Unilever CEO warns of ‘substantial price increases’

Unilever CEO warns of ‘substantial price increases’

Via CNBC.com:

Unilever has ruled out any “transformational” acquisitions for the foreseeable future after its failed bid for GlaxoSmithKline’s consumer arm drew heavy investor criticism and sent its share price tumbling.

The maker of Dove soap and Ben and Jerry’s ice cream said on Thursday it had listened to investor concerns about the potential £50 billion ($68 billion) deal, and had instead decided to buy back up to 3 billion euros ($3.4 billion) of shares over the next two years.

“We have listened carefully to our shareholders. There’s no appetite for a deal the size of GSK consumer health,” CEO Alan Jope told CNBC’s Julianna Tatelbaum Thursday.

“We don’t intend to pursue these types of transformational acquisitions for the foreseeable future. We’ve been unambiguous, we’ve drawn a line under that deal, it’s off the table.”

Inflation a ‘signature characteristic’ of 2022

The company also pointed to a modest outlook for 2022 with higher sales but lower margins as it grapples with soaring inflation.

“The signature characteristic of this calendar year is going to be commodity and input cost inflation,” Jope said, pointing to rising costs across packing, freight and energy, as well as agriculture and chemical commodities.

In its fourth-quarter results released Thursday, Unilever reported a 4.9% rise in underlying sales as people continued to eat more at home. That beat analysts’ mean forecast for 3.8% growth in a company poll.

For the whole of 2021, underlying sales growth was 4.5%, the strongest for nine years.

Jope said the company was set to grow steadily this year — around 4.5-6.5% — but noted that further price rises would be necessary as it tries to offset soaring input costs.

“It’s a last resort to go to pricing,” Jope said. “But in these types of circumstances we will be taking and are taking substantial price increases.”

He added that Unilever’s underlying operating margin was likely to decline by between 140 and 240 basis points as the company continues to invest in areas like research and development, brand support and capital expenditure.

“This is really a margin dip that’s rooted in our determination not to underinvest in the business in a period of high commodity inflation,” he said.