- Unilever Reports Rise in Profits Amid CMA Scrutiny
- CMA Investigates Supplier Prices Amid Cost of Living Crisis
- Unilever Predicts Moderate Sales Growth for the Year
Unilever’s profit margins remain below pre-pandemic levels, but the CMA may investigate if consumers are being overcharged.
The company behind numerous well-known consumer brands, such as Marmite and Magnum ice cream, has reported a rise in profits as the UK’s competition regulator seeks evidence on whether consumers are receiving a raw deal at the cash register.
Over the first half of its fiscal year, Unilever, whose brands include Domestos and Hellmann’s, reported a 20% increase in net profits to €3.9bn (£3.4bn).
The company reported that second-quarter underlying price growth was 9.4% while underlying sales volumes decreased by 0.2%.
It reported its progress days after the Competition and Markets Authority (CMA) exonerated supermarkets of making disproportionate profits.
Last Thursday, the agency said it would focus on the supply chain, including Unilever.
Since the end of the COVID pandemic, food and other producers have substantially increased their prices, with most of the increases attributable to higher energy, transportation, and commodity costs resulting from Russia’s invasion of Ukraine.
The CMA will investigate whether suppliers to supermarkets have increased their prices excessively, resulting in excessive profit margins at the expense of consumers during the current cost of living crisis.
Unilever reported that its underlying operating margin was 17.1%.
There have been several disputes between supermarkets and manufacturers of branded goods in recent years, with chains temporarily refusing to stock certain items due to the prices they were being requested to accept.
This included an extremely public dispute between Tesco and Heinz from the previous year.
In response to the increase in food prices, consumers have opted for supermarket brands, which are typically less expensive.
This trend is demonstrated by the decline in sales volumes reported by Unilever, despite the company’s reporting of rising sales by value in all of its major business segments, including nutrition and ice cream.
The company predicted that underlying sales growth for the entire year would moderate to greater than 5%.
Earlier in the year, it had warned that its prices would rise again in the first half of the year due to rising input costs, but it anticipated price stability for the remainder of the year.
The corporation confirmed this in its first City update since Hein Schumacher succeeded Alan Jope as CEO earlier this month.
Chief financial officer Graeme Pitkethly stated, “We’ve passed the inflation peak, but our reported figures will continue to show a high rate of price growth.
The preponderance of pricing you’ll observe as we progress through the quarters will be carry-forward pricing.
The opening price increase was 5%.
Wealth Club portfolio manager Charlie Huggins termed the results “solid but uninspiring” and said investors needed more margin.
“The question is whether Unilever should be performing better. The answer is nearly certainly affirmative.
“Margins remain well below pre-pandemic levels, and underlying sales growth is robust, but there are problems.”
These included poor sales in Europe, he wrote.
