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By Richa Naidu
LONDON (Reuters) - Unilever Plc raised its full-year sales guidance after beating first-half underlying sales forecasts as the maker of Dove soap and Knorr stock cubes hiked prices to counter soaring costs, lifting its shares on Tuesday.
One of the biggest consumer companies in the world, with more than 400 brands ranging from detergent to ice cream, Unilever's costs have surged since the start of the COVID-19 pandemic created global supply chain logjams.
War in Ukraine has since boosted energy costs and sent prices of raw materials such as wheat, sunflower oil and pulp used in packaging to record highs. Unilever said it sees net material inflation at about 4.6 billion euros this year, including a 2.6 billion euro hit in the second half.
Unilever's first-half operating profit margin fell to 17% from 18.8% a year earlier, even as Unilever raised prices by 9.8%.
The price hikes come despite retailers pushing back against consumer product suppliers, worried about ceding margins and alienating shoppers.
U.S. giant Walmart Inc, the world's biggest retailer, on Monday slashed its profit forecast as surging prices for food and fuel prompted customers to cut back on spending.
"We did see their news this morning, but I think there are many, many aspects to that don't fully connect with Unilever," the British firm's chief financial officer Graeme Pitkethly said on a call with journalists, noting that Walmart's announcement was related more to general merchandise and clothing, and that inflation would vary by region.
However, Pitkethly added: "We expect peak inflation to come in the second half of the year. I don't think we'll be able to catch up in the current quarter."
"We're not going to go back to the previous low inflation environment - we're going to be stuck in this environment for a significant amount of time," said Andy Searle, a partner at consultancy Alix Partners.
Unilever H1 results H1 2022 H1 2021
Turnover 29.6 bln euros 25.8 bln euros
Turnover change 14.90% 0.30%
Underlying sales growth 8.10% 5.40%
Underlying operating margin 17.00% 18.80%
Underlying EPS 1.34 euros 1.33 euros
Underlying EPS growth 1.00% minus 2.0%
Closing net debt 27.1 bln euros 22.4 bln euros
Net debt change yr/yr 20.98% minus 1.75%
SALES OUTLOOK RAISED
Unilever this year made room on its board for activist investor Nelson Peltz, whose Trian investment vehicle had built up a 1.5% stake as of last month.
Peltz "is making a very constructive contribution as a board member," CEO Alan Jope said on a call with journalists but he declined to elaborate.