Consumer goods giant Unilever said cost increases could affect its profits, despite increased sales in the first half of 2021.
The maker of Marmite, Persil and Dove said underlying operating profit margins in the first six months of 2021 fell by a percentage point from a year ago, to 18.8%. Unilever said this was partly due to capital spending, but also warned of inflation in input costs.
Unilever said it expects profit margins to be stable throughout the year, having previously forecast a slight increase, even as it seeks to raise prices to offset rising costs.
Economists around the world are on the lookout for signs of inflation, amid the disruption caused by the coronavirus pandemic. Other consumer goods companies also said they were affected by rising prices on everything from transportation to raw materials and packaging.
Unilever, whose broad product portfolio includes Domestos bleach and Magnum ice cream, said margins were down 2.2 percentage points in beauty and personal care products, while margins were down 2.2 percentage points. in home care also fell 1.3 percentage points.
Alan Jope, managing director of Unilevers, said it was a strong first half, but warned that margins would remain stable in 2021 compared to 2020 due to rising costs.
We saw new cost inflation emerge in the second quarter, he said. Cost volatility and the varying timing of price increases reaching the business have resulted in higher than usual uncertainty about the expected margin for the full year.
Underlying sales grew 5.4% in the first half of the year compared to 2020, with sales of 25.8 billion (22.2 billion).
Unilevers share price fell 4.3% on Thursday to its lowest level since April after the announcement, making it the worst performance on the London FTSE 100 index.
Graeme Pitkethly, chief financial officer of Unilevers, said a sharp rise in commodity prices, including crude oil, palm and soybean oil, could prevent the company from increasing profitability. Rising commodity prices have hit the margins of its personal and home care business, he said.
The declaration of the results came as Unilever faces a dispute over the decision of one of its brands, Ben & Jerrys, to halt ice cream sales in the Israel-occupied West Bank and East Jerusalem. The brand retained a great deal of independence to follow its culture and social mission when it was acquired by Unilever in 2000.
The move has sparked furore among Israeli politicians, including far-right Prime Minister Naftali Bennett, who has promised dire consequences for Ben & Jerrys and Unilever after speaking to Jope. Unilevers executives on Thursday declined to answer questions about the decision.
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