Today, Unilever announces its full-year results for 2022:
- Underlying sales growth accelerated to 9.0%, driven by all Business Groups, with price growth of 11.3% and volumes declining by 2.1%
- Turnover increased 14.5% to €60.1 billion, including 6.2% from currency and (1.0)% from disposals net of acquisitions
- Underlying operating profit improved slightly to €9.7 billion despite a margin decline of 230bps driven by input cost inflation
- Underlying earnings per share decreased by 2.1%, and diluted EPS was up 28.8%, helped by profit on disposals
- Free cash flow €5.2 billion, including €0.3 billion of tax paid on separation of ekaterra, the global Tea business, reflects 97% cash conversion
- €1.5 billion share buyback and €4.3 billion dividends during 2022
- Brand and marketing investment increased €0.5 billion in constant exchange rates
- Our billion+ Euro brands, accounting for 53% of Group turnover, delivered underlying sales growth of 10.9%, led by strong performances from OMO, Hellmann’s, Rexona, Sunsilk and Magnum
- Simpler, more category-focused organisation, in place since 1 July, is driving greater operational focus and faster decisions
Statement from Alan Jope
“Unilever delivered a year of strong topline growth in challenging macroeconomic conditions. Underlying sales growth was 9.0 percent, driven by disciplined pricing action in response to high input cost inflation. Growth was broad-based across each of our five Business Groups, led by strong performances from our billion+ Euro brands. Despite sharp rises in material costs, we have prioritised stepping up our brand and marketing investment. The underlying operating margin was delivered in line with our guidance, with underlying operating profit up for the year.
“We have made further progress in the transformation of Unilever and continued to deliver against our strategic priorities. Our new operating model is already unlocking a culture of bolder and more rapid decision-making with improved accountability. We continue to improve our growth profile, with the sale of the global Tea business and the acquisition of Nutrafol. We are increasingly realising the benefits from the reshaped portfolio, accelerated savings delivery and improved execution.
“There is more to do, but the changes we have made mean that we start 2023 with momentum, setting us up well for delivering another year of higher growth, which remains our first priority.”
In 2022, we carefully balanced price growth, volume and competitiveness to navigate through the high-cost inflation environment. We will again deliver strong underlying sales growth in 2023, with improving volume performance and competitiveness as the year progresses. We will continue to price and drive our cost savings programmes to allow us to invest behind our brands and deliver improved margins.
We expect cost inflation to continue in 2023. Our expectation for net material inflation (NMI) in the first half of 2023 is around €1.5 billion. We anticipate significantly lower NMI in the second half, with a wide range of possible outcomes, though we do not expect cost deflation.
In the first half, underlying price growth will remain high, and volume growth will be negative. Volume will improve as price growth softens, but it is too early to say whether volume will turn positive in the second half. We expect 2023 underlying sales growth to be at least in the upper half of our multi-year range of 3 – 5 percent.
We will deliver only a modest improvement in the underlying operating margin in the full year as we plan for another year of increased investment. With cost inflation remaining high, the underlying operating margin will be around 16 percent in the first half.
Unilever overall performance
Underlying sales growth stepped up to 9.0 percent in 2022, led by pricing, in the face of significant input cost inflation across our markets. Price growth has sequentially improved in each of the past eight quarters, reaching 13.3 percent in the fourth quarter and taking the full year underlying price growth to 11.3 percent. This had, as expected, some negative impact on volumes, which declined by 2.1 percent.
Beauty & Wellbeing grew underlying sales by 7.8 percent driven by price. Volumes were slightly positive, helped by another year of strong growth in Prestige Beauty and Health & Wellbeing, which now account for more than €2.5 billion of turnover. Personal Care underlying sales were up 7.9 percent, driven by strong pricing. Volumes grew in Deodorants, but declined in other categories. Home Care, which was particularly exposed to rising input costs, delivered the highest price growth and some volume decline, leading to underlying sales growth of 11.8 percent.
Nutrition grew 8.6 percent, led by high price growth of Dressings and continued recovery of Unilever Food Solutions. Ice Cream improved underlying sales by 9.0 percent, with strong volume growth in out-of-home channels, benefiting from a good summer season, but not quite compensating for lower in-home volumes.
Emerging markets grew underlying sales by 11.2 percent with price of 13.5 percent and volume down 2.0 percent. South Asia grew strongly through both price and volume. Price growth in Latin America increased to 20.4 percent with volumes contracting by 4.6 percent. China declined slightly as it was affected by pandemic-related restrictions, particularly in the second and fourth quarters. South East Asia achieved double-digit price growth with virtually flat volumes. Turkey delivered high single-digit volume growth in a very inflationary environment. Developed markets increased by 5.9 percent, with 8.4 percent from price and (2.3) percent from volume. Volumes held up better in North America than in Europe.
Turnover increased 14.5 percent to €60.1 billion, which included a currency impact of 6.2 percent and (1.0) percent from disposals net of acquisitions. Underlying operating profit was €9.7 billion, up 0.5 percent versus the prior year. The underlying operating margin declined by 230bps to 16.1 percent. Gross margin decreased by 210bps which reflected €4.3 billion of net material inflation, and increased production and logistics costs that were only partially mitigated by our pricing action and savings delivery.
Brand and marketing investment was stepped up by €0.5 billion in constant exchange rates. This equated to a 10bps contribution to the margin in current exchange rates. Overheads increased by 30bps largely due to investments in capabilities to drive growth and increased scale of our Prestige Beauty and Health & Wellbeing businesses.
Capital allocation and operating model
On 22 July and 19 December 2022, we completed the first and second €750 million tranches of our ongoing share buyback programme of up to €3 billion.
The quarterly interim dividend for the fourth quarter is maintained at €0.4268.
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 are on track to deliver the new structure within existing restructuring plans and to generate around €600 million of cost savings over the first two years after 1 July 2022, with the majority in 2023.
Nutrition (23% of group turnover)
Nutrition underlying sales grew 8.6%, with 10.9% from price and (2.1)% from volume.
Scratch Cooking Aids, the biggest category, delivered mid-single-digit growth. South East Asia, Africa and Latin America performed strongly, led by Knorr, while China declined by high single-digit as a result of pandemic-related restrictions, particularly in the second and fourth quarters.
Dressings had a strong year with broad-based, double-digit price growth and a modest volume decline, supported by the continued high growth of Hellmann’s, particularly in the United States. Despite a decline in China, Unilever Food Solutions delivered double-digit growth and almost recovered to pre-pandemic volume levels, helped by extended distribution and consumers eating out-of-home more frequently.
Underlying operating margin declined 170bps due to an input cost-driven reduction in gross margin.
Ice cream (13% of group turnover)
Ice Cream underlying sales grew 9.0%, with 9.7% from price and (0.7)% from volume. Strong volume growth in out-of-home was offset by volume declines in in-home, reversing some of the pandemic-related trends.
Out-of-home Ice Cream achieved double-digit prices and high single-digit volume growth. The business continued to recover sales lost during the pandemic but is yet to return to 2019 volumes. The in-home business grew mid-single-digit despite mid-single-digit volume declines. Volumes were particularly weak in the fourth quarter due to lapping strong in-home sales that were boosted by lockdowns in the prior two years.
Magnum, Cornetto and Carte d’Or delivered positive volume growth, supported by new variant innovations such as Magnum Remix, launched across 65 countries, and new Cornetto variants in Turkey, South East Asia and China.
Underlying operating margin declined 220bps primarily due to high input cost inflation, which affected gross margin.
Check the latest results here.