 billion buyback programme.
The company said it expected sales growth in 2022, but also flagged ‘very high’ costs that would weigh on margins and restrict major acquisitions.
Underlying sales growth in 2022 was expected to be in the range of 4.5% to 6.5%, but the maker of Dove soap also warned of ‘very high’ input cost inflation in the first half of over €2 billion.
Costs could moderate in the second half to around €1.5 billion, although there was currently uncertainty on the outlook for commodity, freight and packaging costs.
MAINTAINING STRONG PRICES
The company said it would maintain strong prices to ease the impact of rising costs, but did expect some impact on volume as a result.
2022 underlying operating margin was expected to be down by between 140bps and 240bps, to between 16% and 17%, with the first half expected to be impacted more than the second half.
‘We expect margin to be restored after 2022, with the bulk coming back in 2023 and the rest in 2024,’ the company said.
AJ Bell investment director Russ Mould said: ‘All this would suggest Unilever has got itself tied in knots and the shareholder backlash means the clock is ticking for chief executive Alan Jope to properly decide on a long-term strategy to generate sustainable growth otherwise he will be out of a job very soon.’
