Neville Prior

Unilever Sales Beat Estimates

Neville Prior  25 October 2012 01:36:54 PM
Unilever, the world’s second-biggest consumer-goods company, reported third-quarter revenue growth that beat estimates and industry peers as consumers in emerging markets such as Brazil bought more personal-care products. So-called underlying sales increased 5.9 percent from a year earlier, the London- and Rotterdam-based maker of Axe body sprays said today.

The maker of Magnum ice cream has accelerated the rollout of shampoos and deodorants to emerging markets such as Indonesia and China to offset slowing growth in developed markets, where higher price tags have deterred consumers. Revenue in emerging markets rose 12 percent and now represents 55 percent of total sales. This contrasts with competitors Danone and Nestle SA, which last week reported growth that trailed expectations.

“This was Unilever’s opportunity to show its strength and reliability, and we believe that this is what it has done,” Andrew Wood, an analyst at Sanford C. Bernstein, said in a research note. “The most important and impressive performance was volume growth, which was ahead of our estimate and also ahead of Nestle and Danone.

Chief Executive Officer Paul Polman hailed the company’s “consistent performance,” which he said was achieved in spite of a “continued high level of competitive intensity, depressed economies and increasing global imbalances and uncertainty.” The CEO cautioned that the “environment will remain challenging.” Still, Unilever repeated its goal of a modest improvement in core operating margin this year. Underlying sales rose 8 percent in the personal-care segment, Unilever’s most profitable unit, fueled by growth of Tresemme hair products in Brazil and the introduction of Dove Men+Care in that country. Revenue increased 11 percent in the home-care unit, boosted by the entry of Omo fast-stain removal in more than 20 markets. Sales of food like Hellmann’s mayonnaise fell 0.4 percent, a decline over previous quarters, as competitors cut prices of spreads in Europe. Unilever said it has “taken action” to bring margarine prices in line with other brands.

Sales in Latin America grew 14 percent, fueled by Brazil -- Unilever’s biggest market in the region -- along with Argentina and Chile. In Asia, Africa and the Middle East, sales rose 11 percent, helped by Vietnam, Pakistan, India and Indonesia. Results in Africa were “mixed” because of “difficult economic situations” in Nigeria, the company said.

In Europe, sales rose 0.9 percent, an improvement over the 2.2 percent decline in the second quarter. Unilever has offered lower-priced products in Greece to meet the needs of cash- strapped consumers, while its business in Spain has “stabilized,” Chief Financial Officer Jean-Marc Huet said on a conference call. Last week, Danone said declines in Spain and Greece caused the weakest growth in sales of dairy products in more than three years. “Things are not getting better,” Huet said on the call. “We are not economists, but it’s clear to everyone in developed markets, things are not good. It’s also increasingly clear that there is an impact on emerging markets.”

Total sales in the third quarter advanced 10 percent to 13.4 billion euros ($17.4 billion), Unilever said. Underlying sales exclude acquisitions, disposals and currency fluctuations. “This represents another good quarter for Unilever in what was a demanding period,” Graham Jones, an analyst at Panmure Gordon, said in a note. “Unilever’s sales provide further evidence of a company on the up.”
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