The new boss of Unilever has warned of inflationary pressures on some of its most profitable divisions.
Fernando Fernandez, who became chief executive of Unilever in March, flagged rising costs, particularly in its personal care division, which owns Dove soap, as well as in its ice cream business.
“We’ve seen some return of commodity inflation in the year. It’s very concentrated in a few families of materials,” he said. Fernandez added that the FTSE 100 company had been “cautious” in its approach to price increases.
“Pricing is always the last resort, in order to protect our margins,” he said.
Unilever is in the process of spinning off its ice cream division and said the separation of the business remained “on track”. The new company, named the Magnum Ice Cream Company, will have its primary listing in Amsterdam and secondary listings in New York and London.
Tariffs are set to have a “manageable impact” on the consumer goods giant, which continues to invest in North America as it navigates a more challenging macroeconomic environment. The United States is the company’s largest market by revenue.
Srinivas Phatak, Unilever’s acting chief financial officer, said that the group’s local-to-local supply chain meant that US tariffs would have a “very limited and manageable impact” on the business. “Given the context of the global supply chain with our raw materials and packing materials we will have to get them into the US and therefore we are seeing some effect of this coming into our categories, most notably beauty and wellbeing,” Phatak said.
Despite a more challenging macroeconomic environment, the success of Unilever’s Super Bowl advertisement for Dove helped to lift first-quarter sales.
The FTSE 100 group posted underlying sales growth of 3 per cent during the first quarter, slightly ahead of consensus forecasts of 2.8 per cent. However, this marked a slowdown from sales growth of 4 per cent in the fourth quarter.
Unilever also reported volume growth of 1.3 per cent, just missing analysts’ forecasts of 1.5 per cent.
The group said its power brands, which include Dove, Comfort and Magnum, posted underlying sales growth of 3 per cent during the quarter and its beauty and wellbeing division recorded 4.1 per cent growth thanks to continued strong performance from its wellbeing brands.
Dove, which represents about 40 per cent of turnover in personal care, grew by a high single digit. This was driven by the continued success of Dove’s serum shower collection and whole-body deodorants.
Quarterly turnover slipped 0.9 per cent, however, to €14.8 billion as disposals and currency headwinds weighed on the group.
Fernandez said that in North America the group had “outperformed the market and we have been doing that for several consecutive quarters.”
These were the first quarterly results for Fernandez as head of Unilever. He took over from Hein Schumacher in March in the middle of the latter’s efforts to turn around the company. It is understood that Unilever’s board was seeking a more decisive and swift pace of change.
Fernandez said the group’s performance in the first quarter was resilient and added that
Unilever had “interventions in place in some emerging markets to step up growth in the remainder of the year”.
Tom Sykes, head of eEuropean consumer equity research at Deutsche Bank, said: “Developed markets showed strong growth, while emerging markets had a mixed performance with challenges in Latin America, China, and Indonesia. Revenue decline was driven by disposals and currency headwinds.”
Unilever shares fell 25p, or 0.5 per cent, to close at £47.91.
