Unilever rules out major acquisitions, warns of higher costs

The company said it expected underlying sales growth in 2022 to be 4.5% – 6.5%

Consumer products conglomerate Unilever ruled out any major acquisitions in the near future and warned of higher costs as it reported fourth-quarter sales growth and announced a €3bn ($3.41bn) share buyback.

In the first results since its failed bid for GlaxoSmithKline’s consumer health business, the company said it expected underlying sales growth in 2022 to be 4.5% – 6.5%. Pricing would continue to be strong, with some impact on volume as a result.

Fourth-quarter underlying sales grew a better-than-expected 4.9% boosted by higher prices and well ahead of consensus estimates of 3.8%.

The company said it had shelved plans for any major acquisitions ‘in the foreseeable future’ after receiving ‘a strong message that the evolution of our portfolio needs to be measured’ from shareholders.

Unilever made three offers for GSK’s consumer arm and has been under pressure to simplify its structure.

Underlying operating margin for 2022 was expected to fall by 140 – 240 basis points to 16% – 17%, with the main impact on the first half.

We expect margin to be restored after 2022, with the bulk coming back in 2023 and the rest in 2024, Unilever said, adding that it expected high input cost inflation in the first half of more than €2bn ($2.28bn).

This may moderate in the second half to around €1.5bn ($1.71bn), although there is currently a wide range for this that reflects market uncertainty on the outlook for commodity, freight and packaging costs, it said.

The London-listed company posted full-year turnover of €52.4bn ($59.62bn), up 3.4%, and compared with estimates of €52.11bn ($59.29bn), according to its own compiled consensus.

Underlying operating profit also beat expectations, rising 2.9% to €9.6bn ($10.92bn), while net profit was up 9% to €6.6bn ($7.51bn) and higher than consensus of €5.79bn ($6.59bn).

The group reported a 4.5% jump in sales for 2021, driven by a 2.9% increase in prices, with the remaining 1.6% resulting from higher volumes as the group witnessed strong sales across its food business, with brands like Magnum and Ben & Jerry’s performing particularly strongly.

Unilever said its share buyback would start in the first quarter and run over two years.