Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Inflation worries overshadow Unilever's strong first half, hit shares

Stock MarketsJul 22, 2021 09:56AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
2/2 © Reuters. FILE PHOTO: The logo of Unilever is seen at the headquarters in Rotterdam, Netherlands August 21, 2018. REUTERS/Piroschka van de Wouw 2/2

By Siddharth Cavale

(Reuters) -Unilever Plc warned on Thursday that surging commodity costs would squeeze its full-year operating margin, overshadowing strong second-quarter sales growth fuelled by the easing of pandemic-related curbs in many of its markets.

Underlying sales for the maker of Dove soap rose 5% in the three months ended June 30, above 4.8% forecast by analysts.

It maintained its 3-5% sales growth forecast for the year, but rising prices of everything from crude to palm and soybean oil made the company cut its operating margin outlook to "about flat" from "slightly up" earlier and flag greater uncertainty surrounding that forecast.

The warning dragged shares of the FTSE 100-listed company down 6.2% by 1345 GMT, wiping off nearly 7 billion pounds ($9.65 billion)of its market value, and making it the top loser on the index on Thursday.

Finance chief Graeme Pitkethly said he expected cost inflation to be in the high-teens in the second half, above the mid-teens rise anticipated earlier.

He said that since the company issued its guidance in the first quarter, crude oil prices had risen 12%, soy bean oil 21%; while freight and transportation costs had risen and 4% and 7%, respectively.

Unilever (NYSE:UL) said that besides accelerating price hikes, it was introducing pack changes and narrowing promotions in the second half in response to rising costs.

The company raised prices by 1.6% in second quarter. In June those were up to 2.2%

"It is that eternal triangle of the competitiveness of our growth, .... landing the pricing and managing the cost inflation," Pitkethly said.

Chief Executive Alan Jope said the lag between the impact of commodity costs and the benefits of increased product prices had created "a higher than normal range of likely year end margin outcomes."

Investec analyst Alicia Forry called the message on costs slightly disappointing.

"They had been confident of passing through cost inflation at the first quarter stage...now they change their tune."

INFERNO BOOST

Half-year sales rose 5.4%, a touch above the 5.3% forecast, propelled by 8.1% growth in its Foods and Refreshment division, as living restrictions began to ease in many markets.

In Europe, sales of ice cream eaten out of home grew at double-digits, boosted by markets like Italy where its new Magnum lines honoring Dante - Inferno, Purgatorio and Paradiso - sold well. Sales of teas also saw strong volume growth.

Jope also said the company was "fully committed to staying in Israel" after the company was embroiled in a controversy earlier this week over its U.S. subsidiary Ben & Jerry's move to end ice cream sales in occupied Palestinian territories that has caused a backlash against the brand in Israel.

Unilever also said it had completed the review of its tea business, and anticipates either an initial public offering, sale or partnership as a final outcome of the separation.

($1 = 0.8476 euros)

($1 = 0.7276 pounds)

($1 = 0.7257 pounds)

Inflation worries overshadow Unilever's strong first half, hit shares
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email