An upgrade to revenue guidance at Unilever? Is that meant to happen in the midst of an inflationary shock and a squeeze on household budgets? Well, yes, it is – as long as shoppers are willing to pay more for brands such as Domestos bleach, Dove soap, Hellmann’s mayonnaise and Wall’s ice-cream.
And, by and large, they coughed up. Unilever increased its prices by 9.8% in the first half of 2021, and by an eye-catching 11.2% in the second quarter, but the hit to the volume of goods sold was relatively modest at 1.6%. From Unilever’s point of view, that trade-off is tolerable, especially as a chunk of the volume decline was accounted for by locked-down China.
Consumers may not cheer Unilever’s ability to pass on a significant portion (but not all) of higher commodity costs, but shareholders will be reassured by this demonstration of pricing muscle. The City had been half-braced for a serious whack to profit margins but, in the event, Unilever expects to limit the damage to a fall at the operating level this year from 18.4% to 16%. Again, it’ll take that. Poor old supermarkets, rubbing along at 3%-ish, can only look on in envy.
An open question is how far Unilever and its peers will be able to push prices if shocks in the input department keep coming. As things stand today, the company is looking at €4.6bn (£3.9bn) of cost inflation this year, which is a big number even when annual revenues are €52bn. “Uncertain and volatile” – the description of the cost outlook and global economic climate – should be taken at face value.
Zoom out, though, and Unilever chief executive Alan Jope has gone some way to repairing the damage done by January’s chaotic and quickly abandoned tilt at buying GlaxoSmithKline’s consumer healthcare division. Forget £50bn flings and concentrate on managing the business, was the gist of his own shareholders’ response. The advice was good. The return of a £40 share price is nobody’s idea of a long-term triumph, but it’s much better than the £34 seen in March when spirits were sagging.
Rolls-Royce takes the no-nonsense option
Warren East, out of Arm Holdings’ world of microchips, was a surprise pick as chief executive of Rolls-Royce in 2015, but he was also a familiar face plucked from the engine-maker’s own bench of non-executive directors.
By contrast, Tufan Erginbilgic, 62, drew puzzlement as he was appointed as East’s successor on Tuesday. He had 20 years at BP, running the bits that don’t involve producing oil and gas, but departed in 2020 for a partnership gig at US private equity group Global Infrastructure Partners. Erginbilgic’s only direct link to the aerospace business came a few years ago as a non-exec at GKN, which doesn’t make engines.
He brings crossover expertise in low-carbon technology, it should be said – a field where Rolls is trying to get bigger in a hurry in electric power systems, clean jet fuel and small modular reactors. But the recruitment seems primarily to be about appointing a specialist in “high performance culture”, as Rolls chair Anita Frew put it, with a record in “execution, delivery and the creation of significant value”.
Investors will say “amen” to the value bit of that mission given that the share price still sits at a low-altitude 88p after Rolls’ emergency recapitalisation during the pandemic. It ought to be achievable. The job now is about reaping the rewards from the billions invested in jet engines, and then adapting to net zero economics. Events conspired against East. A specialist in no-nonsense delivery is a logical successor.
SoftBank declines THG option
At least Matt Moulding at THG gave everybody a laugh as he announced the least surprising corporate development of the year – confirmation that SoftBank of Japan won’t be taking up its option to pay $1.6bn (£1.3bn) for a 19.9% stake in the online retailer’s Ingenuity division, the bit that provides “end-to-end technology solutions” for other people’s brands as well as the company’s own. The cancellation, said THG, was “in light of global macroeconomic conditions”.
Pull the other one. The deal isn’t happening because shares in THG, or The Hut Group as it was, have collapsed by 90% since the option arrangement was struck in May 2021. These days $1.6bn is enough to buy THG in its entirety, not just a one-fifth stake in its third largest unit. SoftBank has made some zany deals over the years (think WeWork) but it definitely wasn’t going to write the cheque in these circumstances.
