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February 2, 2012

UK: Unilever defends food performance after Q4 volume slide

Unilever CEO Paul Polman has defended the performance of the consumer goods giant's food business after the recent decline in the division's sales volumes accelerated in the last three months of 2011.

By Dean Best

Unilever CEO Paul Polman has defended the performance of the consumer goods giant’s food business after the recent decline in the division’s sales volumes accelerated in the last three months of 2011.

The Anglo-Dutch group today (2 February) reported a 1% increase in annual profits on the back of a 5% rise in turnover, which was boosted by its non-food divisions.

However, underlying volumes from Unilever’s foods division fell 3.9% in the fourth quarter of the year, leading to a 1.2% decrease for the whole of 2011. Sales from the unit were up 4.9% but that was due to the impact of price increases.

Volumes from Unilever’s refreshment unit – which includes ice cream – fell 3% in the last three months of the year. Over the year as a whole, refreshment volumes were up 1.4% leading to a 4.9% increase in underlying sales.

Unilever posted net profit of EUR4.62bn (US$6.07bn) and operating profit of EUR6.43bn for 2011, which were both up 1% on 2010.

Unilever’s margins fell 0.1% in 2011 thanks to its home care business, where input costs led margins to drop 1.7%.

Nevertheless, Polman said Unilever’s non-food businesses and its operations in developing markets, which its grocery brands account for a minority of sales, had driven the company’s performance in 2011. However, he insisted Unilever’s food businesses had held their ground in a number of markets.

“Our overall performance was driven by outstanding growth in emerging markets and the home care and personal care categories,” Polman said. “In foods, whilst price increases have impacted volumes, we have grown in line with our markets and gained share in many of our key businesses.”

Earnings per share increased 4% to EUR1.41, compared to analysts’ consensus expectations of EUR1.46. Unilever’s shares were down 3.74% at GBP20.07 at 08:50 this morning. 

Sanford Bernstein analyst Andrew Wood said investors might be “slightly disappointed” with Unilever’s results. However, he said the numbers compared well to its competitors.

“We expect investors might be slightly disappointed with these results…but we consider them to be strong and resilient in a very tough environment, which is what investors should now expect from Unilever,” Wood said. “Plus they were much better than some highly-regarded peers, and the differences to expectations are marginal, which is far from the huge Unilever misses of the past.”

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