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Consumer goods group Unilever has said inflation has peaked, as the maker of Marmite and Magnums reported better than expected sales growth in the first half of the year.
Underlying sales in the first six months of the year climbed 9.1 per cent, beating analysts’ expectations, although sales volumes remained flat and the company continued to lose considerable market share.
Unilever’s outgoing chief financial officer Graeme Pitkethly said “we have passed peak inflation”, but added that continued price rises would contribute to underlying sales growth in the second half of the year. The group increased prices 9.4 per cent in the first half compared with 13.3 per cent in the final three months of last year.
UK supermarkets Tesco and Sainsbury have also declared that inflationary pressures have peaked, raising hopes that consumers will soon feel the effects of lower prices.
The results are the first to be released since Unilever’s new chief executive Hein Schumacher took over this month. The former head of Dutch dairy co-operative FrieslandCampina takes the reins after a period in which Unilever has faced growing investor discontent over its disappointing share price and an unsuccessful attempt to buy the consumer health division of GSK for £50bn in late 2021.
The company on Tuesday raised its forecast for revenue growth for the year to more than 5 per cent, helping send shares in the company up 5 per cent.
However it also reported a significant hit to its global market share, with the proportion of the business gaining share falling from 48 per cent in the first quarter to 41 per cent in the second quarter, the lowest level since 2018.
Bruno Monteyne, analyst at Bernstein, said the 41 per cent position was “a very bad low point” which suggested Unilever was not investing sufficiently in its brands and that “prices were potentially too high.”
Price increases have eroded the business’s volumes, which fell 0.2 per cent over the first half. Europe was the worst hit by falling volumes, with underlying volume growth falling by almost 10 per cent in the second quarter following 15.5 per cent price increases.
“Europe remains very challenging,” Pitkethly said Tuesday. “We’ve seen a broad-based increase in private market share. Shoppers are buying less and down-trading.” The CFO added that the company had not passed through the full extent of inflation to consumers, in response to claims that consumer goods companies were “profiteering”.
“You see it in the significant lower margins we have as a group, particularly in Europe where the consumer is most hard pressed. We are sharing the pain here,” he said.
Schumacher, meanwhile, said that pricing and inflation were “moderating throughout this year”, but cautioned that volatility in agricultural commodity markets, including drought in southern Europe and the impact of the war in Ukraine on food prices, could lead to further price growth.
Schumacher, who replaced the company’s chief executive of five years Alan Jope, said his task ahead was to use Unilever’s “strong fundamentals” to drive improved performance and competitiveness. He will outline his plans for Unilever when the group reports third-quarter results in October.