Unilever: profit hit in the first half by foreign exchange and costs



Published on

Jul 22, 2021

Cosmetics and food giant Unilever reported lower first-half profit due to negative currency effects and cost inflation.


In the first six months of the year, net profit, group share fell 5% year on year to 3.1 billion euros, according to a statement Thursday.

Turnover grew only 0.3% to 25.8 billion euros, also largely due to an unfavorable currency effect, with the group arguing that it would be much higher at constant exchange rates.

Margins have also suffered greatly from investments in the group’s brands but also from inflation in the costs of raw materials, packaging and distribution.

Freight costs in particular are on the rise and oil and fuel prices have rebounded significantly over the past year.

In August, the fixed costs associated with covid-19 also increased, also weighing on margins.

Managing Director Alan Jope argued that the group’s online sales jumped 50% year-on-year in the first six months of the year, and this mode of marketing now accounts for 11% of the total.

The group underlines in its press release that the operating environment across its various markets “has seen improvements but remains changing. The restrictions on daily life continue across the world, with an impact on distribution channels, distribution of sales. and consumer behavior “.

He notes that restrictions in India weighed heavily in the second quarter but are less stringent than the same period last year, while in China, “normalization has continued but growth is still lower up front. -covid-19 “.

Markets in North America and Europe fell, compared to the first half of last year, as the first strict containment measures boosted demand for hygiene products or food.

If the group observes an increase in its sales in South America, it expresses difficulties in Southeast Asia, in particular in Indonesia where “large parts of the country are in confinement” because of a surge in cases of coronavirus .

“We are convinced that we can generate underlying sales growth in 2021 (…) within our multi-year targets of 3 to 5% despite unfavorable comparison effects in the second quarter,” adds Jope.

Cost volatility is another factor of uncertainty but “we are managing it dynamically and hope to maintain a stable operating margin in 2021”, concludes Jope.

Unilever, parent company of Cif or Omo cleansers, Ax deodorants, Magnum ice creams and Lipton teas, has experienced varying fortunes in countries which have faced the pandemic differently “remarks Richard Hunter, Interactive Investor analyst.

He welcomes the decision to separate teas and certain skincare brand products into a separate branch, “which will allow the group to focus on its key segments”.

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