- Price rises demonstrate the group's ‘brand power’
- Full year sales growth to top previous guidance
- New organisational structure to drive progress
Investors lapped up the first half trading update from consumer goods giant Unilever (ULVR) after the firm posted underlying sales growth well ahead of analysts’ forecasts and raised its full year outlook.
Shares in the Marmite-to-Magnum maker jumped to the top of the FTSE leader board gaining 3% to £40.30.
PRICING POWER
After much debate about the company’s ability to pass on price increases to its customers without damaging sales, Unilever hiked selling prices by 9.8% in the six months to June.
That prompted a 1.6% fall in volumes but still left underlying sales up 8.1% against an average estimate of around a 7% increase.
After a rise of 7.3% in the first quarter, the firm posted underlying sales growth of 8.8% in the second quarter driven by a whopping 11.2% increase in prices.
The biggest hike in second-quarter selling prices was 16.6% in home care, which includes big brands such as Comfort, Domestos and Radiant and makes up around a fifth of group sales, as the firm passed on ‘very high increases’ in raw material costs.
In beauty and personal care, which makes up two fifths of sales and includes brands such as Dove, Pond’s and Rexona, prices were raised by 10.5% leading to just a 2.3% drop in volumes.
In foods and refreshment, which accounts for another two fifths of sales, prices were raised by 9.4% with just a 1.2% drop in volumes.
Sales of ice creams were particularly strong during the quarter led by the out-of-home business which recorded double-digit price and volume growth.
POSITIVE MOMENTUM
Chief executive Alan Jope, who has faced plenty of criticism from big shareholders and activists this year, was particularly pleased with the progress of the firm’s ‘billion+ Euro brands’ which posted underlying sales growth of 9.4% in the first half and represent over 50% of revenues.
‘We have made further progress against our strategic priorities, maintaining strong investment in our brands, and we continue to reshape our portfolio’, said Jope.
Jope also flagged the new category-focused organizational structure which came into effect at the start of this month as ‘an important further step that will underpin the delivery of consistent growth, which remains our first priority’.
Despite the challenges of inflation and an uncertain economic outlook, the firm raised its forecast for full year underlying sales growth to above the top of its previous range of between 4.5% and 6.5%, ‘driven by price with some further pressure on volume’.
