LONDON, Feb 10 (Reuters) – Unilever warned on Thursday of lower margins this year as the consumer goods giant struggles to pass on rising costs to customers.
The manufacturer of Dove soap and Magnum ice cream is all the more affected by inflation as it operates in emerging countries where the rise in prices is particularly sharp.
The group also ruled out any major mergers and acquisitions on Thursday following criticism from investors about the failure of its offer to buy the consumer health branch of GlaxoSmithKline.
Unilever expects 2022 sales to rise between 4.5% and 6.5% but at the same time expects its underlying operating margin to decline by 140 to 240 basis points, after a decline limited to 10 basis points in 2021.
Chief Financial Officer Graeme Pitkethly said inflation-related costs would reach two billion euros in the first half of 2022, but estimated that this was a peak and that these costs should fall to around 1 .5 billion euros in the second half.
Unilever expects its margins to be “restored after 2022, with most of it returning in 2023 and the remainder in 2024”.
This warning raises more questions than answers, said Bernstein analyst Bruno Monteyne.
“If it’s just about covering higher commodity costs, what happened to the pricing power?” he asks. “If there really is so little pricing power, what does that say about the long-term future?”.
On the London Stock Exchange, Unilever shares fell more than 3% in the morning.
Unilever assured on Thursday that it had heard investors’ concerns about the failure of the plan to buy out the consumer health branch of GlaxoSmithKline and decided to initiate a three billion euro share buyback plan over the next two years. .
“We have engaged in extensive dialogue with our shareholders in recent weeks and have received a strong message that the evolution of our portfolio must be measured,” Chief Executive Alan Jope said in a statement.
Shortly after news broke of GSK’s rejection of Unilever’s bid, sources said Nelson Peltz’s activist hedge fund Trian Partners had taken a stake in the group.
At the end of January, Unilever also announced its intention to cut around 1,500 management positions as part of a restructuring aimed again at allaying shareholder concerns.
(Reportage Richa Naidu; French version Dina Kartit, edited by Blandine Hénault)