Unilever warns cost inflation will remain high as it repeats full-year margin guidance

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Unilever PLC (LSE:ULVR) said it expects cost inflation to remain at “strongly elevated levels” into next year as it announced sales growth above analysts’ forecasts for the third quarter.

The maker of Marmite and Dove soap also reiterated its forecast for flat operating margins for the current year despite rising costs.

Unilever said underlying sales grew 2.5% in the third quarter, beating analysts’ estimates of 2.2%. The group responded to “unprecedented” cost inflation in the period by raising prices 4.1%, which offset a 1.5% drop in volumes.

Consumer goods companies are facing soaring energy, packaging and transport costs and Unilever chief executive Alan Jope said the company will take “appropriate pricing action” and implement productivity measures to offset increased costs.

“We continue to expect that we will deliver in line with our margin guidance of around flat for the full year,” Jope added.

Underlying sales rose by 4.4% in the first nine months of the year and Unilever said it is on track for full-year sales growth of 3%-5%.

The group said its markets remain volatile and pandemic-related restrictions continue around the world to varying degrees, which is impacting sales mix and consumer behaviour.

The US, China and India, Unilever’s priority markets, delivered strong growth in the third quarter, while South East Asia, which continues to be impacted by Coronavirus (COVID-19), was the main source of volume decline in the period.

Ecommerce grew 38% and now accounts for 12% of sales, the group said.

It said its high-growth new businesses, Prestige Beauty and Functional Nutrition, enjoyed double-digit growth.

The group is paying a quarterly dividend of EUR0.4268 per share and said its EUR3bn share buyback programme will be completed by the end of the year.

Unilever shares were 0.79% higher at 3,849.00p in early trade.


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