Unilever Turnover, Profits Rise, as Group Pauses Sale of Elida Beauty – WWD

LONDON – Following a tumultuous few weeks which saw the arrival of a high-profile activist investor, Nelson Peltz, Unilever delivered full-year sales and profit growth in line with market expectations, although it warned that inflation would weigh heavily on costs and pricing in the first half.

The company, which tried – and failed – to purchase the consumer healthcare arm of GlaxoSmithKline in a move that triggered a share-price collapse, said will not pursue major acquisitions in the foreseeable future.

Having consulted with major shareholders, it will also conduct a share buyback program of up to 3 billion euros over the next two years.

The corporate giant, parent of brands ranging from Dove skincare to Domestos disinfectant, added that it also plans to hang on to the Elida group of personal care brands, including Q-Tips, Caress, Tigi, Timotei, Impulse and Monsavon.

It had originally planned to sell the cluster of brands, which had combined revenues of around 600 million euros in 2020. Unilever said it can create more value if it manages Elida as an independent unit within the overall business.

In the 12 months to Dec. 31, turnover was 52.4 billion euros, up 4.5 percent on an underlying basis, and 3.4 percent on a reported one. Analysts had expected 4.3 percent organic growth for the year.

The underlying operating profit margin of 18.4 percent was also in line with market expectations. Reported operating profit was 8.7 billion euros, 4.8 percent higher than the previous year, while net profit rose 9 percent to 6.6 billion euros on a reported basis.

Alan Jope, Unilever’s embattled chief executive officer who has come under fire from angry shareholders following the failed GSK acquisition attempt, noted that the company delivered its fastest underlying sales growth in nine years.

He said the company has “continued to re-shape” its portfolio into high-growth spaces, making acquisitions in prestige beauty and functional nutrition, while agreeing to the sale of its tea division for 4.5 billion euros to a fund controlled by CVC Capital Partners.

Jope added that the major challenge of 2021 had been input cost inflation. In response, the company hiked prices by 2.9 percent for the year.

“We are focused on driving faster growth from our strong portfolio of brands and markets, and in 2022, we will manage a significant input cost inflation cycle, and will continue to invest competitively in marketing, R&D and capital expenditure,” Jope said.

He added that, following the GSK bid, Unilever has “engaged extensively with our shareholders in recent weeks, and received a strong message that the evolution of our portfolio needs to be measured.”

Beauty and Personal Care was the largest division in the full year, notching 21.9 billion euros in sales, up 3.8 percent on the previous year.

The company said that all categories delivered good growth apart from skin cleansing, which declined following elevated demand in the prior year. Skin care grew high single-digit with channels reopening in 2021.

The Prestige Beauty division grew in the double-digits with all brands benefitting from e-commerce and a recovery in beauty channels compared to the prior year, Unilever said. New innovations in Prestige Beauty included Dermalogica’s biolumin-c and sound sleep cocoon and Ren’s zero waste packaging.

The company added that underlying operating margin in Beauty and Personal Care was flat, with “high material inflation” in palm oil having a particularly high impact on gross margin, despite stepped-up pricing.

In the current year, the company said it expects underlying sales growth to be in the range of 4.5 percent to 6.5 percent, which is well ahead of analysts’ forecasts.

Unilever said it expects “very high input cost inflation” in the first half of more than 2 billion euros, adding that figure may moderate in the second half to around 1.5 billion euros.

The company noted there is a currently much “uncertainty on the outlook for commodity, freight and packaging costs.”

The company’s new and simpler organizational structure, announced earlier this month, is expected to generate around 600 million euros of cost savings over two years.

In 2022, underlying operating margin is expected to be down, and range between 16 percent and 17 percent, with the first half impacted more than the second half. Unilever said it expects margin to be restored after 2022, with the bulk coming back in 2023 and the rest in 2024.

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