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Unilever increased its margins in the first half of its financial year, despite €1.6bn of input inflation as it raised prices to pass costs on to consumers.

The consumer giant’s first-half underlying sales growth for the six months to 30 June was 9.1%, wholly driven by pricing, which was up 9.4% while volumes fell 0.2%.

However, underlying price growth has sequentially moderated from 13.3% in the fourth quarter of 2022, which helped volumes move back to “virtually flat” with a step-up in performance in beauty & wellbeing and personal care offsetting volume declines elsewhere.

Beauty & wellbeing grew underlying sales by 9.1%, with volume growth of 3.8% led by continued double-digit growth in prestige beauty and health & wellbeing, as well as strong growth in hair care.

Personal care underlying sales were up 10.8%, driven by price and 3.2% volume growth with strong sales of deodorants.

Home care grew 8.4% with volumes almost flat in emerging markets and down in Europe.

Nutrition grew 10.4% with strong growth of dressings, while underlying volumes of 1.9% reflect a challenging European market.

Ice cream underlying sales growth was 5.7%, with volumes down 5.2% due to the in-home segment.

The percentage of the group’s business winning market share on a rolling 12 month-basis reduced to 41%, reflecting the impact of a 17% SKU reduction, pricing dynamics, and consumer shifts in certain markets (including tea and laundry value segments in India and Brazil and personal care in North America).

Regionally, emerging markets grew underlying sales by 10.6% with price of 10.0% and a return to positive volume growth at 0.6%.

Developed markets grew underlying sales by 6.9%, with 8.4% from price and volumes down 1.4% from volume. Volumes held up well in North America, while underlying price growth remained elevated in Europe given its higher exposure to categories with significant cost inflation.

Overall turnover increased 2.7% to €30.4bn, which included a currency impact of 3.2% and 2.7% from disposals net of acquisitions.

Underlying operating profit was €5.2bn, up 3.3% versus the prior year, with underlying operating margin up by 10bps to 17.1%.

Gross margin increased by 30bps despite €1.6bn of net material inflation and increased production and logistics costs as cost increases were fully mitigated by pricing, savings and improved mix.

However, Unilever stressed that, after several periods of high cost inflation, gross margin remains 270bps below its level in the first half of pre-Covid 2019.

Brand and marketing investment stepped up by €0.4bn in constant exchange rates, a 30bps increase as a percentage of turnover in current exchange rates.

Total operating profits were up 22.6% to €5.5bn, with operating margins up 290bps to 18.1%.

Recently appointed CEO Hein Schumacher commented: “Unilever’s performance in the first half highlights the qualities that attracted me to the business: an unmatched global footprint, a portfolio of great brands and a team of talented people.

“My early immersion in the business has confirmed my belief in Unilever’s strong fundamentals. The task ahead is to leverage these core strengths – supported by our simplified operating model – to drive improved performance and competitiveness. This is our absolute priority and it will mean bringing greater focus and sharper execution, with science-backed innovations and investment behind our brands.

“This opportunity to step up our performance and unlock our full potential makes it an exciting time to lead Unilever. I look forward to sharing further details when we report our Q3 results in October.”

Morning update

Catering giant Compass Group has posted strong growth in its third quarter as out-of-home eating continues to bounce back.

Organic revenue growth was 15% in the three months to 30 June, despite lapping the reopening of all sectors in the prior year.

Year to date organic revenue growth has been 21%, benefiting from client retention of 96.7%, balanced net new business growth of 5%, appropriate pricing of 7% and strong like-for-like volume growth of 9%.

The group said outsourcing trends remain strong and are contributing to a significant pipeline of new business opportunities across all its regions.

While inflation remains elevated, it said it was making margin progress by mitigating cost pressures, pricing appropriately and benefiting from operational leverage.

The group reiterated its 2023 guidance, expecting operating profit growth towards 30% on a constant-currency basis, to be delivered through organic revenue growth of around 18% and an underlying operating margin in the range of 6.7% to 6.8%.

“Longer term, we expect the growth opportunities to sustain mid-to-high single-digit organic growth and a path back to our historical margin, leading to profit growth above revenue growth,” it stated.

“With our proven value creation model, we will continue rewarding shareholders with compounding returns over the long term.”

Food to go player Greencore delivered a “solid” financial performance in the three months to 30 June, with ongoing resilience of the categories in which it operates.

Group reported revenue increased by 1.9% to £495.4m.

On a pro forma basis, revenue grew by 9.3%, with the increase driven by a combination of inflation recovery and underlying volume growth, supported by the contribution from new customer wins.

Across the group, manufactured volume growth in the quarter was up 0.9%.

Reported revenue in food to go categories increased by 0.6% to £335.3m with pro forma revenue growth of 8.1%. The increase was primarily due to inflation recovery, in addition to food to go manufactured volumes being 2% ahead of the same period last year.

Reported revenue in other convenience categories was £160.1m, up 4.7% iyear-on-year and a 12.1% increase on a pro forma basis.

The improvement was largely due to inflation recovery, the on-boarding of new business wins in ready meals coupled with a strong performance across ambient sauces. Underlying ready meals volumes in the quarter were 2.6% lower net of new business wins.

Greencore said cost inflation continued to be managed through ongoing recovery and other mitigating actions, though the rate of inflation in some areas was now beginning to slow.

The group continues to expect to generate full-year performance in line with current market expectations, ahead of its seasonally important fourth quarter.

Market expectations are for adjusted operating profits of £70m and net debt of £188.6m.

CEO Dalton Philips said: “I am encouraged by the progress made during the third quarter and that manufactured volume growth is continuing to support our top line momentum. This clearly illustrates the underlying demand for the categories in which we operate, as well as Greencore’s resilience in the current difficult consumer spending environment.

“The food to go category remains hugely relevant to consumers as they contend with the cost of living crisis, and it is particularly notable that 52% of supermarket sandwiches are now bought as part of a meal deal, up from 46% this time last year. We are delighted that our core category is playing such a key role in feeding the UK, and in a way that represents such good value.

“As we enter the fourth quarter, which is a seasonally important trading period for the business, we remain confident that the group will deliver a full year outturn in line with current market expectations.

“As outlined at the interim results in May, our priority in the near-term is to rebuild profitability and returns to create a platform on which to build for future growth”.

Total till sales at UK supermarkets slowed to 8.9% over the last four weeks ending 15 July 2023, according to new market share data from NIQ.

This is a decline from the 12.4% recorded in June 2023, with the drop in sales partly due to the unusually high growth experienced the previous month.

This is also combined with a slowdown in food inflation and trading against previous high comparatives which included the acceleration of inflation this time last year.

NIQ data shows that volume sales at the grocery multiples also weakened to -3.6% (from -2%) as shoppers sought to readjust spend ahead of their summer holidays.

This was also aided by the cooler and wetter weather during the week ending 14 July leading to less occasions for shoppers to socialise and spend on additional items and the start of last year’s heatwaves.

As a result, July was the first time shoppers spent less than a prior period since the seasonal lull in January and last September, which was after the summer heatwaves.

In terms of category performance, growth slowed for dairy products (+9.4%) and frozen foods (+7%) amidst retailer price cuts. However, there was an increase in sales of confectionery (up 16.5%), packaged grocery (13.4%) and crisps and snacks (12.8%), with confectionery sales seeing the fastest growth.

On an individual retailer level, Tesco and Sainsbury’s were both up 11%, with Asda up 10.7% and Morrisons 2.3%.

Adli and Lidl were up 22.3% and 17.9% respectively.

Marks & Spencer sales jumped 14.2%m while Co-op was up 4.9%, Iceland 6.9% and Waitrose 3.6%.

As Brits seek out more ways to cut costs on grocery bills, NIQ data also shows a growing demand for the value retail chains, like B&M and Home Bargains where fmcg sales increased 11%.

Mike Watkins, NIQ’s UK head of retailer and business insight, said: “Shoppers continue to seek out value by looking for bargains, we’re seeing them become more channel agnostic and less likely to remain loyal to many supermarkets. The value retail channel is becoming a destination for many households for snacks, household and personal care as well as certain branded packaged grocery items.

“Over the next eight weeks, we expect to see a similar pattern on spending with little improvement in volume sales as school holidays kick off. The battleground for shopper loyalty is now shifting - retailers must be prepared to build on the trend to shop little and more often when consumers revert to their usual shopping patterns post holidays.”

Finally, Lindt & Sprüngli has increased its sales and profit outlook for 2023.

The first half of 2023 was “very successful” for the group, with organic sales up 10.1% to compared with the previous year to CHF2.09bn (excluding Russia).

It saw strong growth in its core Europe markets (up 8.9% to CHF1bn), with the German and French markets continued to achieve impressive growth.

Italy and the UK, also important and established core markets, even achieved double-digit growth. The Swiss market also performed particularly well.

North America saw double-digit organic sales growth of 11.2% to CHF798.1m, with rest of the world up 11.1% to CHF281.7m.

Operating profit (EBIT) increased to CHF255m, while the EBIT margin rose to 12.2%.

The group’s outlook for the financial year 2023 has been revised upwards to reflect sales growth in the range of 7%-9% and profit margin expansion of 30-50 basis points.

On the markets this morning, the FTSE 100 has edged up 0.1% to 7,682.7pts.

Early risers include Virgin Wines, up 6.5% to 32.5p, Unilever, up 4.6% to 4,204.5p and Nichols, up 3.9% to 1,065p.

Fallers include Compass Group, down 3.5% to 2,052p, SSP Group, down 1.5% to 252.8p and Naked Wines, down 1.3% to 76p.

Yesterday in the City

The FTSE 100 opened up 0.2% to 7,678.6pts yesterday.

Ocado jumped 14.3% to 785p after it announced it had settled all litigation with Norwegian rival AutoStore, following a long-running legal battle over intellectual property, that will see it paid £200m.

Other risers included McBride, up 4.5% to 34.1p, Naked Wines, up 2.1% to 77p, Paypoint, up 1% to 452p, Deliveroo, up 0.8% to 123p, Marks & Spencer, up 0.7% to 205.8p, Coca-Cola HBC, up 0.5% to 2,396p, Tesco, up 0.5% to 261.4p and Compass Group, up 0.4% to 2,126p.

Fallers included Hotel Chocolat, down 5% to 113p, Bakkavor, down 4.3% to 101p, Nichols, down 2.4% to 1,025p, Unilever, down 1.6% to 4,018.5p and Greencore, down 1.3% to 84.7p.