Friday, July 23, 2021

"Inflation Pushes Consumer-Goods Giant Unilever to Accelerate Price Increases"

Ummm.... companies raising prices in anticipation of rising prices is something we haven't seen in a while.

If you start hearing learned discussions of LIFO vs. FIFO accounting treatment grab yourself some of that quirky little instrument, the Series I bond and get familiar with ag futures and depreciation schedules for asset-heavy enterprises.

And bar soap. For some reason soap (a dandy way to store fat) has shown the tendency to retain value.

But maybe that was just Weimar, 1923 and Chicago, 1979 and Hungary, 1946 (prices rising 350% per day in July, 75 years ago this month). Still though, think storables, and price elasticity and black market value and....

Anyhoo, on to the Walls Street Journal, July 22:

Warning from maker of Dove soap and Ben & Jerry’s ice cream follows similar moves by Procter & Gamble and General Mills
The maker of Dove soap and Hellmann’s mayonnaise warned of accelerating price increases across a range of products, as it seeks to counter cost inflation across its business.

Unilever PLC said Thursday that it was grappling with higher costs for ingredients, packaging and transportation, which would likely lower its full-year profitability—a warning that sent shares down 5% in early trading.

The London-listed consumer-goods giant said it would step up price increases across the world, having already raised prices 1.6% in the second quarter.

“We are going to have to take a little higher levels of price increase,” Chief Financial Officer Graeme Pitkethly told reporters.

Inflation has continued to pick up pace, rising at the fastest pace in 13 years in the U.S. last month as the recovery from the pandemic gained steam and consumer demand drove up prices of everything from autos to clothes and restaurant meals. Other packaged-food manufacturers, including Procter & Gamble Co. and General Mills Inc.,have also warned of rising prices this year.

Mr. Pitkethly said Unilever’s large scale and strong inventories would help to mitigate the price rises but that several costs were out of the company’s control and rising more than expected. The price of ingredients such as palm oil, crude oil and soybean oil all rose sharply in the quarter.

Rising costs of commodities, increased marketing spend compared with last year and expenses linked to the Covid-19 pandemic have reduced Unilever’s profitability, with the company saying its underlying operating margin in the first six months of the year fell 1 percentage point to 18.8% from a year earlier. The company now expects a slightly lower profit margin for the year.

“We’re very focused on our pricing actions, which we think are landing well but inflation has been even higher than we anticipated,” Mr. Pitkethly said.

He added that the company had already been able to quickly increase prices in places such as Brazil and Argentina, but that doing so in Europe, for example, can take more time because the sales contracts it signs are often for longer periods.

The comments came as Unilever reported a 5.4% rise in first-half underlying sales growth to 25.8 billion euros, equivalent to $30.4 billion, boosted by strong sales of its food and refreshment products. It attributed 4% of that growth to higher sales volumes, with 1.3% coming from higher prices.
Net profit for the first six months of the year fell 5% to €3.12 billion because of a negative impact from currency fluctuations....


 And remember: "The Inflation Is Transitory, The Loss of Purchasing Power Is Permanent"