Unilever Is Upbeat About 2023 Following 10.5 Percent Uptick in Q1 Growth

LONDON — Unilever has started the year on a high, with underlying sales up 10.5 percent to 14.8 billion euros in the first fiscal quarter and a positive outlook for the year ahead.

The maker of brands ranging from Dove to Domestos said sales rose 7 percent year-over-year in the three months to March 31, driven by a combination of price and volume growth.

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Inflation continues to drive up input costs and sticker prices, although Unilever said it expects to see the impact soften “significantly” as the year progresses. The company is not expecting cost deflation, however.

For the full fiscal year, Unilever is anticipating “strong, underlying sales growth” with an improved volume performance compared with last year.

Growth will be “at least” in the upper end of Unilever’s multiyear range of 3 to 5 percent. The company said underlying price growth will remain high in the first half, and decline through the year.

Unilever’s shares ended Thursday up 1.7 percent to close at 44.45 pounds.

Chief executive officer Alan Jope, who is stepping down later this year and making way for his replacement, Hein Schumacher, noted that growth was broad-based across the company and geographic regions.

Alan Jope, CEO of Unilever
Unilever’s CEO Alan Jope is retiring in July.

He said during the quarter Unilever “stepped up both the effectiveness of our innovation and the investment behind our brands. We continue to shift our portfolio into higher growth spaces. Our new operating model is driving focused resource allocation and is unlocking a culture of bolder, faster decision-making and disciplined execution,” he added.

During a call with analysts, Jope was cautiously optimistic about fiscal 2023.

“Although the levels of performance we’ve seen so far are as expected, it’s an unpredictable world out there. We’ll get there — but [sales growth] may not be in a straight line. I have some confidence that 2023 will be a good year of growth for the company. Sales volumes will continue to pick up as pricing moderates,” he said.

Overall, sales in the Beauty and Well-being category rose to 3.1 billion euros in the first quarter, up 9.3 percent on an underlying basis, and up 13.3 percent compared with the corresponding period last year.

Unilever said Vaseline and Pond’s delivered double-digit growth, supported by innovations with “additional consumer benefits,” such as the premium Gluta-Hya serum, which promises to revitalize skin overnight and boost elasticity.

Strong performance in the division also came from a double-digit growth in the subcategories of Prestige Beauty and Health and Well-being, which together account for 5 percent of Unilever’s group turnover.

Unilever said Paula’s Choice, Hourglass and Liquid IV, the hydrating electrolyte drink mix, contributed “strongly” to the uptick in prestige and well-being sales.

During a call with analysts he also commented on the progress in China, following the lifting of restrictions late last year.

Unilever does not break out sales for China specifically, but the Asia-Pacific Africa region had first-quarter sales of 6.8 billion euros, with underlying growth of 9.9 percent. The APA region is Unilever’s largest by turnover.

Jope said consumers are spending “carefully” in China, and growth was “low” although momentum began picking up at the end of quarter. “Consumer confidence isn’t exactly roaring back because unemployment remains high. I think what we’ve been seeing is a gentle recovery in China, which kicked in towards the end of March.”

By contrast, he said India and South Asia showed strong growth, and that the uptick in India in particular was coming from cities rather than rural areas.

In a report following the results on Thursday, RBC Europe noted that Unilever has followed other staple companies in the first quarter with sales “handsomely exceeding” company-compiled consensus expectations.

Pierre Tegner at Oddo BHF said given the strong start to the year, Unilever’s unchanged organic growth guidance of 3 to 5 percent “seems conservative, even if the management is now targeting the upper range.” He noted that consensus was already expecting 4.7 percent for 2023.

Asked by an analyst for his thoughts about leaving the company where he spent his career, Jope was typically gracious.

He told analysts on the call that FMCG, or fast-moving consumer goods, was an “exciting arena that requires winning on multiple fronts to get a good, overall performance. But it’s a team effort, and I think [analysts] over-fixate on the CEO role and on the impact that one individual has on the organization.”

Jope said he’d take credit for “anything that’s gone poorly at Unilever” but for anything that’s gone well, “it’s the result of a team effort.” He said he was proud to be leaving behind a better portfolio of brands and a stronger and more streamlined organization.

“We’ve been much more active portfolio managers than I think has been recognized. I’m particularly proud that we’ve given birth to the prestige beauty business and to the health and well-being divisions and for their nine consecutive quarters of double-digit growth, led by volume.”

He noted that a number of his predecessors as CEO had tried to unify the business — and failed, “but now we’ve now got a simple legal structure, like a normal company. Our strategic priorities are crystal clear by geography, by channel, by category and by brand.

We are a more disciplined execution machine. Maybe one of the things that I will leave is a simpler organization, having blown up a very complex matrix and put in place five business groups that I hope make it easier for [everyone] to see how the business runs.”

Jope described the incoming CEO as “a fantastic choice. He understands FMCG. He understands Unilever. He’s very strategically sharp and will bring his own ideas. I’m sure you will thoroughly enjoy engaging with him as we go forward.”

The announcement of Jope’s departure last September capped nine months of disruption at Unilever.

In late 2021, on Jope’s watch, Unilever had made a botched attempt to purchase GlaxoSmithKline’s Consumer Health business, which is now a public company called Haleon, quoted on the London Stock Exchange.

Unilever’s move — and the price it was willing to pay for the division — irked shareholders, tarnished Jope’s image and saw Unilever’s share price collapse. The disruption also opened the door to activist investor Nelson Peltz’s Trian Fund Management.

As the GSK chaos was unfolding Trian made an investment of nearly $2 billion in Unilever, and over the summer, Peltz joined the Unilever board as a non-executive director.

Following the failed bid, Unilever also shook up its way of working and restructured is management teams in order to become “a simpler, more category-focused business.” It moved away from its former “matrix structure” and is now organized around five business groups: Beauty and Well-being, Personal Care, Home Care, Nutrition and Ice Cream.

The new model resulted in a reduction in senior management roles of around 15 percent and more junior management roles by 5 percent, equivalent to around 1,500 roles globally.

Before succeeding Paul Polman as CEO, Jope served as president of beauty and personal care, Unliever’s largest single division. There, he pursued an aggressive acquisitions plan, snapping up high-end beauty companies such as Kate Somerville and Ren in a bid to broaden the portfolio and elevate the offer.

Jope joined the company as a graduate marketing trainee in 1985, and during his career ran the company’s North Asia business for four years and served as president, Russia, Africa and Middle East. He spent more than a decade in senior foods, home care and personal care roles for Unilever in the U.S.

Schumacher was announced as Jope’s replacement earlier this year and will take over on July 1.

Most recently, Schumacher was CEO of Royal FrieslandCampina, an international dairy and nutrition business with 11 billion euros in annual turnover. He was named a non-executive director of Unilever, owner of brands including Dove, Vaseline and Ben & Jerry’s, last year.

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