Unilever increased its prices by 2.3% during the third quarter as it moved to counter rising energy and ingredient costs triggered by the Iran war. The FTSE 100 consumer goods group, whose brands include Dove and Sure, also reported that volume growth decelerated from 5.5% to 2.9%.
Cost pressures from the Iran war
The Anglo-Dutch corporation has faced higher costs since oil prices spiked following the outbreak of the Iran war, which pushed up both ingredient and shipping expenses. Unilever told shareholders on Wednesday that the price increase was part of its response to these pressures.
Chief executive Fernando Fernandez said: "We have delivered another quarter of competitive growth, led by continued strong volume delivery and a step up in price to offset the impact of higher commodity costs."
Divisional performance
Revenues rose by 9% in the group's home care division, while beauty and wellbeing grew 5.7% and personal care climbed 6.3%. The company's overall performance was held back by its food division, where sales edged up just 0.1% in the quarter to $3.1bn, slowing from 1.2% growth in the first half of the year.
Unilever is facing significant headwinds in the US foods market, where it is dealing with intensifying competition in the condiments sector. The company confirmed it is implementing selective price reductions to drive sales of those products.
Market trends and outlook
The group was also hampered by a 0.9% decline in sales across developed markets, including a 1.7% drop in Europe, which it attributed to a "soft market environment". In emerging markets, Unilever reported 9.5% underlying sales growth, with double-digit growth in India, Turkey, Vietnam and Pakistan. Volumes there expanded by 6% while prices rose 3.3%.
Unilever, which agreed to sell its food arm to US firm McCormick for $45bn in March, said the disposal of the division — including Marmite, Hellmann's and Bovril — is making "strong progress" and is expected to conclude by mid-next year. The company is now concentrating on its health and beauty portfolio, which includes Dove, Tresemmé and Vaseline.
Analysts at RBC Capital Markets described the third-quarter performance as "decent", noting that sales growth in emerging markets and homecare "more than compensat[ed] for anemic growth in developed markets and food". They added: "The reality is that it (and by extension its shareholders) still own a food business that is dragging down group performance."
