Unilever on Thursday gave a dire evaluation of shopper sentiment in Europe and China, two of its key markets, however raised its full yr gross sales forecast because it lifted costs to counter hovering prices.

Like the remainder of the buyer items trade, Unilever’s margins have been squeezed because the begin of the conflict in Ukraine that has pushed up prices of vitality and key substances. Consequently, the corporate has raised costs sharply.

“We’re shocked how nicely volumes have held up [given] the degrees of value will increase we have been pressured to take,” CEO Alan Jope instructed CNBC after the outcomes had been revealed. “It is testomony to the energy of our manufacturers and our execution.”

Consumers world wide paid 12.5% extra for Unilever merchandise within the quarter – a file value hike for the corporate – with gross sales volumes declining 1.6%. The corporate reported a better-than-expected enhance in third-quarter gross sales.

Shares rose about 1% in morning commerce.

“Client sentiment in Europe is at an all time low,” Chief Monetary Officer Graeme Pitkethly instructed reporters, warning of fears of a “confluence of occasions” in Europe with vitality costs and inflation rising and customers’ financial savings waning.

“Each the premium segments of the market and the worth segments of the market are literally rising fairly shortly, at an equal charge,” Pitkethly instructed journalists.

However inflation and the promise of austerity in some international locations has prompted a cost-of-living disaster that’s pushing some folks in the direction of cheaper different merchandise, equivalent to non-public label items made by retailers.

“The fundamental wants of our European customers are occupying the next share of wallets – issues like utilities, transportation and meals – and there tends to be reduce on discretionary non-food gadgets.”

Unilever makes greater than 400 manufacturers starting from Persil detergent to Ben & Jerry’s ice cream.

In China, Unilever’s third greatest market that has been doubling down on Covid-19 lockdowns, gross sales grew by 1%.

“The China quantity, 1%, was actually a aggressive efficiency in a Chinese language market that’s nonetheless fairly subdued by continued lockdowns in China,” Pitkethly stated, including that confidence in China is decrease relative to historic norms and that Unilever was not as capable of enhance costs within the nation.

Unilever stated it now expects underlying gross sales progress for the total yr 2022 to be above 8%. In July, the corporate stated it anticipated to beat its earlier forecast of 4.5% to six.5%.

“As we have been seeing with different names within the wider trade, elevating costs and preserving volumes ticking greater is starting to develop into a mammoth problem,” Matt Britzman, fairness analyst at Hargreaves Lansdown, stated. “The 1.6% drop in volumes over Q3 is not all that unhealthy.”

— CNBC’s Hannah Ward-Glenton contributed to this report