Consumer goods giant Unilever has raised its full-year sales outlook after achieving its best quarterly sales performance in more than a decade, just before a £33.8 billion deal to spin off its food business.
Shares surge on strong first-half results
The company behind Marmite and Dove saw shares climb 6% in morning trading on Tuesday. Unilever reported a strong first half, with sales growth accelerating to 5.8% in the second quarter. This was driven by a 5.5% increase in sales by volume, the highest underlying volume growth for over ten years.
Overall sales edged up 0.5% in the first half, and pre-tax profits rose 1.8% to €4.66 billion (£3.98 billion) in the six months to June 30. Operating profits increased 2.6% to €4.89 billion (£4.17 billion), or 0.9% higher on an underlying basis to €5.2 billion (£4.44 billion).
Outlook upgraded
Unilever now expects full-year sales growth within its 4% to 6% medium-term guidance, having previously forecast it would be at the bottom end. It also anticipates underlying volume growth of around 3%, up from previous guidance of at least 2%.
The half-year figures come as the group prepares to split its food business into a joint venture with US rival McCormick, announced in March. The joint venture will combine brands such as Marmite with McCormick's French's mustard, creating a major food giant.
Some Unilever shareholders recently criticised the board at the annual general meeting for approving the deal without a shareholder vote.
Food business lags behind
The results showed food sales trailing other divisions, with underlying growth of 1.2% in the first half, compared to 5.9% for beauty and wellbeing, 4.8% for personal care, and 7.6% for home products. Bosses said home and personal care products supported growth in the UK.
Unilever chief executive Fernando Fernandez said: “The UK is one of our most important European markets. We have been having a strong summer performance in there in homecare and personal care. It’s our home market and we are committed to growing the business there.”
Unilever noted that its food business faced soft conditions and increased competition in the US condiment sector. However, it has sought to address this by targeting growth through premium and avocado mayonnaise.
Fernandez added: “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.”
