Unilever PLC has said that it would take two years to return to the profitability level of last year as the worst inflation since the financial crisis erodes the benefits of faster growth.
Unilever expects peak inflation in the first half of the year, when raw material costs are forecast to increase by 2 billion euros (US$2.3 billion).
Operating margin would likely narrow by as much as 2.4 percentage points this year, Unilever said yesterday, adding that it expects the bulk of the margin to come back next year and a full recovery in 2024.
Photo: Bloomberg
The maker of Dove soap also ruled out making major acquisitions in the foreseeable future after chief executive officer Alan Jope was rebuffed for his attempt to buy GlaxoSmithKline PLC’s consumer healthcare division.
It is Unilever’s first results since news of its unsuccessful attempt to buy the Glaxo unit, which investors met with criticism, provoking a stock sell-off.
Pressure has been rising on Jope after billionaire activist investor Nelson Peltz’s Trian Fund Management LP built a stake in the company.
The company announced a 3 billion euro buyback program as it reported a 4.5 percent gain in underlying sales growth for last year, while analysts expected a gain of 4.3 percent.
Unilever last month said it would cut 1,500 jobs, and restructure its divisions to accelerate growth and improve accountability.
The company is making ice cream, beauty and personal care independent units, which could facilitate mergers and acquisitions.
Unilever in July last year abandoned a forecast for an improvement in its profit margin, saying that it would be near 2020’s level.
The company has been increasing prices by the most in almost a decade to compensate for higher raw material costs.
Unilever’s forecast is for a margin of 16 percent to 17 percent this year.
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