Unilever’s shares experienced a significant increase on Thursday morning, following the company’s announcement of raising its full-year margin guidance and confirming the progress of the spinoff of its ice cream business. The share price surged by nearly 8% initially, but later stabilized around a 5.45% gain by mid-morning in London.
In the first-half results published on the same day, Unilever reported sales growth across all segments, with beauty and well-being expanding by 7.1%. However, the performance of the ice cream segment was lackluster, with only a 0.6% growth in sales and a 1% decline in volumes sold. This disappointing performance was attributed to pricing issues and a lower volume growth compared to other segments.
The decision to separate the ice cream unit, which includes popular brands like Ben & Jerry’s and Magnum, was part of Unilever’s strategy to streamline its business operations. By focusing on beauty and well-being, personal care, home care, and nutrition, the company aimed to enhance its competitiveness and deliver better value to consumers. CEO Hein Schumacher highlighted the need for improved pricing strategies and increased focus on competitiveness to drive growth in the ice cream segment.
Unilever had previously raised prices across product categories in response to input cost pressures across agricultural products, energy, transport, and logistics. However, the underlying price growth in the second quarter of this year was only 1%, significantly lower than the 8.2% growth seen in the same period of the previous year. Despite missing the expectations for organic sales growth, the company exceeded expectations for its gross margin and raised its margin guidance for the full year to at least 18%.
Unilever emphasized its focus on margin expansion in the first half of the year, driven by volume leverage and net productivity. CEO Schumacher underscored the importance of refueling the company’s brands and increasing investments in marketing for its top brands. The company’s strong gross margin progression was attributed to several factors that may not continue into the second half of the year, including a low comparator year with higher input costs.
Unilever’s recent performance highlights both strengths and weaknesses in its business operations. While the company has shown resilience in maintaining its margin growth and expanding its market presence, challenges remain in certain segments like ice cream. Moving forward, Unilever will need to address pricing issues, enhance competitiveness, and continue to invest in its core brands to drive sustainable growth and profitability.
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