British giant consumer goods Unilever reported financial results for 2022, recording a 14.5% increase in turnover to 60 billion euros, while the net profit increased by 25% and exceeded 8 billion euros. Growth was broadbased across each of five Business Groups, led by strong performances from all brands.

Underlying sales growth (an internal metric used by the company to show more accurately the actual growth of the business.) stepped up to 9.0% in 2022, led by pricing across our markets.

Price growth has sequentially improved in each of the past eight quarters, reaching 13.3% in the fourth quarter and taking the full year underlying price growth to 11.3%. This had, as expected, some negative impact on volumes, which declined 2.1%.

Beauty & Wellbeing grew underlying sales by 7.8% 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%, 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%.

Nutrition grew 8.6%, led by high price growth of Dressings and a continued recovery of Unilever Food Solutions. Ice Cream improved underlying sales by 9.0%, 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% with price of 13.5% and volume down 2.0%. South Asia grew strongly through both price and volume.

Price growth in Latin America increased to 20.4% with volumes contracting by 4.6%. 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%, with 8.4% from price and (2.3)% from volume. Volumes held up better in North America than in Europe.

Turnover increased 14.5% to €60.1 billion, which included a currency impact of 6.2% and (1.0)% from disposals net of acquisitions.

Underlying operating profit was €9.7 billion, up 0.5% versus the prior year. Underlying operating margin declined by 230bps to 16.1%.

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 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.

The company proposed a quarterly dividend of €0.4268 per share payable in March 2023.

Outlook for 2023

Unilever expects 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%.″