Strong sales growth and continued progress against strategy

Statement from Alan Jope

"Unilever delivered a year of strong topline growth in challenging macroeconomic conditions. Underlying sales growth was 9.0%, 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 prioritized 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 realizing the benefits of 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 priority.”

Outlook

In 2022, Unilever carefully balanced price growth, volume, and competitiveness to navigate through the high-cost inflation environment. Unilever will again deliver strong underlying sales growth in 2023, with improving volume performance and competitiveness as the year progresses. They will continue to price and drive our cost savings programs to allow them to invest behind our brands and deliver improved margins.

Unilever expects cost inflation to continue in 2023. The expectation for net material inflation (NMI) in the first half of 2023 is around 1.5 billion euros. It is anticipated to significantly lower NMI in the second half, with a wide range of possible outcomes, though they do not expect cost deflation.

In the first half, underlying price growth will remain high, and volume growth will be negative. The volume will improve as price growth softens, but it is too early to say whether the 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%.

Unilever will deliver only a modest improvement in the underlying operating margin in the full year, as they plan for another year of increased investment, and with cost inflation remaining high, the underlying operating margin will be around 16% in the first half.

Unilever overall performance

Underlying sales growth stepped up to 9.0% 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% 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 by 2.1%.

Nutrition grew 8.6%, led by a 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.

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.

The underlying operating margin declined 170bps due to an input cost-driven reduction in gross margin.

Ice cream (13% of group turnover)

Ice Cream's 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 as a result of 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, which has been launched across 65 countries, and new Cornetto variants in Turkey, South East Asia, and China.

The underlying operating margin declined 220bps primarily due to high input cost inflation which affected gross margin.