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Unilever Full Year Results 2021


Average read time: 10 minutes

Today, we announced our full year results for 2021 with underlying sales growth of 4.5% - our fastest underlying sales growth in nine years.

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  • Fastest underlying sales growth in nine years – 4.5%, with 2.9% price and 1.6% volume
  • Turnover increased 3.4%, with a positive impact from acquisitions and a negative impact from currency
  • Underlying operating profit increased 2.9% and underlying operating margin decreased by 10bps
  • Underlying earnings per share increased 5.5% and diluted earnings per share 9.2%
  • Announced the sale of Tea business for €4.5 billion, with completion expected in H2 2022
  • Completed €3 billion of share buybacks in 2021; announcing further €3 billion programme for 2022-2023
  • Dividend per share growth of 3% for 2021
  • Announced a simpler, more category-focused organisational model

Statement from CEO Alan Jope

“The acceleration of Unilever’s operating performance continues. We delivered our fastest underlying sales growth for nine years – 4.5% for the full year, with 1.6% from volume.

“Our thirteen billion-Euro brands grew 6.4%. Priority markets of China, India, and the US grew at 14.3%, 13.4%, and 3.7% respectively. Our growth in e-commerce was 44%, ahead of global channel growth and bringing e-commerce to 13% of turnover. We have continued to re-shape our portfolio into high growth spaces, acquiring in Prestige Beauty and Functional Nutrition, and agreeing the sale of our Tea business.

“The major challenge of 2021 has been the dramatic rise of input costs. We responded with pricing actions, delivering underlying price growth of 2.9% for the year, accelerating to 4.9% in the fourth quarter, with full year underlying operating margin down 10bps and underlying earnings per share up 5.5%.

“We are focused on driving faster growth from our strong portfolio of brands and markets, and recently announced a major change to create a simpler, more category-focused organisation designed to further improve performance. In 2022, we will manage a significant input cost inflation cycle and will continue to invest competitively in marketing, R&D and capital expenditure.

“We have engaged extensively with our shareholders in recent weeks and received a strong message that the evolution of our portfolio needs to be measured. We therefore do not intend to pursue major acquisitions in the foreseeable future and will conduct a share buyback programme of up to €3 billion over the next two years.”

Outlook for 2022

We expect underlying sales growth in 2022 to be in the range of 4.5% to 6.5%. Pricing will continue to be strong, with some impact on volume as a result.

We currently expect very high input cost inflation in the first half of over €2 billion. This may moderate in the second half to around €1.5 billion, although there is currently a wide range for this that reflects market uncertainty on the outlook for commodity, freight and packaging costs.

The new organisation is expected to generate around €600 million of cost savings over two years. We plan to maintain competitive levels of investment in marketing, R&D and capital expenditure through a period of inflation-led gross margin pressure until input costs normalise and the full extent of pricing is reflected.

2022 underlying operating margin is expected to be down by between 140bps and 240bps, so maintained between 16% and 17%, with the first half impacted more than the second half. We expect margin to be restored after 2022, with the bulk coming back in 2023 and the rest in 2024.

Unilever’s strong cash flow delivery will continue, and the Board has approved a share buyback programme of up to €3 billion to be conducted over the next two years, which we expect to commence in the first quarter.

Organisational change

In January 2022, we announced major changes to Unilever’s organisation to make it simpler and more category-focused. Unilever will be organised around five category-focused Business Groups, each responsible and accountable for their strategy, growth and profit delivery; running their businesses in all geographies.

We expect our new organisation to be fully operational from the middle of the year. The new structure will be achieved within existing restructuring investment plans of €2 billion across 2021 and 2022. Restructuring investment for 2022 is therefore expected to be around €1.4 billion, returning to pre-2017 levels of around 1% of turnover thereafter. The new organisation is expected to generate around €600 million of cost savings over two years.

Our markets

Very high input cost inflation has been widespread across our markets and is expected to continue. Covid-19 is having an ongoing impact on the operating environment, including in the final quarter of the year as new restrictions were implemented in some geographies.

In North America and Europe markets declined in 2021 as we lapped high demand in the prior year for in-home food and hygiene products. Covid-19 impacted India in the early part of the year. In China the market recovered well in 2021 but economic growth has started to slow. Markets in Latin America are recovering, with growth driven by higher prices, although macroeconomic volatility remains high. In South East Asia markets are improving following tough restrictions on daily life through 2021. In Turkey, economic conditions deteriorated throughout the fourth quarter.

Unilever overall performance

Stepping up competitive growth is our priority. In 2021, our five strategic priorities and focus on operational excellence delivered full year underlying sales growth of 4.5% with volume of 1.6% and price of 2.9%. In the fourth quarter price stepped up to 4.9% with volume flat, as our brands provided strong pricing power in an environment of rising commodity and other input costs. Foods and Refreshment grew fastest in 2021 with 5.6% underlying sales growth with food solutions and out-of-home ice cream partially recovering from channel restrictions in 2020.

In the US growth has returned to competitive levels, with strong contributions from Prestige Beauty, functional nutrition and food solutions. India grew double-digit with balanced volume and price and strong actions on savings and mix. China grew double-digit, led by volume, with growth broad-based across categories and channels, especially e-commerce.

Latin America grew high single-digit led by price with flat volume in a high inflation market. South East Asia declined following tough Covid-19 related restrictions throughout the year and weak competitive performance in Indonesia. Europe grew slightly from both price and volume.

Prestige Beauty delivered strong double-digit growth across all brands as channels reopened, with e-commerce a big contributor. Functional nutrition grew double-digit across the portfolio of brands.

E-commerce growth was 44% and now represents 13% of Unilever’s turnover.

Turnover increased 3.4%. Underlying sales growth was 4.5%, there was a net positive impact of 1.3% from acquisitions and disposals and a negative impact of 2.4% from currency-related items.

Underlying operating profit was €9.6 billion, an increase of 2.9% including a negative impact from currency of 4.3%. Underlying operating margin decreased by 10bps. Gross margin decreased by 120bps reflecting very high inflation in raw material, packaging and distribution costs, partially offset by savings and pricing actions. Brand and marketing investment fell slightly but remained at competitive levels, and overheads benefitted from turnover leverage, making a positive impact of 90bps and 20bps respectively on underlying operating margin.

Free cash flow was €6.4 billion compared to €7.7 billion in 2020 as we increased capital expenditure and lapped the strong working capital improvement of 2020 which was maintained in 2021.

We have agreed to sell our global tea business, ekaterra (“Tea”), to CVC Capital Partners Fund VIII for €4.5 billion on a cash-free, debt-free basis. In full year 2020, ekaterra generated turnover of around €2 billion. The sale excludes Unilever’s tea business in India, Nepal and Indonesia as well as Unilever’s interests in the Pepsi Lipton ready-to-drink tea joint ventures and associated distribution businesses.

After reviewing options for Elida Beauty, we concluded that this business will create the most value managed as an independent unit within Unilever, with dedicated focus under our new operating model.

Beauty & Personal Care

Beauty & Personal Care underlying sales grew 3.8%, with 3.0% from price and 0.8% from volume.

All categories delivered good growth apart from skin cleansing which declined following elevated demand in the prior year.

Skin care grew high single-digit with channels reopening in 2021. Vaseline performed strongly throughout the year, supported by several premium innovations across brightening, therapeutics and hydration. Deodorants grew as the market continued to recover, with good growth and restored competitiveness in North America. Dove refillable deodorant launched in the US and has been well-received by consumers.

Hair care grew mid-single-digit with Sunsilk, Dove and Clear contributing and styling in North America being restored to competitive growth. Oral care grew with good performance in South Asia and Africa. Prestige Beauty grew double-digit with all brands benefitting from e-commerce and a recovery in beauty channels compared to the prior year. New innovations in Prestige Beauty include Dermalogica’s biolumin-c and sound sleep cocoon and Ren’s zero waste packaging.

Underlying operating margin in Beauty and Personal Care was flat, with high material inflation in palm oil having a particularly high impact on gross margin, despite stepped up pricing. Brand and marketing investment was lower overall due to reductions in Europe and South East Asia where Covid-19 restrictions impacted market growth. We invested more in the US and China, and benefitted from efficiencies in advertising production costs.

Home Care

Home Care underlying sales grew 3.9%, with 3.1% from price and 0.7% from volume.

In fabric care, mid-single-digit growth in fabric cleaning and low single-digit growth in fabric enhancers was led by South Asia and Latin America. We continue to see good innovation performance from dilutable laundry liquids across Latin America, under the OMO brand. Capsule and liquid formats continued to grow well, and in China OMO became the leading capsules brand in traditional retail and second largest in e-commerce. Underlying sales in home and hygiene declined mid-single-digit as we lapped strong demand for hygiene products in 2020, and overall home and hygiene continues to trade ahead of pre-pandemic levels.

Underlying operating margin in Home Care declined by 110bps. Gross margin declined as very high input cost inflation could not yet be fully recovered through stepped up pricing. Brand and marketing investment was lower, reflecting elevated spend in 2020 behind hygiene products at the peak of the pandemic.

Foods & Refreshment

Foods and Refreshment underlying sales grew 5.6%, with volume growth of 2.9% and price of 2.7%.

Ice cream grew mid-single-digit, balanced across volume and price. Growth was driven by out-of-home food, with in-home ice cream flat as we lapped double-digit prior year growth. Our Magnum and Ben & Jerry’s brands each grew high single-digit. Food solutions has begun to recover from channel closure in 2020, delivering double-digit growth.

In-home food saw low single-digit price led growth, following elevated demand and double-digit growth in 2020. Our largest food brand Knorr grew high single-digit across in-home and out-of-home channels through innovations such as zero-salt stock cubes and Rinde Mas in Latin America, a plant-based product that extends the yield of meat dishes while adding flavour. Dressings brand Hellmann’s grew double digit for the second year in succession. Our retained tea business grew double-digit.

Foods and Refreshment underlying operating margin improved by 40bps. Gross margin declined as high input cost inflation could not yet be fully recovered through increased pricing. Brand and marketing investment increased, driven by India and China, but benefitted underlying operating margin as a result of faster turnover growth.

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