UK/NETHERLANDS: Unilever beats forecasts, "weak" food showing

By Katy Askew | 23 January 2013

Underlying sales rise 6.9%
Net profit up 7%
"Weak" food Q4

Unilever beats, food remains weak

Unilever has booked an expectation-beating increase in underlying sales as growth of its personal care division offset a "weak" food performance.

The Anglo-Dutch consumer goods giant said today (23 January) that underlying sales in the period rose by 6.9% to EUR51.3bn (US$68.4bn), beating consensus forecasts of 6.5%. Growth was driven by an 11.4% sales gain in emerging markets, which now account for 55% of group sales.

Unilever's bottom line also benefited from an easing of commodity prices for its consumer goods business, with core operating margin rising to 13.8%. However, in food, Unilever partially offset rising commodity costs by lowering its advertising and promotional spend. Fourth-quarter food operating margins were flat while gross margins were down, Unilever said.

Net profit for the fiscal year climbed 7% to EUR4.9bn, while operating profit rose 9% to EUR7bn.

"These results have been achieved in tough economic conditions, with volatile commodity costs and in an intensely competitive environment," said chief executive Paul Polman.

However, Unilever's food division has faced a number of challenges, including "difficult markets" and the company said that fourth-quarter growth was "weak". Unilever revealed its spreads business saw sales drop on pricing and the group's core savoury business was "sluggish", despite efforts to revitalise the business by focusing on NPD. In contrast, dressings "continued to perform well" despite an increase in competitive behaviour, the group added.

Unilever shares were up 2.82% in morning trade.

Show the press release

STRONG, BROAD-BASED GROWTH IN 2012

Full year highlights

·    Turnover increased by 10.5% to €51.3 billion with a positive impact from foreign exchange of 2.2% and acquisitions net of disposals of 1.1%.

·    Underlying sales growth 6.9% comprising volume growth of 3.4% and price growth of 3.3%.

·    Emerging markets underlying sales growth 11.4% now representing 55% of turnover.

·    Core operating margin up 30bps to 13.8%; gross margin up 10bps, advertising and promotions up €470 million at constant exchange rates.

·    Core earnings per share increased by 11% to €1.57; free cash flow of €4.3 billion.

Fourth quarter highlights

·    Underlying sales growth 7.8% with volume growth of 4.8% and price growth of 2.9%.

Paul Polman: Chief Executive Officer statement

"We continue to make good progress in transforming Unilever into a sustainable growth company. We have reported another quarter of good quality, profitable growth ahead of our markets. All categories and all geographies grew with a good overall balance between volume and price. Emerging markets again contributed double-digit growth helping us exceed €50 billion turnover, an important milestone in our journey to double the size of Unilever from €40 to €80 billion whilst reducing our environmental impact.

These results have been achieved in tough economic conditions, with volatile commodity costs and in an intensely competitive environment. They reflect the progress made in delivering bigger, better innovations and rolling them out faster, improving our execution in the market place and increased discipline driving savings in all areas of the business. We continued to invest behind our brands, again increasing advertising and promotions spend. I am pleased to report that Magnum and Sunsilk have joined the group of €1 billion brands in our portfolio, bringing the total to fourteen. This gives us confidence that Unilever is becoming fit to win. Importantly, we achieved these results whilst continuing to lay the foundations for the long term. The Unilever Sustainable Living Plan is becoming embedded across the business.

However there is no room for complacency: markets will remain challenging, with intense competition and volatile commodity costs. We remain focused on achieving another year of profitable volume growth ahead of our markets, steady and sustainable core operating margin improvement and strong cash flow."

Original source: Unilever

Sectors: Chilled foods, Condiments, dressings & sauces, Dairy, Emerging markets, Financials, Frozen, Ice cream

Companies: Unilever

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