Unilever’s margins are in the limelight due to soaring commodity costs




July 22, 2021

Unilever’s first-half results should show how consumer goods giants are dealing with rising commodity and shipping costs-whether it was able to raise prices without hitting sales volumes. , Or whether the margin is squeezed.


But Thursday’s result is also a rebounding move in Israel, an ongoing struggle over the group’s decision to stop selling products in the occupied Palestinian territories, the group’s American ice cream brand Ben & Jerry’s. Is attracting attention.

Analysts pigeon According to a consensus provided by the company, soap and Hermann mayonnaise makers report that their underlying operating profit has fallen 1.2 percentage points from a year ago.

Pantry purchases and a surge in home meals during the pandemic blockade last year Unilever Reduce marketing and store promotions and increase profit margins. However, soaring product costs for everything from plastics to tea and nuts in the first half of 2021 questioned the year-round goal of raising margins “slightly” from last year.

The company reported a basic operating margin of 18.5% in 2020.

Jeffreys analyst Martin Debu said Unilever’s commodity costs were initially forecast due to rising prices for plastics, ethylene oxide and palm oil, which are used primarily in the manufacture and packaging of its beauty and personal care products. We expect it to rise from% to 9.8%. Product. 40% of Unilever’s total sales are raw material and packaging costs.

“We continue to see 2021 as the industry’s most important cost challenge year since 2011,” says Deboo.

Unilever raised prices by 1% in the first quarter, but in areas such as tea and high-inflation Latin American countries, analysts expect the impact to be felt only later this year, with high commodity prices in the first half. It states that it is leaving.

Unilever is expected to raise prices further, but the initial price increases have already weakened sales in countries such as Brazil. Morgan Stanley Analysts pointed out in a research report earlier this month. Emerging markets such as Brazil, India and China account for 60% of group sales.

“We know these high investment costs, but it is difficult to estimate the exact actual impact on margins, which poses additional risk to future results not only for this quarter’s impact, but also for the second half’s impact. “We are pleased to announce that Tineke Flicky, Head of UK Equity Research at Waverton Investment Management, a shareholder of Unileaver.”

Despite the pressure, Unilever said in April that it was confident that it could achieve the underlying sales growth for the full year, within the mid-term target of 3-5%, with the first half near the upper end of the range. ..
Some analysts say it’s less bullish, but that cold April and heavy rain in May have curtailed ice cream consumption outside the home.

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Unilever’s margins are in the limelight due to soaring commodity costs

Source link Unilever’s margins are in the limelight due to soaring commodity costs

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