By Dhirendra Tripathi
Investing.com – ADRs of Unilever (NYSE:UL) fell 2% in premarket trading Thursday after the company said it will take two years for it to regain the profitability levels it saw last year 2021, as it responds to rising input price pressures.
The consumer goods giant expects “very high input cost inflation in the first half of over 2 billion euro” ($2.3 billion). The hit should ease to $1.5 billion in the second half, it said. High costs for marketing and advertising are expected to compound other operational issues.
Unilever said it expected margins to be "restored after 2022, with the bulk coming back in 2023 and the rest in 2024."
Unilever makes hundreds of products, ranging from floor-cleaner Domestos and Dove soap to Ben & Jerry’s ice-cream, exposing it to multiple sources of inflation. Competition is intense and price hikes above a certain threshold risk consumers opting for cheaper alternatives. In the fourth quarter, pricing accounted for all a 4.9% rise in underlying sales. Volumes were flat, by contrast.
The company expects 2022 underlying sales growth to be 4.5%-6.5%, with the operating margin eroding by 1.4 to 2.4 percentage points.
Competition, margins and new markets were the focus when CEO Alan Jope launched the $68-billion bid for GlaxoSmithKline's (NYSE:GSK) consumer health business, a pursuit the company quickly gave up under shareholder pressure. It's ruling out any further big M&A for now and, in order to assuage investor concerns, it is now proposing to buy back shares worth up to 3 billion euro in next two years.