Unilever annual profit drops 15 per cent on flat sales

British consumer goods giant Unilever on Thursday said its profit after tax dropped 15 per cent last year to €6.5 billion (£5.55bn) as sales flattened.

Chief executive Hein Schumacher said in the earnings statement that “competitiveness remains disappointing and overall performance needs to improve” at the group whose products include Magnum ice cream, Cif surface cleaner and Dove soap.

Group revenue dipped 0.8 per cent to €59.6bn last year compared with 2022.

Businesses and consumers worldwide continue to battle higher costs as inflation remains stubbornly high, especially in the UK.

Unilever, which makes also Ben & Jerry’s ice cream and Hellmann’s mayonnaise, hiked prices of all its goods last year by an average of 6.8 per cent.

The amount of goods sold edged up as the price hikes cooled.

“Volumes are growing again, led by Unilever’s biggest brands,” noted Matt Britzman, equity analyst at Hargreaves Lansdown.

“Price hikes have come tumbling back down to earth, from the mammoth double-digit levels seen in the first quarter (of last year).

“Cost inflation is easing, meaning less needs to be passed on to consumers who were starting to trade away from Unilever’s higher priced products,” he added.

Unilever’s share price jumped nearly three percent following the earnings update, helped by the announcement it was repurchasing more shares.

Schumacher became Unilever CEO last year, replacing Alan Jope who had come under fierce pressure from activist investors.

Jope had led Unilever’s failed $50bn bid for the former healthcare unit of drugmaker GlaxoSmithKline.

Schumacher, the former head of Dutch dairy and nutrition firm Royal FrieslandCampina, launched in October an action plan to grow Unilever.

“The new leadership team has embedded the action plan at pace,” he added in Thursday’s results statement.

“We are at the early stages of this work and there is much to do but we are moving with speed and urgency to transform Unilever into a consistently higher performing business,” he added.

Analysts said it is too soon to judge the turnaround plan.

“The plan isn’t just about cutting costs and increasing efficiency. It’s designed to make Unilever a more innovative business, with stronger, faster growing brands. This requires increased brand and marketing investment, and will not be quick or easy to achieve,” Charlie Huggins, manager of the quality shares portfolio at Wealth Club, commented.

“Cost of living challenges mean private label brands have never been more appealing, meaning Unilever is having to work harder just to maintain market share, let alone grow it. This action plan feels like it has more substance than past initiatives, but it needs to succeed to stop the business going backwards.”