Unilever warns of rising costs as profits rise

LONDON: British consumer goods group Unilever on Thursday logged rising annual net profit but warned that soaring inflation would ramp up costs again this year. Profit after tax rose 8.4 percent to six billion euros ($6.9 billion) last year, Unilever said in a statement.

The group, which has faced fierce criticism over its recent failed $50-billion bid for the health care unit of drugmaker GlaxoSmithKline, ruled out any major acquisitions and pledged to return three billion euros to investors via share buybacks.

Unilever, whose brands include Magnum ice cream, Cif surface cleaner and Dove soap, said revenues advanced 3.4 percent to 52.4 billion euros last year.

“The major challenge of 2021 has been the dramatic rise of input costs,” said chief executive Alan Jope, in reference to items such as raw materials.

“We responded with pricing actions,” he added, noting that prices of Unilever goods were hiked by an average 2.9 percent over the past year — but accelerated to 4.9 percent in the fourth quarter.

Surging global inflation and rocketing energy prices are hurting consumers, just as virus-battered economies recover from Covid lockdowns.

As a result, Unilever warned that it expected “very high input cost inflation... of over 2.0 billion euros” in the first half of this year.

“This may moderate in the second half to around 1.5 billion euros, although there is currently a wide range for this that reflects market uncertainty on the outlook for commodity, freight and packaging costs,” it added.

Unilever’s share price dropped 1.7 percent to 3,744 pence in early afternoon deals on London’s rising stock market.

“The promise of share buybacks and a softly-softly approach to acquisitions won’t give Alan Jope much of a break from the mounting criticism over the way the business has been run,” noted Hargreaves Lansdown analyst Susannah Streeter.

“Inflation is flashing as a big warning light in these results and the worst may be yet to come.”

Thursday’s results also come as Jope faces growing pressure from investor activists over his leadership in the wake of the failed GSK bid.

“We have engaged extensively with our shareholders in recent weeks and received a strong message that the evolution of our portfolio needs to be measured,” added Jope on Thursday.

“We therefore do not intend to pursue major acquisitions in the foreseeable future and will conduct a share buyback programme ... over the next two years.”