Unilever experienced a significant boost in its share price on Thursday morning after announcing an improved full-year margin guidance and confirming that the spinoff of its ice cream business is on track to be completed by the end of 2025. The shares surged by nearly 8% initially before stabilizing at a growth of around 5.45% by 10:14 a.m. in London. This surge in share price was driven by the company’s impressive performance across all segments as highlighted in its first-half results.
Unilever’s vast portfolio of brands, including well-known names such as Dove, Axe, Hellmann’s, and Knorr, recorded sales growth across all segments in the first half of the year. The beauty and well-being segment saw a remarkable expansion of 7.1%, showcasing the strong performance of these products. However, the ice cream segment lagged behind with only 0.6% sales growth, coupled with a 1% decline in volumes sold. This underperformance in the ice cream business, which accounts for 15% of the group’s turnover, was labeled as “disappointing” by Unilever.
Strategic Spinoff Plans
In a strategic move to streamline its business and focus on key areas such as beauty and well-being, personal care, home care, and nutrition, Unilever announced back in March its decision to separate its ice cream unit, which includes popular brands like Ben & Jerry’s and Magnum. The company aims to enhance its competitiveness and drive growth in more profitable segments by divesting the ice cream business. Despite the disappointing performance of the ice cream segment, Unilever remains optimistic about the future outlook.
Unilever’s CEO, Hein Schumacher, highlighted the company’s pricing strategy in response to the challenging market conditions. Unilever had raised prices early in the inflationary cycle of the past three years due to significant input cost pressures across various commodities. The recent results showed an underlying price growth of 1% in the second quarter, a significant decrease from the 8.2% growth recorded in the same period last year. This pricing strategy, combined with a focus on margin expansion, has been key to Unilever’s financial performance.
Analysts’ Insights and Outlook
While Unilever’s organic sales growth slightly missed expectations in the second quarter, analysts remain optimistic about the company’s future prospects. Jefferies analysts noted that the company’s beat on gross margin and the revised margin guidance for the full year are positive indicators of its financial health. The company’s commitment to margin expansion and investment in marketing behind its top brands has been well-received by the market.
Unilever’s strong performance across various segments, coupled with its strategic spinoff plans and margin expansion efforts, have driven a surge in its share price. Despite challenges in the ice cream business, the company’s focus on growth and competitiveness bodes well for its future success in the consumer goods industry.