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Unilever braced for tighter margins as inflation hits company profits

·2-min read
Food and drink, including ice creams like Ben & Jerry’s, Cornetto and Magnum, were responsible for almost 40% of Unilever’s sales in the first half of 2022. (Unilever)
Food and drink, including ice creams like Ben & Jerry’s, Cornetto and Magnum, were responsible for almost 40% of Unilever’s sales in the first half of 2022. (Unilever)

Maker of Ben & Jerry’s ice cream and Hellmann’s mayonnaise, Unilever, posted a drop in operating margins as inflation takes a bite out of corporate profits.

The consumer goods company saw revenue grow 8.1% in the first half of 2022 to top £25 billion, ahead of previous guidance, while profit margins dropped 180 basis points to 17%. A fall in the volume of goods sold was offset by 9.8% product price growth.

Unilever boss Alan Jope said pricing in the UK had not kept up with inflation, while customers were trading down from Unilever brands to supermarket own-brand products.

Hargreaves Lansdown equity analyst Matt Britzman said: “The operation’s becoming less efficient as inflation pushes a host of costs higher, and that comes through in the lower margins.

“Having a host of strong brands is essential if any business wants to pass on rising costs, and Unilever has those up its sleeve… [but] there’s a limit to how much someone will pay for a Magnum.”

Unilever shares grew 2.4% to 4,009p in early trading.

The results come after a bruising period for the company which saw one of its subsidiaries, Ben & jerry’s ice cream, suing its parent Unilever for allegedly undermining the integrity of the brand by selling its Israeli operation to a local business.

Ben & Jerry’s had previously decided to suspend sales of its ice cream in occupied Palestinian territories, saying it would be “inconsistent with our values.”

Food and drink, including ice creams like Ben & Jerry’s, Cornetto and Magnum, were responsible for almost 40% of Unilever’s sales in the first half of 2022.

The company ranks 8th for share price gains made between spring and summer with an average of 6% increases over the past six years according to financial experts Invezz, as the hot weather impacts consumer behaviour as well as investment decisions.

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