Inflation grants Unilever huge profit growth

The cost-of-living crisis is not bothering Unilever. On the contrary: the FMCG giant saw its profits rise by a quarter in 2022. The company’s major reorganisation has also been completed.

Price effects

The calendar year 2022 brought Unilever some strong financial figures: in all five of the company’s new Business Groups, sales increased. Sharp price increases rather than sales growth were to thank for this: prices rose by 11.3 % on average, while volume fell by 2.1 %.

Total sales rose 14.5 % to 60.1 billion euros. The so-called billion-dollar brands, which account for 53 % of sales, grew by 10.9 %. The strongest performers were OMO, Hellmann’s, Rexona, Sunsilk and Magnum.

Huge profit rise

Since 1 July, the company has been reorganised around five revised product categories. For example, there is now a division for Beauty & Wellbeing, separate from Personal Care (including toothpaste and deodorants), while Ice Cream now encompasses all ice creams, whether for home or on-the-go. That restructuring also resulted in a major round of layoffs.

Inflated buying costs did cause a small dent in the margin (- 230 basis points), but still the underlying operating profit improved slightly to 9.7 billion euros. Net profit was over 8 billion euros, a notable increase by 24.9 %.

Chinese eagerness

The producer of A-brands like Knorr will continue to raise prices in 2023 as well, certainly in the first half of the year. Costs will continue to rise, and they will no longer fall, outgoing CEO Alan Jope thinks. Still, he expects volumes to improve: he counts on at least 4 % growth.

Especially in China and Southeast Asia consumption may well explode, as they recover after years of pandemic restrictions. The Chinese have been unable to spend anything there for so long that their savings books are now overflowing: they are booking plenty of airline tickets and hotels, so even abroad they will boost consumption.