Tough Start to 2017 Warns Unilever After Posting Lower Than Expected Results for End of 2016

26 Jan 2017 --- Unilever blames the “challenging markets” of Brazil and India for lower than expected financial results for the last quarter of 2016 where underlying sales rose 2.2 percent compared with the 2.8 percent that was anticipated.

Publishing its full financial results for 2016, the multinational says for the full year, sales growth was 3.7 percent, below the 3.9 percent analysts were expecting.

Sales increased by 4.3 percent at constant exchange rates while turnover, which is at current rates, declined 1.0 percent. Emerging markets underlying sales growth was 6.5 percent with price up 5.4 percent and volume up 1.1 percent.

Unilever says that market conditions were challenging throughout the year, particularly in the fourth quarter. In the markets in which the company operates volumes were flat in aggregate. 

In a number of countries volumes have been weak as consumers and retailers adjust to devaluation-led cost increases. The economic crisis in Brazil and removal of Rs.500 and Rs.1,000 notes from circulation in India presented significant additional headwinds for Unilever. 

Nevertheless CEO Paul Polman remains buoyant but stresses the challenges of tough market conditions will continue throughout the first part of 2017. 

“We have delivered another good all-round performance despite severe economic disruptions, particularly in India and Brazil, two of our largest markets. This further demonstrates the progress we have made in transforming Unilever into a more resilient business. We have again grown ahead of our markets, driven by strong innovations that support our category strategies,” he says. 

“At a time of unprecedented global change, ‘Connected 4 Growth’ – the next stage in our transformation – will make Unilever simpler, faster and more connected with our consumers and customers, and we are already starting to see positive results. We are also making further progress in reshaping our portfolio, adding businesses in fast-growing segments with the acquisitions of Dollar Shave Club, Blueair, Seventh Generation and Living Proof.”

Unilever’s food category showed a sustained return to growth with good performances in dressings, driven by the squeezy packs with easy-out technology and organic variants, and savoury, led by cooking products in emerging markets. 

Hellmann’s and Knorr both delivered another year of strong growth by successfully modernizing their ranges, with extensions into organic variants and with packaging that highlights the naturalness of their ingredients. 

Knorr’s digital campaign ‘Love at First Taste’ reached more than 100 million people. Sales in spreads declined, as modest growth in emerging markets was offset by the continued but slowing decline in developed markets.

Looking ahead, Polman adds: “Our priorities for 2017 continue to be volume growth ahead of our markets, a further increase in core operating margin and strong cash flow. The tough market conditions which made the end of the year particularly challenging are likely to continue in the first half of 2017. 

“Against this background, we expect a slow start with growth improving as the year progresses.”