First half revenue of €29.6bn, reflecting underlying sales growth of 8.1% and improvements across all business divisions. Growth was entirely driven by an increase in pricing, as volumes declined 1.8%.
Rising input costs weighed on margins, but higher sales meant underlying operating profit grew 4.1% to €5.0bn.
Sales guidance for the full year has been raised, now expected above the previous range of 4.5-6.5%. Underlying operating margin guidance remains at 16%, within the previous range of 16% to 17%.
The group announced a dividend of €0.4268 and plans to start another €750m tranche of its ongoing buyback scheme in the third quarter.
The shares rose 2.2% following the announcement.
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Our View
From Magnum to Domestos, Unilever's responsible for some of the world's most recognisable brands. This familiarity and consumer trust is Unilever's superpower, and the reason it's been able to charge a premium for its products.
But price increases to cope with inflation can only go so far, even with a strong set of brands. The group's walking a thin line between protecting margins and losing long-term customers.
There aren't too many companies boasting yearly sales over €50bn. As an integral part of the global consumer supply chain we don't think this is likely to fall too much. Unilever has long been considered a relatively defensive play.
Protecting the brand is Unilever's number one priority, and that comes at a hefty cost. Brand and marketing investment racked up €3.7bn in the first half, with that expected to increase into the second. That's all part and parcel with the group's strategy of locking in long-term customers with well-known, trusted brands.
This part of the business is a non-negotiable, so if revenue starts to weaken margins will come under pressure.
Price increases will go a long way to help cushioning the blow, but there's only so much you can hike before customers walk away.
Luckily there are other levers to pull. The group's shifting its organisational structure following a period of lacklustre growth and pressure from investors. Greater focus and cost savings of €600m over the next couple of years certainly sounds good. But turning a beast like Unilever into a streamlined outfit isn't a quick process.
On a more positive note, free cash flow at the half year mark was €2.2bn and net debt was 2.3 times cash profits (EBITDA), which helps underpin ongoing investment and the dividend. There's a prospective yield of 4.0% on offer, please remember though there are no guarantees.
The group's valuation has come down below the long-term average, reflecting the market's uncertainty. This could prove attractive if management can navigate through this turbulence effectively.
Unilever key facts
All ratios are sourced from Refinitiv. Please remember yields are variable and not a reliable indicator of future income. Keep in mind key figures shouldn't be looked at on their own - it's important to understand the big picture.
Half Year Results (underlying)
Beauty & Personal Care sales grew 7.5% to €12.2bn. Price increases of 9.0% more than offset a 1.3% decline in volumes. Latin America, South Asia and Turkey were standout benefactors of higher prices. Rising costs meant operating margin decreased 1.8 percentage points, but higher sales pushed operating profit up to €2.4bn from €2.2bn.
Home Care sales grew 10.7%, with 14.5% from higher prices and a 3.4% drop in volumes. Double-digit price increases landed across most geographies in response to increasing raw material costs. Those higher costs weighed on operating margin which fell 2.0 percentage points, partially offset by lower marketing spend. Operating profit was broadly flat at €723m.
Foods & Refreshment sales grew 7.3%, with 8.3% from price rises and a 0.9% drop in volumes. Pricing was broad-based and particularly high in dressings given higher input costs. Sales from ice cream and foods both enjoyed high single digit growth - Magnum, Cornetto and Hellmann's the standout brands. Operating margins declined 1.7 percentage points, again due to higher costs. Operating profit was broadly flat at €1.9bn.
Free cash flow over the period declined from €2.4bn to €2.2bn, as higher operating cash flow was offset by increased tax and capital expenditure. At the 30 June 2022, net debt stood at €27.1bn compared to €25.5bn at the start of the period.
This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. It was correct as at the date of publication, and our views may have changed since then. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by Refinitiv. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.
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