Thursday 22 July 2021 2:29 pm

Unilever hit by rising commodity prices despite positive sales growth

Consumer goods giant Unilever has drawn back its full-year operating margin forecast as commodity costs have surged in the past six months.

The group, which owns Dove and Hellmann’s, turned over €25.8bn in its half-year results – just 0.3 per cent more than last year.

However, the group has already raked in a further €13.5bn in the second quarter of this year.

Unilever posted a higher-than-expected underlying sales growth of 5.4 per cent, despite the commodity price growth which has been pushed by pandemic demand and shaky supply chains.

Following the announcement, shares sank 5.4 per cent in its afternoon trading, dragging the total share price to 4,067.00.

It comes amid tensions between Unilever, its ice cream subsidiary Ben & Jerry’s and Israel’s new prime minister Naftali Bennett.

Earlier this week, Israel warned the consumer goods giant of “severe consequences” if Ben & Jerry’s upheld its decision to boycott the West Bank.

But beyond ice cream, the giant has been buckling down on the growing beauty industry and nutrition markets.

Beauty and functional nutrition grew strongly and we recently announced the acquisition of digitally-native skincare brand Paula’s Choice,” CEO Alan Jope said.

‘Steady ship’

“The operational separation of our tea business is substantially complete. Our e-commerce business grew 50 per cent and the channel now represents 11 per cent of sales.”

The global conglomerate’s volume-led approach, where it owns a mass of household brands, means it is less likely to drive prices up to rally revenues, senior equity analyst at Hargreaves Lansdown, Sophie Lund-Yates, said.

“Surprise, surprise, Unilever’s shown itself to be a steady ship in the storm, with nothing unexpected coming out of half-year results.

“That’s the joy of a giant like Unilever, whose stable of brands mean a certain level of revenue stream is pretty much guaranteed, whatever the weather.”

With operating margins in the region of 19 per cent, Lund-Yates said “there isn’t anything to be really concerned about, but with full-year guidance trimmed it will be something to keep an eye on.”