Consumer goods giant Unilever has upped its annual outlook after notching up its best quarterly sales performance in more than a decade ahead of a £33.8 billion deal to spin off its food business.
The Marmite to Dove soap firm saw shares surge 6% higher in morning trading on Tuesday after Unilever cheered a strong performance in its first half, with sales growth ramping up to 5.8% in the second quarter.
This was driven by a 5.5% jump in sales by volume – the highest underlying volume growth for more than 10 years.
Overall sales lifted 0.5% in the first half and pre-tax profits rose 1.8% to 4.66 billion euros (£3.98 billion) in the six months to June 30.
Operating profits rose 2.6% to 4.89 billion euros (£4.17 billion), or 0.9% higher on an underlying basis, to 5.2 billion euros (£4.44 billion).
Unilever said it now expects full year sales growth within its 4% to 6% medium-term guidance, having previously forecast for it to be at the bottom end of the range.
The group also expects around 3% underlying volume growth, against previous guidance for at least 2% growth for the year.
Its half-year figures come as the group moves to split its food business into a joint venture with US rival McCormick.
The joint venture, which was announced in March, will create a major food giant that combines brands such as Unilever’s Marmite with McCormick’s French’s mustard.
But some Unilever shareholders recently criticised bosses at its annual general meeting for approving the major deal without putting it to a shareholder vote.
The results also showed food sales lagging behind the rest of the group, with underlying growth of 1.2% in the first half, against 5.9% for beauty and wellbeing, 4.8% for personal care and 7.6% for home products.
Bosses said the group’s home and personal care products helped support growth in the UK.
Unilever chief executive Fernando Fernandez said: “The UK is one of our most important European markets.
“We have been having a strong summer performance in there in homecare and personal care.
“It’s our home market and we are committed to growing the business there.”
Unilever also highlighted that its food business saw soft conditions and increased competition in the condiment sector in the US weigh on growth.
However, it stressed that it has sought to address this by targeting growth through premium and avocado mayonnaise.
Mr Fernandez added: “We have delivered a strong volume-led performance in the first half, with a significant step-up in the second quarter – the best volume quarter at Unilever in over a decade.
“These results show our ability to continue performing while transforming our portfolio.
“Our combination of foods with McCormick is progressing well and will unlock significant value.”
Emily Sawicz, director and analyst at RSM UK, said: “By streamlining its portfolio and investing behind its strongest beauty, wellbeing and personal care brands, Unilever is strengthening its competitive position.
“The challenge now will be sustaining momentum in emerging markets while navigating cost inflation and reigniting growth in developed economies, where premium personal and home care categories have generally proven more resilient.”
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