Consumer goods maker Unilever has lifted its sales forecast, after hiking its prices — fuelling the cost of living squeeze facing customers around the world.
Unilever, whose brands range from Dove soap and Vaseline to Marmite and Magnum ice cream, lifted its prices by 9.8% in the first half of this year, accelerating to 11.2% in the second quarter.
This resulted in sales growth of 8.1% for the first half, with volumes falling 1.6% as some customers switched to cheaper rival products (or simply did without).
Soaring commodity prices pushed up Unilever’s costs this year, particularly in the Home Care sector, and the company has passed that bill onto customers.
The company now expects to beat its previous forecast of sales growth between 4.5% and 6.5%, “driven by price” as it keeps charging more for its products.
Alan Jope, Unilver’s chief executive officer, says its price rises ‘mitigated’ input cost inflation (while driving UP consumer inflation):
“Unilever has delivered a first half performance which builds on our momentum of 2021, despite the challenges of high inflation and slower global growth.
Underlying sales growth of 8.1% was driven by strong pricing to mitigate input cost inflation, which, as expected, had some impact on volume.
Jope claims that it is trying to keep price rises as low as possible, during a period of ‘sustained inflation’.
Unilever also continues to funnel profits to its investors. It completed a EUR750m share buyback tranche last week, and plans to launch a second tranche this quarter, as it aims to buy back up to EUR3bn of its stock.
Shares have jumped 3.1% in early trading, to the top of the FTSE 100 index of blue-chip shares.
Power supply problems are causing disruption to rail services on the UK’s east coast main line this morning – a day before a national strike is expected to cause widespread problems.
Damage to the overhead electric wires between Peterborough and Stevenage means trains on the route may be cancelled, delayed by up to 60 minutes or revised.
Major disruption is expected until the end of the day, National Rail warns.
It will affect trains from London’s Kings Cross running to and from towns and cities including Edinburgh, Berwick-Upon-Tweed, Aberdeen, Newcastle, Middlesbrough, Stirling, Sunderland, Skipton, Hull, Bradford, Harrogate, York, Lincoln and Leeds.
Replacement buses are being deployed, with train operators confirming that services are being hit:
Some tickets are being accepted on other routes (although this won’t help those currently stuck on trains).
Heathrow airport has unveiled a ?321m adjusted pretax loss for the first half of the year after weeks of lengthy queues and flight cancellations, with passenger numbers back at near pre-pandemic levels.
Britain’s busiest airport said the summer getaway had “started well”, despite recently announcing a daily cap of 100,000 passengers until early September after it struggled to cope with rebounding demand for travel.
The London hub blamed a lack of ground handling staff for recent weeks of travel chaos and lengthy delays for passengers, describing this as the “constraint on Heathrow’s capacity”.
The airport estimated that airlines were lacking about 30% of ground handling staff compared with before Covid, adding there had not been an increase in these workers since January.
Eslewhere this morning, jet engine maker Rolls-Royce has named former BP executive Tufan Erginbilgic as its new chief executive to succeed outgoing boss Warren East.
Erginbilgic will take on the role on January 1 next year; East announced in February that he planned to leave at the end of 2022 after eight years at the helm.
Mr Erginbilgic spent more than 20 years at BP, including five years as part of its executive team and latterly as boss of the oil giant’s downstream business, before he left the group in 2020.
He is currently a partner at private equity firm Global Infrastructure Partners (GIP), which focuses on large-scale investments in infrastructure businesses and manages 81 billion US dollars (67 billion) for investors.
Mr Erginbilgic – who is a UK and Turkish national – will be paid a base salary of ?1.25m at Rolls, 30% of which will be paid as shares deferred for two years.
Brexit is to blame for some of the staffing problems that caused air travel disruption this year, according to easyJet’s CEO.
Johan Lundgren has told LBC Radio that the labour pool is now smaller, meaning some potential recruits aren’t available now.
Before Brexit, and before the pandemic, around 40% of applications to work for easyjet at Gatwick and the London area were non-UK nationals, primarily EU nationals.
Today that number is 2.5%, Lundgren explains, adding;
You can’t say that Brexit doesn’t have an impact… clearly the pool is much smaller.
Shares in easyJet have dipped in early trading (down 0.8%).
They’re down over a third so far this year, as the Ukraine war drove up energy costs, making flying more expensive and leaving consumers with less to spend.
EasyJet says that its July operations have been “much improved”, since it removed some flight capacity due to caps at London Gatwick and Amsterdam Schiphol.
Johan Lundgren, easyJet Chief Executive, tells shareholders:
“Delivering for customers this summer remains our highest priority.
During the quarter we carried seven times more customers than the same time last year and operated 95% of our schedule. We have taken action to build the additional resilience needed this summer and the operation has now normalised.
Customers will be fervently hoping Lundgren is right, after staff shortages and soaring demand led to delays and cancellations this year (and cost easyJet ?133m).
John Holland-Kaye has also rebutted criticism from Ryanair yesterday that airports messed up their ‘one job’ of hiring enough security staff and ground handlers for the summer rush.
Heathrow’s CEO tells the Today Programme that it is “bizarre” to accuse airports of not hiring enough ground handlers, as they’re employed by the airlines.
This is like accusing us of not having enough pilots.
John Holland-Kaye, Heathrow CEO, warns that it will take years for the airline industry to rebuilt after the pandemic:
We can’t ignore that COVID has left the aviation sector deeply scarred, and the next few years will need investment to rebuild capacity, with a focus on safety, consumer service, resilience and efficiency.
Airlines need to recruit and train more ground handlers; airports need catch up on underinvestment during the COVID years – at Heathrow, that means replacing the T2 baggage system and new security lanes.
And he takes a swipe at the UK’s aviation regulator for deciding that Heathrow should cut its landing fees over the next few years.
Recent months have shown that passengers value easy, quick and reliable journeys, not penny pinching, and the CAA should be encouraging the investment that will deliver for consumers.”
Good morning and welcome to our rolling coverage of business, the world economy and the financial markets.
Despite the recovery in air travel this summer, Heathrow Airport and budget airline easyJet have both reported losses this morning as the industry struggles to give all its customers a decent service.
Heathrow has posted a loss of ?321m for the first six months of the year, an improvement on the ?466m it lost in January-June 2021, when pandemic travel restrictions were in force.
Although passenger numbers surged to 26.1m, compared with just 3.9m a year earlier, Heathrow says it also faced higher costs. It isn’t planning to pay a dividend to its shareholders for 2022 (a wise move, given the delays and lost baggage suffered by some passengers this year).
Heathrow claims that the summer getaway has “started well”, despite having to introduce a cap on passenger numbers to avoid further travel chaos.
It insists that it started planning nine months ago for the summer peak, and that its own resources are “on track”.
We have hired 1,300 people in the last 6 months and will have a similar level of security resource by the end of July as pre-pandemic
Instead, Heathrow points the finger at airlines for problems, such as the mountain of lost baggage that built up last month. It estimates that they have just 70% of airline ground handlers compared to pre-pandemic levels, due to cost-cutting in the pandemic.
In the second half of June, as departing passenger numbers regularly exceeded 100,000 a day, we started to see a worrying increase in unacceptable service levels for some passengers; an increase in delays to get planes on to stand, bags not travelling with passengers or being delivered very late to the baggage hall, low departure punctuality and some flights being cancelled after passengers had boarded.
Rising costs and cancellations hit budget airline Easyjet’s bottom line too. It has posted a pre-tax loss of ?114m for April-June, including a ?133m loss due to disruption and cancelled flights.
That’s a better performance than the ?318m loss in the same quarter last year.
EasyJet — one of the airlines which has struggled the most — flew 22m customers in the last quarter, up from 3m a year ago, and says:
The unprecedented ramp up across the aviation industry, coupled with a tight labour market, has resulted in widespread operational challenges culminating in higher levels of cancellations than normal.
Those cancellations means easyJet operated 95% of its planned schedule in Q3, with some customers seeing their flights cancelled at the last minute.
Also coming up today
The International Monetary Fund is expected to downgrade its global growth forecasts for 2022 and 2023 today, when it releases its updated World Economic Outlook.
Last week, IMF chief Kristalina Georgieva warned that the war in Ukraine had put more pressures on commodity and food prices, while global financial conditions are tightening more than expected, and global supply chains were still strugging.
European energy ministers will meet in Brussels today to discuss proposals to cut their gas use by 15% from August to March, with several countries having negotiating exemptions or softer rules.
Some governments, such as Spain, had opposing a blanket target, although yesterday’s news that Gazprom has cut flows to Europe highlights the growing risks of shortages this winter.
Supply fears have pushed wholesale gas prices close to their highest levels in four months, meaning consumers could face even higher bills this winter.
And this morning, a group of MPs have warned the UK government must immediately provide additional support to households, or risk millions plunging into “unmanageable” debt and damage to the economy.
European stock markets are set for a muted start, with the FTSE 100 called a little higher.
The agenda
11am BST: CBI’s distributive trades survey of UK retailers
2pm BST: IMF publishes its updated World Economic Outlook
2pm BST: US house price index for June
3pm BST: US consumer confidence report for July
English
Arabic
Chinese (Simplified)
Dutch
French
German
Italian
Portuguese
Russian
Spanish