Unilever, the owner of Marmite, Dove and Ben & Jerry’s, has defended price rises continuing despite a better-than-expected 17% increase in profits.
Shares in the London-based company rose 6% on Thursday morning as Unilever said its profit margins had gone up 2.5 points to 19.6% in first half of the year – well ahead of analyst expectations – as prices rose 1.6%. Underlying operating profit increased 17.1% year-on-year to €6.1bn (£5.14bn) for the period to the end of June.
The company said its profit margins had been helped by “carry-over pricing from a period of higher inflation”, as well as efficiency benefits from selling more products and more premium brands.
Shares in the London-based company went up 6% on Thursday morning as Unilever said its profit margins had risen 2.5 points to 19.6% in first half of the year – well ahead of analyst expectations – as prices rose 1.6%.
Hein Schumacher, the chief executive of Unilever, said: “Over the last year we did not pass on all of the inflationary impact to consumers.”
The strong profits came despite a slowdown in the US beauty market and disappointing sales in south-east Asia, where Unilever said trade had been partly hit by a consumer boycott of western brands owing to events in Gaza.
The amount of ice-cream sold fell by 1% amid unseasonable weather in Europe and “challenging market dynamics” in China, where Cornetto sales were down. Unilever said it was “on track” to demerge its ice-cream business, which includes Magnum and Wall’s, by the end of 2025.
The figures were in contrast to a difficult half-year for its rival Nestlé, which warned sales growth for the next six months would now be a quarter less than hoped for, at 3%. The owner of KitKat, Purina cat food and Nescafé coffee reported pet food, ice-cream and nutrition sales had lagged behind expectations as analysts said the group had encountered soft demand in China and tough price competition elsewhere.
Analysts at Jefferies suggested there were “signs of slashed pricing” and concerns about “the strength of brands in this new environment” as cost of living pressure weighed on households, prompting them to consider supermarket own-label alternatives to well-known brands.
Schumacher said Unilever expected profit margins to be at least 18% in the second half of the year as prices across the grocery industry would continue to increase by between 2% and 3% into next year.
Fernando Fernandez, the finance director of Unilever, said that price rises were being underpinned by wage inflation, which “remains significant” and that not all this extra cost would be passed to consumers as the company wanted to ensure brand competitiveness.
Schumacher said the group had seen increasing promotional activity in Europe and deflation in some developing markets such as India, but promotions remained steady in North America.
Unilever continues to trade in Russia, attracting controversy as many western brands have pulled out since the invasion of Ukraine.
Schumacher said the company had “localised operations” in Russia and its goal was to “minimise economic contribution” to the state. “This is a very tough situation and very much on my mind. We continue to monitor operations there very closely,” he added.
