Unilever warned the market that further price hikes are on the way despite double-digit price inflation in 2022, but investors were reassured by the consumer giant’s full-year results on Thursday.

The Anglo-Dutch consumer group posted underlying sales growth of 9% in 2022, entirely driven by pricing in the face of significant input cost inflation, which has increased through each of the past eight quarters, reaching a record 13.3% in the fourth quarter and taking the full-year underlying price growth to 11.3%.

Unsurprisingly this had a negative impact on sales volumes as consumers reacted to soaring prices by buying 2.1% fewer Unilever goods.

Overall turnover increased 14.5% to €60.1bn for the 12-month period, including a currency benefit of 6.2% and a 1% reduction from disposals net of acquisitions.

Despite the price hikes, underlying operating margins declined by 230bps to 16.1%, reflecting €4.3bn of net material inflation, and increased production and logistics costs. Underlying operating profit improved 0.5% to €9.7bn as higher revenues marginally outstripped the impact of lower margins.

Unilever warned that rocketing cost inflation would continue in 2023, with first-half net material inflation still around €1.5bn despite lapping the strong inflation of 2022. But Unilever said it anticipated “significantly lower” inflation in the second half and volumes would improve as price growth softened, though the group said it expected only a “modest” improvement in full-year operating margin.

Jefferies said the guidance was “reassuring, relative to apprehensiveness on the way in”, albeit not consistent with a second half rebound thesis.

Barclays highlighted some concern with European volume trends, but brushed off the small downgrade to 2023 margin estimates. “The stock looks cheap but the question we are pondering is whether we have to wait the usual three or four quarters to see the benefit of a new CEO or could it come quicker given Alan Jope has done a lot of the hard yards on organization and portfolio.”

Addressing the task awaiting incoming CEO Hein Schumacher, AJ Bell added: “[Schumacher] joins in July, by which time we may well see widespread evidence of inflation easing, but whether Unilever brings its prices back down is another thing. The new boss will need to think quickly about this point, as well as defining what Unilever should look like over the next decade.”

Unilever shares inched up 0.6% to 4,122p on the results, but remain marginally down so far in 2023 despite the wider share price rally.

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