Statement from Hein Schumacher, CEO
“Unilever’s performance in the first half highlights the qualities that attracted me to the business: an unmatched global footprint, a portfolio of great brands and a team of talented people.
“My early immersion in the business has confirmed my belief in Unilever’s strong fundamentals. The task ahead is to leverage these core strengths – supported by our simplified operating model – to drive improved performance and competitiveness. This is our absolute priority and it will mean bringing greater focus and sharper execution, with science-backed innovations and investment behind our brands.
“This opportunity to step up our performance and unlock our full potential makes it an exciting time to lead Unilever. I look forward to sharing further details when we report our Q3 results in October.”
Outlook
In a volatile and high-cost environment, we will deliver another year of strong underlying sales growth in 2023. We expect underlying sales growth for the full year to be above 5%, ahead of our multi-year range, with underlying price growth continuing to moderate through the year.
Our expectation for net material inflation (NMI) for 2023 is around €2 billion of which €0.4 billion is anticipated in the second half. We continue to expect a modest improvement in underlying operating margin for the full year, reflecting higher gross margin and increased investment behind our brands.
Unilever overall performance
Underlying sales growth in the first half was 9.1%, with 9.4% from price and -0.2% from volume. As underlying price growth has sequentially moderated from 13.3% in the fourth quarter of 2022, volumes were virtually flat with a step-up in performance in Beauty & Wellbeing and Personal Care offsetting volume declines elsewhere.
The percentage of our business winning market share on a rolling 12 month-basis has reduced to 41%, reflecting the impact of a 17% SKU reduction, pricing dynamics, and consumer shifts in certain markets. These included Tea and Laundry value segments in India and Brazil respectively, and super-premium segments in Personal Care North America. We continue to focus on the longer-term health and competitiveness of the business while developing the portfolio into high-growth spaces and channels.
Beauty & Wellbeing grew underlying sales by 9.1%. Volume growth of 3.8% was led by continued double-digit growth in Prestige Beauty and Health & Wellbeing, as well as strong growth in Hair Care. Personal Care underlying sales were up 10.8%, driven by price and 3.2% volume growth with strong sales of Deodorants. Home Care grew 8.4% with volumes almost flat in emerging markets and down in Europe. Nutrition grew 10.4% with strong growth of Dressings, while underlying volumes of -1.9% reflect a challenging European market. Ice Cream underlying sales growth was 5.7%, with volumes down 5.2% due to the in-home segment.
Emerging markets grew underlying sales by 10.6% with price of 10.0% and a return to positive volume growth at 0.6%. Latin America delivered 16.3% underlying sales growth with price moderating and volume up 1.6%. South Asia grew double-digit through price and some volume, driven by India. China grew 7.9%, with improved volumes following the lifting of pandemic-related restrictions. Growth in South East Asia was muted due to a sales decline in Indonesia, while Turkey delivered strong volume growth in a continued hyper-inflationary economy.
Developed markets grew underlying sales by 6.9%, with 8.4% from price and -1.4% from volume. Volumes held up well in North America, while underlying price growth remained elevated in Europe given its higher exposure to categories with significant cost inflation.
Turnover increased 2.7% to €30.4 billion, which included a currency impact of -3.2% and -2.7% from disposals net of acquisitions. Underlying operating profit was €5.2 billion, up 3.3% versus the prior year. Underlying operating margin improved by 10bps to 17.1%. Gross margin increased by 30bps despite €1.6 billion of net material inflation and increased production and logistics costs. The cost increases were fully mitigated by pricing, savings and improved mix.
After several periods of high cost inflation, gross margin remains 270bps below its level at H1 2019. Brand and marketing investment stepped up by €0.4 billion in constant exchange rates, a 30bps increase as a percentage of turnover in current exchange rates. Overheads improved by 10bps due to growth leverage while we continued to invest in capabilities and our Prestige Beauty and Health & Wellbeing businesses.
Operating model and capital allocation
Since 1 July 2022, our simpler, more category-focused operating model for Unilever has been in place, organised around five Business Groups and a technology-driven backbone, Unilever Business Operations. We continue to expect around €600 million of cost savings, with the majority delivered by the end of 2023.
After completing two €750 million tranches in 2022 of our ongoing share buyback programme of up to €3 billion, we completed a third €750 million tranche on 2 June 2023. The quarterly interim dividend for the second quarter is maintained at €0.4268.
We completed the sale of the Suave brand in North America on 1 May 2023. On 14 June, we announced the acquisition of Yasso Holdings, Inc.a premium frozen Greek yogurt brand in the United States.
Beauty and health (20% of group sales)
Beauty & Wellbeing's underlying sales increased 9.1%, with 5.1% driven by price and 3.8% driven by volume.
The Hair Care business grew in the low single digits, driven by positive volume growth in the Americas. Sunsilk and TRESemmé achieved his double-digit growth due to successful reboots.
Core Skin Care experienced mid-single digit growth. vaseline The performance was strong as we extended the successful Gluta-Hya series into the pro-age segment, offering additional benefits and drawing new consumers into the brand. In North Asia, AHC The double-digit decline was due to the reset of cross-border channels.
Prestige Beauty and Health & Wellbeing once again achieved volume-led double-digit growth. At Prestige, Paula's selection, dermalogica and hourglass The company achieved strong growth by introducing new products backed by cutting-edge science and technology. dermalogicaPhytoNature Oxygen Cream. In health and welfare, IV fluid continues to do well, launching three sugar-free versions of its hydration technology without compromising flavor or function.
Underlying operating margin was flat, but gross margin improvement was offset by higher overhead costs.
Personal care (23% of group sales)
Personal care sales increased 10.8%, prices increased 7.3% and volumes increased 3.2%.
Deodorants achieved high double-digit growth, driven by Europe and the Americas, where volumes increased due to a recovery in service levels and related pipeline fills. axe The launch of the Fine Fragrance range, which combines odor protection with premium fragrances, resulted in double-digit sales growth.We have released new variations below Rexona They are built on our superior 72-hour technology and deliver high double-digit growth for your brand.of pigeon The personal care portfolio also grew by double digits.
Skin cleansing grew in the low single digits with strong growth in Latin America and South Asia.
Oral care achieved high single-digit growth due to restart Pepsodent In Southeast Asia.
Underlying operating margin decreased 10 bps due to improved gross margin and lower overhead expenses, offset by increased investment in brand and marketing.
Home care (20% of group sales)
Home Care underlying sales increased 8.4%, 11.2% on price and -2.5% on volume.
Fabric cleaning grew by double digits. In Europe, OMO Delivering capsules in plastic-free packaging to more countries, reducing plastics and chemicals for the best cleaning performance, contributing to increased production and double-digit brand growth.
Fabric Enhancers had mid-single-digit growth driven by price. In China, comfortable Introducing an updated version of beads with improved fragrance sustainability.
In Latin America, we introduce the first product range designed specifically for the laundromat and hospitality sector, offering the perfect whitewash. OMO and comfortable brand.
Home & Hygiene posted mid-single-digit growth, while Air Wellness business declined.
Due to the improvement in gross profit margin, the underlying operating profit margin improved by 30 bps.
Nutrition (22% of group sales)
Nutritional sales increased 10.4%, with 12.6% price and -1.9% volume growth.
Scratch Cooking Aids grew in the low single digits. Growth was price-driven, with negative volumes, particularly in Europe and North America.
Dressing continues to grow in double digits, Hellmann's In the U.S., we're combining our “Make Taste, Don't Waste” campaign with innovations like spicy mayonnaise to boost sales during the Easter and barbecue seasons.
Unilever Food Solutions China accelerated double-digit growth throughout the first half of the year, and China returned to double-digit growth in the second quarter.
Underlying operating margin increased 80 bps primarily due to overhead reductions, partially offset by lower gross margin as a result of continued higher input costs.
Ice cream (15% of group sales)
Ice cream underlying sales increased 5.8%, 11.5% from price and -5.2% from volume.
Home ice cream continued to be impacted by lower consumption due to the discretionary nature of the category in an inflationary environment, resulting in low single-digit volume growth.
Home ice cream grew double digits with strong prices and volumes. In Europe, the bad weather in April and May was almost offset by the good weather in June.
magnum Starchaser and Sunlover limited edition innovations performed well, growing in the high single digits. In North America, talent Mini gelato and sorbetto bars are the perfect indulgent snack to enjoy on the go.of heart The brand is twister range.
Underlying operating profit margin decreased by 100 bps due to lower gross profit margin due to input costs.
