Unilever faces its biggest cost increase in a decade, the CEO warns

The CEO of Unilever said that with the soaring cost of raw materials, packaging and transportation, the consumer goods manufacturer is facing the most serious inflationary pressure in a decade.

Alan Jope’s warning came as makers of Domestos bleach, Hellmann’s mayonnaise, and Magnum ice cream reported that after cost inflation accelerated in the second quarter, its basic operating margin for the six months to June fell by 100 basis points. , To 18.8%.

“We are facing a very significant cost increase,” Qiaopu said. “Our first reaction was to seek savings in our own business to offset these costs, but the scale of these costs will require us to continue to take some price increases.”

The company said advertising investment has also depressed profit margins. The company is the latest report in the industry that soaring transportation and commodity prices have caused squeezing, which has affected materials from palm oil to plastics.

British mixer manufacturer Fever tree On Tuesday, it said that it expects full-year profit margins to be hit by rising costs. Jon Moeller, P&G’s chief financial officer, said last month that rising commodity and freight prices have increased the company’s costs this year by $600 million.

Qiaopu said that the price of palm oil used in many of Unilever’s personal care products has risen by 70% over the first half of last year, while the price of soybean oil has now risen by 80%, the price of crude oil has risen by 60%, and the price of ocean freight has risen by 60%. 40% to more than 50%.

He said: “These levels of inflation have not been seen since 2011.”

“When the range of commodity price increases is so wide, it is difficult to avoid price increases for the entire portfolio.”

As the coronavirus has also affected costs, Unilever stated that it expects its basic operating margin to be flat throughout 2021. Anglo-Dutch shares fell more than 5% in Thursday afternoon trading.

Profit pressure comes from Unilever’s efforts to cope with the consequences of its Ben & Jerry’s brand decision Stop selling its ice cream In the occupied Palestinian territories, this move triggered an angry call from the Israeli prime minister this week to Qiaopu.

Qiaopu said that the decision to withdraw from the West Bank and East Jerusalem was made by “Ben Jerry and its independent board of directors.” Unilever established its role when it acquired the dessert brand in 2000.

Qiaopu said that the decision “is in line with the acquisition agreement we signed 20 years ago, and Unilever has always recognized the importance of this agreement to the sustainable and healthy development of Ben & Jerry’s business.”

“I want to emphasize again Unilever’s continued commitment to Israel,” he said. The multinational company has four factories and 2,000 employees in Israel.

After the chairman of the board criticized Unilever’s attitude towards the announcement, partly about whether Ben & Jerry’s will continue to sell its products throughout Israel, Jope stated that “have a healthy dialogue with Ben & Jerry’s and other members of Unilever “.

In addition to the cost warning, Unilever also reported that basic sales increased by 5.4%, slightly higher than expected, and turnover reached 25.8 billion euros, a slight increase from the previous year. Net profit fell to 3.4 billion euros from 3.5 billion euros a year ago.

The company said that price increases led to a 1.3% increase in sales, and the rest was due to increased sales of its products, from detergents and hand sanitizers to teas.

Jefferies analyst Martin Deboo said that margin pressure is “a possible flavor of the season.”

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