Unilever PLC (LON:ULVR) cut full-year profit guidance as underlying sales growth slowed in the second quarter and cost inflation and volatility increased.
Underlying sales growth in the second quarter was 5.0%, down from 5.7% in the first - its best since 2015.
This included price growth of 1.6%, which accelerated through the quarter as the group moved to increase prices in its various markets in response to inflation in many commodities. This compared to price growth of 1% in the first quarter and 0.3% last year.
“We have seen further cost inflation emerge through the second quarter,” said chief executive Alan Jope, adding that cost volatility and the timing of when price changes land on shelves “create a higher than normal range of likely year end margin outcomes”.
He said the company is “managing this dynamically and expect to maintain underlying operating margin for 2021 around flat”, having said three months ago that margins were expected to increase.
Jope said the group was making “good progress” on the strategic plan outlined earlier this year, including expanding the product portfolio into “high growth spaces”.
He said the operational separation of the tea business is “substantially complete”, but the board has still not decided to spin the business out with a flotation, sale or partnership.
First-half results as a whole showed underlying sales growth of 5.4%, with volume growth of 4% and 1.3% for prices, while statutory revenues were up just 0.3% at €25.8bn.
There was a relative decline in food consumed at home and flat growth in hygiene products compared to this time last year when demand spiked due to the incoming coronavirus pandemic. But in Europe, volume growth was supported by a recovery in out-of-home ice cream.
Underlying earnings per share fell 2% to €1.33, with a negative impact of 6.3% from currency swings, while reported EPS dropped 5% to €1.19.
With €2.4bn of free cash flow in the half, another quarterly shareholder dividend of €0.4268 per share was confirmed, along with the €3bn share buyback announced in April.