Consumer goods giant Unilever has raised its annual outlook after posting its best quarterly sales performance in more than a decade, ahead of a £33.8 billion deal to spin off its food business into a joint venture with US rival McCormick.
Strong half-year results
Shares surged 6% higher in morning trading on Tuesday as the Marmite to Dove soap firm cheered a strong first half. Sales growth ramped up to 5.8% in the second quarter, driven by a 5.5% jump in sales by volume – the highest underlying volume growth for more than 10 years.
Overall sales lifted 0.5% in the first half, and pre-tax profits rose 1.8% to 4.66 billion euros (£3.98 billion) in the six months to June 30. Operating profits rose 2.6% to 4.89 billion euros (£4.17 billion), or 0.9% higher on an underlying basis to 5.2 billion euros (£4.44 billion).
Improved guidance
Unilever now expects full-year sales growth within its 4% to 6% medium-term guidance, having previously forecast it to be at the bottom end of the range. The group also expects around 3% underlying volume growth, against previous guidance for at least 2% growth for the year.
Food business spin-off
The half-year figures come as the group moves to split its food business into a joint venture with McCormick. The venture, announced in March, will create a major food giant combining brands such as Unilever’s Marmite with McCormick’s French’s mustard. Some Unilever shareholders recently criticised bosses at its annual general meeting for approving the deal without putting it to a shareholder vote.
Divisional performance
Food sales lagged behind the rest of the group, with underlying growth of 1.2% in the first half, against 5.9% for beauty and wellbeing, 4.8% for personal care and 7.6% for home products.
CEO and analyst comments
Unilever chief executive Fernando Fernandez said: “We have delivered a strong volume-led performance in the first half, with a significant step-up in the second quarter – the best volume quarter at Unilever in over a decade. These results show our ability to continue performing while transforming our portfolio. Our combination of foods with McCormick is progressing well and will unlock significant value.”
Emily Sawicz, director and analyst at RSM UK, said: “By streamlining its portfolio and investing behind its strongest beauty, wellbeing and personal care brands, Unilever is strengthening its competitive position. The challenge now will be sustaining momentum in emerging markets while navigating cost inflation and reigniting growth in developed economies, where premium personal and home care categories have generally proven more resilient.”
