Unilever has warned more price rises are on the way to mitigate an extra €3.5bn of costs in 2022.
Announcing its annual results this morning, the under-fire consumer goods giant said pricing would remain “strong” going forwards to reflect “very high input cost inflation”.
In the first half of the year, Unilever expects this inflation to reach over €2bn. That may moderate in the second half to around €1.5bn, it said, although there was a wide range for this, reflecting market uncertainty on the outlook for commodity, freight and packaging costs.
It warned it was currently experiencing widespread and very high input cost inflation across its markets.
“In the fourth quarter, price stepped up to 4.9% with volume flat, as our brands provided strong pricing power in an environment of rising commodity and other input costs,” Unilever said.
Foods and Refreshment delivered the fastest growth in 2021, with 5.6% underlying sales growth as food solutions and out-of-home ice cream partially recovered from channel restrictions in 2020.
Overall underlying sales growth for the year was 4.5%, with volume of 1.6% and price of 2.9%. This represented its highest organic growth for nine years.
Growth was achieved despite declines in North America and Europe as the group lapped high demand in the prior year for in-home food and hygiene products. Conversely, in China the market recovered well in 2021, although Unilever noted that economic growth had started to slow. In Latin America, price increases had delivered growth, while South East Asia markets were improving following tough restrictions on daily life through 2021, it added.
E-commerce growth was 44% and now represents 13% of Unilever’s turnover.
Prestige Beauty delivered strong double-digit growth across all brands as channels reopened, with e-commerce a big contributor. Functional nutrition grew double-digit across the portfolio of brands.
Turnover increased 3.4%, with a net positive impact of 1.3% from acquisitions and disposals and a negative impact of 2.4% from currency-related items.
Underlying operating profit was up 2.9% to €9.6bn, including a negative impact from currency of 4.3%.
Underlying operating margin decreased by 10bps and gross margin decreased by 120bps, reflecting very high inflation in raw material, packaging and distribution costs, partially offset by savings and pricing actions.
The group’s brand and marketing investment fell slightly but remained at “competitive levels”.
In 2022, Unilever said it expects underlying sales growth to be in the range of 4.5% to 6.5%, driven by pricing with some impact on volume as a result.
It is targeting €600m of cost savings over two years to help mitigate inflation, though it said it plans to maintain competitive levels of investment in marketing, R&D and capital expenditure until input costs normalise and the full extent of pricing is reflected.
CEO Alan Jope commented: “The major challenge of 2021 has been the dramatic rise of input costs. We responded with pricing actions, delivering underlying price growth of 2.9% for the year, accelerating to 4.9% in the fourth quarter, with full year underlying operating margin down 10bps and underlying earnings per share up 5.5%.
“We are focused on driving faster growth from our strong portfolio of brands and markets, and recently announced a major change to create a simpler, more category-focused organisation designed to further improve performance. In 2022, we will manage a significant input cost inflation cycle and will continue to invest competitively in marketing, R&D and capital expenditure.
“We have engaged extensively with our shareholders in recent weeks and received a strong message that the evolution of our portfolio needs to be measured. We therefore do not intend to pursue major acquisitions in the foreseeable future and will conduct a share buyback programme of up to €3bn over the next two years.”
Unilever shares are down 1.6% to 3,767.4p on the news.
Spirits giant Pernod Ricard has reported “record” first half sales of close to €6bn, with organic growth of 17% and sharp rises across its regions and key brands
Americas was up 14%, with “very dynamic” growth in the region, notably USA, Brazil and Travel Retail.
Asia-RoW was up 16% driven by China, India and Turkey, while Europe rebounded by 21% led by Spain, France, Travel Retail and continued dynamism in Eastern Europe.
Its Strategic International Brands and Specialty portfolio drove strong price/mix with the former posting a sales increase of 19% and broad-based growth, including Jameson, Martell, Ballantine’s, Absolut and Chivas Regal, all double-digit.
Speciality brands were up 21%, with dynamic momentum of American whiskeys, Malfy, Monkey 47, Redbreast, Lillet and agave portfolio.
Strategic International Brands were up 19% and strategic local brands up 14%.
Wines were down 6% after a soft first half, due in particular to New Zealand lower harvest.
Overall second quarter sales were €3.24bn, with 14% organic growth, slowing from 20% growth in Q1 as it cycles higher comparisons in some markets.
FY22 first half profit from recurring operatings was up 22% to €2bn, with a strong organic operating margin improvement of 147bps.
Gross margin was up 39bps, with strong pricing across regions and operational excellence savings more than compensating inflation in costs of goods, notably from logistics and commodities.
Looking forward, Pernod Ricard said it expects continued on-trade rebound, off-trade resilience and travel retail gradual recovery driving strong diversified sales momentum across regions
Dynamic top line will continue to drive operating margin expansion albeit moderating in the second half, with increased investments to fuel growth momentum
Chairman and CEO Alexandre Ricard commented: “The execution of our Transform & Accelerate strategy is delivering an excellent and broad-based performance in the first half, with brand share gains in most countries and with all our Must-Win Markets showing very strong growth. I take the opportunity to praise the engagement and performance of our teams throughout the world, who have relentlessly accomplished outstanding work, in an environment still largely disrupted on many fronts by the Covid crisis.
“We remain focused on executing our strategy, progressing on our Sustainability and Responsibility journey and accelerating our digital transformation. A successful mix of robust fundamentals, the dedication of our teams and our portfolio of brands, has yielded a very strong set of results and seen us through this crisis, emerging even stronger.””
Elsewhere, German food delivery group Delivery Hero posted fourth quarter growth 39% in 2021 with gross merchandise value of €9.6bn for the quarter.
It said the last quarter of 2021 was marked by improved economics and strengthening of leadership in key regions and new verticals.
In total for the year, the company generated a GMV of €35.4bn, up 62% year-on-year and slightly exceeding the given guidance of €33 to €35bn.
The adjusted EBITDA/GMV margin for the financial year 2021 was down 2.2%, but was in line with the set guidance of around -2%.
Next year the group is anticipating GMV to range between €44 to €45bn, with total segment revenue to reach €9.5 to €10.5bn and an adjusted EBITDA/GMV margin of around -1.0% to -1.2%.
The company is on track to generate a positive adjusted EBITDA for the platform business for the full year 2022.
“With steady growth rates and an increasing contribution margin of own-delivery, it is clear that our business model works,” it stated. “Our deliberate focus on scale and driving efficiency pays off, and we expect our platform business to generate a positive adjusted EBITDA this year.”
Niklas Östberg, CEO and Co-Founder of Delivery Hero commented: “The last quarter of 2021 was marked by improved economics and strengthening of leadership in key regions and new verticals.
“Finishing off the year on a high note, we signed an agreement to become the majority shareholder of Glovo, which will increase our geographical footprint and long term growth potential. Upon closing, we will serve up to 2.2 billion people around the world.”
Associated British Foods has announced the launch of its inaugural public bond, a £400m, 2.5% offer due 2034.
The bonds are expected to be rated A by S&P Global Ratings and will diversify the group’s sources of funding and extend the duration of its borrowings. The bond is being issued ahead of the maturity of its remaining Private Placement notes.
John Bason, Finance Director, said: “We are delighted to announce ABF’s inaugural public bond issue. These bonds will diversify the source of funding for the group. They will enhance our liquidity and support the continued investment for growth in our businesses.”
English wine producer Gusbourne saw net revenues almost double in 2021, rising by 95% to £3.1m.
The growth reflects continued and accelerating sales growth, with the expected like for like growth in second half more than double the prior year at around 120%.
The group saw significant growth in UK Trade sales as the sector continued to recover from the prior year effects of COVID-19.
Direct to consumer also showed strong growth driven by online sales and cellar door operations in Kent.
DTC sales for the year are expected to represent 28% (30% last year) of net revenue for the year and UK trade sales are expected to represent 51% (up from 37%) with International Sales at 21% (down from 33%).
Charlie Holland, Gusbourne’s CEO commented: “We are delighted to have almost doubled our revenues as customer numbers continue to increase across all major sales channels.
“This, together with the fundraising at the end of last year and a significantly strengthened balance sheet, allows us to look confidently to the future as we continue to invest in building our brand and strengthening Gusbourne’s position as one of the UK’s most significant producers of fine English wine.”
On the markets this morning, the FTSE 100 is up 0.1% at 7,650pts.
Risers include McBride, up 2.7% to 48.7p, SSP Group, up 2% to 302.2p and Imperial Brands, up 1% to 1,795.5p.
Fallers include Deliveroo, down 4.8% to 141.9p, Hotel Chocolat, down 4.6% to 460p and Just Eat Takeaway.com, down 4% to 3,517p.
Yesterday in the City
The FSTE 100 rose 1% yesterday to close at 7,643.4pts.
PZ Cussons was up 4.5% to 198.2p despite group revenues declined 9.3% to £283.7m in the half as a result of the Carex declines and the disposal of non-core assets.
Ocado shares rebounded 6.1% to 1,300p after a sharp drop on Tuesday following its annual results.
Fallers included FeverTree, down 2.2% to 2,138p and Sainsbury’s, down 1.5% to 277.4p.