REG - Unilever PLC - 1st Quarter 2022 Trading Statement

UnileverAnnouncement

28/04/2022 07:00

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RNS Number : 6134J  Unilever PLC  28 April 2022

 

UNILEVER TRADING STATEMENT FIRST QUARTER 2022

 

 

 STRONG EXECUTION IN CHALLENGING CONDITIONS

 

 

 

Performance highlights

 Underlying performance                                         GAAP measures
                                                vs 2021                              vs 2021

 Underlying sales growth (USG)                  7.3%            Turnover  €13.8bn    11.8%
 Quarterly dividend payable in June 2022                        €0.4268 per share

 

·      Underlying sales growth of 7.3%, with 8.3% price and (1.0)%
volume

·      Turnover increased by 11.8%, including a currency impact of 3.5%

·      Quarterly dividend maintained at €0.4268 per share

·      First €750 million tranche of up to €3 billion share buyback
programme commenced

 

 

 Alan Jope: Chief Executive Officer statement

 

"We are executing well in a very challenging input cost environment.
Underlying sales growth of 7.3% was driven by strong pricing, with a limited
impact on volume in the quarter. This performance was delivered against the
backdrop of significant rises in input costs that have further accelerated
through the first three months of the year, and the human tragedy of the war
in Ukraine.

The delivery of another solid quarter of sales growth builds on the improved
growth momentum that we achieved in 2021 and is underpinned by Unilever's
increased focus on operational excellence as well as disciplined adherence to
our chosen strategic priorities. We are maintaining strong investment in our
top brands, growing our thirteen billion+ Euro brands by 8.8% in the quarter.
eCommerce sales now represent 14% of turnover following another quarter of
strong double-digit growth. Our priority markets of the USA, India and China
all grew competitively. We continue to reshape our portfolio into high growth
spaces, with Prestige Beauty and Functional Nutrition again growing strongly.
We remain on track to deliver the previously announced, simpler, more
category-focused organisation structure on 1 July 2022.

There is more to do as we navigate our business through unprecedented cost
inflation, but we are making good progress. We are committed to sustaining
this step-up in our growth and competitiveness."

 

28 April 2022

 

 Outlook for 2022

We continue to expect input cost inflation of around €2.1 billion in the
first half, but the outbreak of war in Ukraine and the related increase in raw
material inflation have raised our cost forecast for the second half of 2022.
We currently expect input cost inflation for H2 to be around €2.7 billion.

This period of unprecedented inflation requires us to take further pricing
action with some impact on volume as a result. We now expect underlying sales
growth in 2022 to be towards the top end of the previously guided range of
4.5% to 6.5%. We will ensure that we protect the health of our brands as we
continue to invest competitively in marketing, R&D and capital
expenditure.

We expect underlying operating margin for the first half to be within our
guided 2022 range of 16% - 17%. As a result of the forecast increase in costs
in the second half, we currently expect the full year underlying operating
margin to be at the bottom end of that range. The greatest area of uncertainty
and volatility is around the costs, and we will update with our half year
results. We expect to restore margin through pricing, mix and savings delivery
during 2023 and 2024, as market conditions normalise.

 

 

 FIRST QUARTER OPERATIONAL REVIEW

Our market context: High input cost inflation has been widespread across our
markets and rose further during the first quarter as the war in Ukraine
impacted global markets and commodities. While restrictions have been eased in
many markets, Covid-19 continues to affect consumers and operations,
particularly in countries that have implemented new restrictions and
lockdowns.

 

In most of the markets in which we operate, market growth was driven by price
which had an impact on volumes. India, China and Brazil saw price-led market
growth coupled with softer volumes. Market volumes increased in Indonesia,
Philippines and Vietnam while market conditions in Thailand remained
challenging. In Turkey, inflation increased further during the first quarter.
In Europe, several markets declined in value while there was price-driven
market growth in North America.

 

Unilever overall performance: Our priority is sustained, competitive growth,
delivered through strong brands and our continued drive for operational
excellence across the value chain. Underlying sales growth was 7.3% with 8.3%
from price and (1.0)% from volume and all Divisions grew strongly. Price
stepped up further from the levels seen in the fourth quarter with some
negative impact on volume, most notably in Home Care which took the strongest
pricing action, leading to growth of 9.2% over the period. Beauty &
Personal Care grew 7.1% in the quarter, driven by price and continued strong
growth in Prestige Beauty and vitamins, minerals and supplements. Foods &
Refreshment grew 6.5% through price. Volumes in food solutions and out-of-home
ice cream improved as both continued to benefit from channels reopening. This
helped offset most of the volume decline in in-home channels which lapped high
demand during lockdowns in 2021.

 

Emerging markets grew by 9.5% with a 10.1% contribution from price, with
volumes slightly negative. Pricing in Latin America was particularly strong at
16.4% with volumes contracting by 5.7%. Developed markets increased by 4.1%,
with 5.7% from price and (1.5)% from volume. North America grew by 8.5%,
through both price and volume increases, while sales grew by 0.7% in Europe as
price growth was accompanied by a decline in volumes.

 

Turnover increased 11.8% to €13.8 billion, which included a positive
currency impact of 3.5% and 0.6% from acquisitions net of disposals.

 

In January 2022, we announced a new organisation for Unilever that is simpler,
more category-focused, and organised around five Business Groups. We have been
making the changes needed to deliver the new organisation and are on track for
launch from the middle of the year. We expect the new structure to generate
around €600 million of cost savings over two years and to be achieved within
existing restructuring investment plans.

 

On 23 March, we commenced the first tranche of €750 million of the share
buyback programme of up to €3 billion that was announced on 10 February
2022.

 

We expect the announced sale of our global tea business to complete in the
second half of 2022.

 

 

 FIRST QUARTER OPERATIONAL REVIEW: DIVISIONS

 

                             First Quarter 2022
 (unaudited)                 Turnover  USG    UVG    UPG
                             €bn       %      %      %
 Unilever                    13.8      7.3    (1.0)  8.3
 Beauty & Personal Care      5.7       7.1    (0.3)  7.4
 Home Care                   3.0       9.2    (2.9)  12.5
 Foods & Refreshment         5.1       6.5    (0.6)  7.1

Beauty & Personal Care

Beauty & Personal Care underlying sales grew 7.1%, with 7.4% from price
and (0.3)% from volume.

 

Deodorants posted high single-digit growth, helped by technology-driven
innovations behind Dove and Rexona, as well as Axe making a strong start to
the year. Hair posted mid single-digit growth driven by both styling and wash
& care. Sunsilk and TRESemmé contributed strongly with price-led growth
while Suave declined. Skin cleansing delivered high single-digit growth with
Dove, Lux and Lifebuoy performing well, but volumes declined in a contracting
market. Skin care grew low single-digit driven by North Asia and South Asia
while sales in North America were flat. Prestige Beauty had another quarter of
double digit-growth, on top of a very strong prior year comparator, when the
health and beauty channel re-opened. Hourglass and Living Proof started
strongly into the year supported by the premium hair and make-up categories
bouncing back.

 

Home Care

Home Care underlying sales grew 9.2%, with 12.5% from price and (2.9)% from
volume, lapping a very strong prior year comparator and facing contracting
market volumes.

 

Fabric cleaning achieved a strong start to the year, with double-digit,
price-led growth across most markets and volumes declining only marginally.
OMO continued to successfully drive the liquids market development in India,
while newer formats such as capsules grew strongly in both China and Europe.
Fabric enhancers delivered low single-digit growth, benefitting from a good
start to the year in India, China and Turkey, partially offset by declines in
the United Kingdom and South-East Asia. Home and hygiene saw modest growth,
with strong pricing being offset by negative volumes against the backdrop of a
strong prior year comparator. Domestos further built on the growth of recent
years, led by our bleach portfolio.

 

Foods & Refreshment

Foods & Refreshment underlying sales grew 6.5%, with 7.1% from price and
(0.6)% from volume.

 

Foods delivered high single-digit growth with strong pricing in all key
geographies. Hellmann's posted double-digit growth against a strong baseline
in the prior two years, supported by the successful 'Superbowl' campaign.
Knorr continued to evolve the portfolio by responding to consumer needs in
fast-growing segments such as plant-based innovations in Latin America and
focused Veganuary activations in Europe. Food solutions grew double-digits,
taking the turnover above 2019 levels.

 

Ice cream growth in the first quarter was driven by double-digit increases in
the out-of-home channel, while in-home sales were slightly down. Out-of-home
sales benefitted from the easing of restrictions in Europe and the sell-in
ahead of an anticipated stronger ice cream season, as well as a good
performance in China. Magnum continued its strong growth momentum, helped by
launching its core "Remix" innovation, a twist on the classic Magnum stick.

 

 

 FIRST QUARTER OPERATIONAL REVIEW: GEOGRAPHICAL AREA

 

 (unaudited)    First Quarter 2022
                Turnover  USG    UVG    UPG
                €bn       %      %      %
 Unilever       13.8      7.3    (1.0)  8.3
 Asia/AMET/RUB  6.6       9.1    0.5    8.5
 The Americas   4.5       9.0    (1.0)  10.0
 Europe         2.7       0.7    (4.4)  5.4

 

 

 (unaudited)        First Quarter 2022
                    Turnover  USG    UVG    UPG
                    €bn       %      %      %
 Emerging markets   8.3       9.5    (0.6)  10.1
 Developed markets  5.5       4.1    (1.5)  5.7
 North America      2.8       8.5    1.8    6.6
 Latin America      1.7       9.8    (5.7)  16.4

 

 

Asia/AMET/RUB

Underlying sales grew 9.1%, with 8.5% from price and 0.5% from volume. India
posted double digit-growth led by price while holding volumes flat. This was
achieved by a particularly strong Home Care performance with market share
gains across all price tiers and regions. China delivered mid single-digit,
volume-driven growth with continued momentum from eCommerce and a strong
quarter in skin care and ice cream. South-East Asia started to bounce back,
posting mid single-digit growth, on the back of markets recovering from
Covid-19 impacts. Indonesia returned to growth, after focused interventions to
improve competitiveness and strengthen the infrastructure of distributor
trade. In Turkey, price growth increased further while growing volume. Africa
grew double-digits driven by strong price growth and slightly negative
volumes. We announced that we will no longer invest in Russia, but we will
continue providing the local population with basic products. Our Russian
business represents 1% of group turnover while our Ukraine operations have
been significantly constrained.

The Americas

Underlying sales growth in North America was 8.5%, with 6.6% from price and
1.8% from volume. Prestige Beauty, functional nutrition and food solutions all
continued their strong momentum, delivering double-digit growth. Hair care and
dressings also posted double-digit, price-led growth, with volumes declining
marginally.

 

Latin America grew 9.8%, with 16.4% from price and (5.7)% from volume. All
three Divisions landed double-digit pricing, as a response to rising commodity
inflation and currency devaluations. In the context of double-digit pricing
across most countries, volumes declined in Brazil and Chile while volumes were
almost flat in Argentina.

Europe

Underlying sales grew 0.7%, with 5.4% from price and (4.4)% from volume. Most
markets in Europe were in volume decline as consumer demand was impacted by
price increases across all categories. Ice cream lapped strong in-home sales
in the prior year when Covid-19 restrictions across countries boosted in-home
consumption. In contrast, the out-of-home ice cream business benefitted from
fewer restrictions in the quarter and a stronger sell-in ahead of the ice
cream season. Home Care declined mid single-digit, while Beauty & Personal
Care sales were flat, with price gains offset by negative volumes.

 

 COMPETITION INVESTIGATIONS

As previously disclosed, Unilever is involved in a number of ongoing
investigations by national competition authorities,

including those of France, Portugal and South Africa. These proceedings and
investigations are at various stages and

concern a variety of product markets. Where appropriate, provisions are made
and contingent liabilities disclosed in

relation to such matters.

 

Ongoing compliance with competition laws is of key importance to Unilever. It
is Unilever's policy to co-operate fully with competition authorities whenever
questions or issues arise. In addition, the Group continues to reinforce and
enhance its internal competition law training and compliance program on an
ongoing basis.

 

 DIVIDENDS AND SHARE BUYBACKS

The Board has declared a quarterly interim dividend of Q1 2022 of £0.3590 per
Unilever PLC ordinary share or €0.4268 per Unilever PLC ordinary share at
the applicable exchange rate issued by WM/Reuters on 26 April 2022.

 

The following amounts will be paid in respect of this quarterly interim
dividend on the relevant payment date:

 

Per Unilever PLC ordinary share (traded on the London Stock Exchange):
                            £ 0.3590

Per Unilever PLC ordinary share (traded on Euronext in Amsterdam):
                                   €
0.4268

Per Unilever PLC American Depositary Receipt:
                                                US$
0.4555

 

The euro and US dollar amounts above have been determined using the applicable
exchange rates issued by WM/Reuters on 26 April 2022.

 

US dollar cheques for the quarterly interim dividend will be mailed on 16 June
2022 to holders of record at the close of business on 20 May 2022.

 

The quarterly dividend calendar for the remainder of 2022 will be as follows:

 

                   Announcement Date  Ex-Dividend Date  Record Date       Payment Date
 Q1 2022 Dividend  28 April 2022      19 May 2022       20 May 2022       16 June 2022
 Q2 2022 Dividend  26 July 2022       4 August 2022     5 August 2022     1 September 2022
 Q3 2022 Dividend  27 October 2022    17 November 2022  18 November 2022  9 December 2022

 

On 23 March, we commenced the first €750 million tranche of the share
buyback programme of up to €3 billion over two years that was announced on
10 February 2022.

 

         SEGMENT INFORMATION - DIVISIONS

 

(unaudited)

 First Quarter                                           Beauty & Personal      Home   Foods & Refreshment      Total

                                                         Care                   Care
 Turnover (€ million)
 2021                                                    5,034                  2,604  4,690                    12,328
 2022                                                    5,742                  2,923  5,117                    13,782
 Change (%)                                              14.1                   12.3   9.1                      11.8
 Impact of:
 Acquisitions (%)                                        1.6                    0.3    0.0                      0.7
 Disposals (%)                                           0.0                    0.0    (0.2)                    (0.1)
 Currency-related items (%), of which:                   4.8                    2.5    2.7                      3.5
 Exchange rates changes (%)                              4.4                    2.0    2.4                      3.1
 Extreme price growth in hyperinflationary markets* (%)  0.4                    0.5    0.3                      0.4

 Underlying sales growth (%)                             7.1                    9.2    6.5                      7.3
 Price* (%)                                              7.4                    12.5   7.1                      8.3
 Volume (%)                                              (0.3)                  (2.9)  (0.6)                    (1.0)

 

 

 SEGMENT INFORMATION - GEOGRAPHICAL AREA

(unaudited)

 First Quarter                                           Asia /   The                                 Europe  Total

                                                         AMET /   Americas

                                                         RUB

 Turnover (€ million)
 2021                                                    5,958    3,795                               2,575   12,328
 2022                                                    6,640                   4,496                2,646   13,782
 Change (%)                                              11.4     18.5                                2.8     11.8
 Impact of:
 Acquisitions (%)                                        0.3      1.4                                 0.7     0.7
 Disposals (%)                                           (0.1)    (0.0)                               (0.2)   (0.1)
 Currency-related items (%), of which:                   2.0      7.2                                 1.4     3.5
 Exchange rates changes (%)                              1.9      6.1                                 1.4     3.1
 Extreme price growth in hyperinflationary markets* (%)  0.1      1.1                                 (0.0)   0.4

 Underlying sales growth (%)                             9.1      9.0                                 0.7     7.3
 Price* (%)                                              8.5      10.0                                5.4     8.3
 Volume (%)                                              0.5      (1.0)                               (4.4)   (1.0)

 * Underlying price growth in excess of 26% per year in hyperinflationary
economies has been excluded when calculating the price growth in the tables
above, and an equal and opposite amount is shown as extreme price growth in
hyperinflationary markets.

 

 NON-GAAP MEASURES

In our financial reporting we use certain measures that are not defined by
generally accepted accounting principles (GAAP) such as IFRS. We believe this
information, along with comparable GAAP measurements, is useful to investors
because it provides a basis for measuring our operating performance, and our
ability to retire debt and invest in new business opportunities. Our
management uses these financial measures, along with the most directly
comparable GAAP financial measures, in evaluating our operating performance
and value creation. Non-GAAP financial measures should not be considered in
isolation from, or as a substitute for, financial information presented in
compliance with GAAP. Wherever appropriate and practical, we provide
reconciliations to relevant GAAP measures. The non-GAAP measures used in this
announcement are underlying sales growth, underlying volume growth and
underlying price growth (see below).

 

Underlying sales growth (USG)

Underlying sales growth (USG) refers to the increase in turnover for the
period, excluding any change in turnover resulting from acquisitions,
disposals, changes in currency and price growth in excess of 26% in
hyperinflationary economies. Inflation of 26% per year compounded over three
years is one of the key indicators within IAS 29 to assess whether an economy
is deemed to be hyperinflationary. We believe this measure provides valuable
additional information on the underlying sales performance of the business and
is a key measure used internally. The impact of acquisitions and disposals is
excluded from USG for a period of 12 calendar months from the applicable
closing date. Turnover from acquired brands that are launched in countries
where they were not previously sold is included in USG as such turnover is
more attributable to our existing sales and distribution network than the
acquisition itself. The reconciliation of changes in the GAAP measure turnover
to USG is provided on page 6.

 

Underlying price growth (UPG)

Underlying price growth (UPG) is part of USG and means, for the applicable
period, the increase in turnover attributable to changes in prices during the
period. UPG therefore excludes the impact to USG due to (i) the volume of
products sold; and (ii) the composition of products sold during the period. In
determining changes in price we exclude the impact of price growth in excess
of 26% per year in hyperinflationary economies as explained in USG above. The
measures and the related turnover GAAP measure are set out on page 6.

 

Underlying volume growth (UVG)

Underlying volume growth (UVG) is part of USG and means, for the applicable
period, the increase in turnover in such period calculated as the sum of (i)
the increase in turnover attributable to the volume of products sold; and (ii)
the increase in turnover attributable to the composition of products sold
during such period. UVG therefore excludes any impact on USG due to changes in
prices. The measures and the related turnover GAAP measure are set out on page
6.

 

 

 

 CAUTIONARY STATEMENT

This announcement may contain forward-looking statements, including
'forward-looking statements' within the meaning of the United States Private
Securities Litigation Reform Act of 1995. Words such as 'will', 'aim',
'expects', 'anticipates', 'intends', 'looks', 'believes', 'vision', or the
negative of these terms and other similar expressions of future performance or
results, and their negatives, are intended to identify such forward-looking
statements. Forward-looking statements also include, but are not limited to,
statements and information regarding the Unilever Group's (the 'Group')
emissions reduction targets and other climate change related matters
(including actions, potential impacts and risks associated therewith). These
forward-looking statements are based upon current expectations and assumptions
regarding anticipated developments and other factors affecting the Group. They
are not historical facts, nor are they guarantees of future performance or
outcomes.

Because these forward-looking statements involve risks and uncertainties,
there are important factors that could cause actual results to differ
materially from those expressed or implied by these forward-looking
statements. Among other risks and uncertainties, the material or principal
factors which could cause actual results to differ materially are: Unilever's
global brands not meeting consumer preferences; Unilever's ability to innovate
and remain competitive; Unilever's investment choices in its portfolio
management; the effect of climate change on Unilever's business; Unilever's
ability to find sustainable solutions to its plastic packaging; significant
changes or deterioration in customer relationships; the recruitment and
retention of talented employees; disruptions in our supply chain and
distribution; increases or volatility in the cost of raw materials and
commodities; the production of safe and high quality products; secure and
reliable IT infrastructure; execution of acquisitions, divestitures and
business transformation projects; economic, social and political risks and
natural disasters; financial risks; failure to meet high and ethical
standards; and managing regulatory, tax and legal matters. A number of these
risks have increased as a result of the current Covid-19 pandemic.

These forward-looking statements speak only as of the date of this
announcement. Except as required by any applicable law or regulation, the
Group expressly disclaims any obligation or undertaking to release publicly
any updates or revisions to any forward-looking statements contained herein to
reflect any change in the Group's expectations with regard thereto or any
change in events, conditions or circumstances on which any such statement is
based.

Further details of potential risks and uncertainties affecting the Group are
described in the Group's filings with the London Stock Exchange, Euronext
Amsterdam and the US Securities and Exchange Commission, including in the
Annual Report on Form 20-F 2021 and the Unilever Annual Report and Accounts
2021.

 

 ENQUIRIES

 

 

 Media: Media Relations Team                                                                               Investors: Investor Relations Team
 UK          +44 78 2527 3767   lucila.zambrano@unilever.com (mailto:lucila.zambrano@unilever.com)         +44 20 7822 6830    investor.relations@unilever.com (mailto:investor.relations@unilever.com)

 or          +44 77 7999 9683   JSibun@tulchangroup.com (mailto:JSibun@tulchangroup.com)

 NL          +31 10 217 4844    els-de.bruin@unilever.com (mailto:els-de.bruin@unilever.com)

 or          +31 62 375 8385    marlous-den.bieman@unilever.com (mailto:marlous-den.bieman@unilever.com)

 

There will be a web cast of the results presentation available at:

www.unilever.com/investor-relations/results-and-presentations/latest-results
(https://www.unilever.com/investor-relations/results-and-presentations/latest-results/?utm_source=Qresults&utm_medium=Results-PDF)

 

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