Unilever sales beat estimates to grow 5.4% in first half year

Unilever on Thursday topped expectations with second-quarter sales growth, helped by higher prices and strong sales of ice-cream and teas, but warned surging commodity costs would squeeze its full-year operating margin.

Underlying sales rose 5 per cent in the three months that ended June 30, beating the 4.8 per cent analysts had expected.

Half-year sales came in 5.4 per cent higher, above the 5.3 per cent forecast, propelled by 8.1 per cent growth in its Foods and Refreshment division, as Covid-19 restrictions began to ease in many markets.

In Europe, ice-cream eaten out of home grew double-digits while it also saw strong consumption in markets like Turkey, China and India. Sales of teas, including Lipton and PG Tips, also generated strong volume growth in North America, Turkey, Europe and India.

“We believe full-year outlook will land well within the 3-5% growth range with our biggest focus on competitive growth,” chief financial officer Graeme Pitkethly said on a media call.

He played down, however, expectations for margin growth due to a strong jump in prices of commodities including crude, palm and soybean oil, that hit margins in its personal and home care business.

The company said it now expected full-year underlying operating margins to be flat compared to slightly up earlier, citing “more incremental inflation than we saw in the first quarter.” The group also said it had completed the review of its tea business, and anticipates either an initial public offering, sale or partnership before the end of October 2021.

“We are making good progress against the strategic choices outlined earlier this year, including the development of our portfolio into high growth spaces. Prestige Beauty and Functional Nutrition grew strongly, and we recently announced the acquisition of digitally native skin care brand Paula’s Choice. The operational separation of our Tea business is substantially complete,” chief executive Alan Jope said.

The company’s ecommerce business grew 50 per cent and the channel now represents 11 per cent of sales.

Underlying earnings per share for the company came in at €1.33 (£1.14) for the first half, also beating the €1.24 euro average estimate. Underlying operating margin fell 1 percentage point to 18.8 per cent, less than the 1.2 percentage point drop analysts had been expecting.

Overall, first-half turnover came in at €25.8 billion, a touch above the €25.7 billion analysts had expected.