Unilever Releases Third Quarter 2010 Results
Underlying volume growth 4.8%. Underlying sales growth 3.6% with underlying price growth improving to (1.2)%; in-quarter pricing was flat for the third successive quarter.
Nov 4 2010 --- The third quarter results reflect solid progress, particularly given the combined headwinds of slow economic growth, weak consumer confidence in many markets and higher commodity costs. Whilst market growth continues to be sluggish in the developed economies, the emerging markets continue to grow strongly albeit more slowly than the levels seen earlier in the year. Volume share improved in an environment of continuing high levels of competitive activity. In-quarter pricing was flat for the third successive quarter and gross margin declined in the face of higher input costs although this was partially mitigated by our strong cost savings initiatives. Advertising & promotions spend was flat at constant exchange rates against the high comparators in the prior year quarter. Indirects were significantly lower in the quarter, reflecting the benefits of our savings programmes and phasing effects, some of which will reverse in the fourth quarter.
The transformation of the organisation continues with the establishment of the global supply chain organisation and the announcement of the proposed acquisition of Alberto Culver. We expect to complete the acquisition of Sara Lee’s personal care business during the fourth quarter of 2010.
Chief Executive Officer:
“We have delivered another quarter of solid progress driven by our emerging markets business which again reported high levels of volume growth. This reflects the strength of our position in these markets where competitive activity is intense. Overall volume growth remained strong on the back of stronger innovations and the extension of our brands into new markets. In-quarter pricing was flat with increased prices in some categories offset by others where downward adjustments were needed to stay competitive. Over the course of the first nine months we have significantly increased the investment in our brands and are spending in line with the timing of our in-market activities.
These results confirm again that our strategy to focus on the consumer and to accelerate growth is working. Our priorities remain to drive profitable volume growth and strong cash flow along with steady and sustainable improvement in underlying operating margin for the year as a whole. We continue to expect underlying price growth to turn positive towards the end of the year.”The transformation of the organisation continues with the establishment of the global supply chain organisation and the announcement of the proposed acquisition of Alberto Culver. We expect to complete the acquisition of Sara Lee’s personal care business during the fourth quarter of 2010.
Asia Africa CEE
The region grew ahead of the market and volume shares continue to improve, with particularly strong performances in South East Asia, Saudi Arabia, South Africa and India where the actions taken to respond to competitive pressure resulted in an improved performance across the portfolio. Turkey also performed strongly, notably in ice cream.
Asia and Africa continue to be the engine of growth in the region with double digit volume growth in the year-todate. CEE markets remain stagnant but here too we continue to gain volume share. Underlying operating margin was down, reflecting lower gross margins in the quarter and the continuing investment behind our brands. The rollout of the regional IT platform progressed well, with the new platform deployed and running in China, Hong Kong, Taiwan, Australia and New Zealand.
The Americas
Volume growth in North America was over 2%, a solid performance given the difficult market conditions. In the US, our performance in deodorants, hair, ice cream and frozen ready meals was particularly encouraging with good performance from recent innovations. We have gained volume share within the margarine segment but our share in spreads was weaker as a consequence of margarine losing share to butter.
In the quarter, Latin American markets grew strongly and we gained volume share whilst delivering underlying sales growth at around 7% with a positive contribution from pricing. The performance in Mexico was strong and broad-based across the portfolio. Year-to-date Brazil remains the key driver of volume growth in Latin America with pricing now progressively improving.
Western Europe
Volume growth in Western Europe was positive in the quarter and we continue to gain volume share. Underlying price growth in the third quarter improved from the previous quarter but was still negative year-on-year due to the high level of promotional intensity in many of our markets. Conditions in Greece, Spain and Ireland remain difficult.
Our ice cream business performed well, contributing strong underlying sales growth and share gains on the back of a successful innovation programme. Deodorants also continued to progress well.
Operating margin was again positive, primarily reflecting the benefits of the cost saving programmes.
Q3 growth was solid across the portfolio with strong innovation led growth in ice cream and deodorants, partially offset by a decline in spreads. Innovation impact continues to increase as we successfully launch bigger and better innovations, more quickly across more markets. Magnum Gold?! has now been successfully launched in 29 countries and Dove Men+Care is now in 30 countries. In hair, Dove Damage Therapy has been launched successfully and is being extended into more markets. Beyond new innovations, we are increasingly expanding our powerful brands into new markets. The expansion of Lifebuoy into new markets is driving double digit global growth of the brand and the expansion of Cif into new markets in Asia has also delivered strong growth.
Savoury, Dressings and Spreads
Savoury growth continued to improve with volumes holding up well as price became positive. PF Chang restaurant quality frozen meals are driving North American growth and the Knorr cook-in bags are performing well in CEE, Turkey and Australasia. The Knorr Jelly bouillon is growing on the back of distribution extension in China and the Knorr Soupy noodles range is making good progress in India.
Although the spreads business remained weak, the Pro-activ brand is improving on the back of a new campaign which emphasises the core heart health benefits. Dressings benefitted from a strong quarter in the Americas. The free range egg/healthy ingredients campaign is doing well in all regions.
Ice Cream and Beverages
Strong ice cream growth was very encouraging, especially given the unfavourable summer weather in Europe. This reflects disciplined in-market execution and a strong innovation programme. Improved sales and market shares in the United States were driven by Klondike, Ben & Jerry’s and new product launches. Fruttare goes from strengthto- strength in Latin America and we have also launched successfully in South East Asia. The launch of Magnum Mini helped drive strong growth in Turkey. Inmarko in Russia innovated across the price points and progressed well.
Tea growth remains healthy but slowed from previous quarters. There were good performances in the UK and India, both improving shares. The relaunch of Lipton Milk Tea in China has been received positively. Ades soy beverages are achieving strong double digit growth in Latin America, reflected in strengthening market shares.
Personal Care
Deodorants continue to deliver strong results and global shares continued to improve. Dove Men+Care has been launched across Europe with encouraging results. Rexona continues to make good progress helped by the success of Rexona Clinical and the relaunches in Japan and India. Sustained growth in Hair reflected a strong performance in both North and Latin America and the success of the Dove Damage Therapy launch. The Lux Hair relaunch in Japan and China has been received well and shows strong momentum.
Skin reflects the continuing success of Dove Nutrium Moisture and Dove Men+Care. The rollout of Lifebuoy continues to do well and is now in 33 markets. Vaseline Sheer Infusion has not met expectations but the Vaseline brand is growing well in emerging markets. In oral we have now rolled out Pepsodent anti-cavity to 25 countries and are supporting with the successful ‘brush day and night’ campaign. Signal White Now continues to do well and is now in 30 markets with multiple launches completed in Q3 2010.
Home Care and other
Laundry performance continues to improve with underlying price less negative and volumes holding up well despite sustained high levels of competitive intensity. The relaunches of Wheel and Rin have helped deliver market share improvements in India and the rollout of liquids continues to drive share gains across a number of markets.
We have continued the rollout of the Surf brand into new markets. The good performance in household cleaning reflects a combination of superior products, strong advertising and relevant innovations. Cif has achieved market leadership in multi-purpose and kitchen cleaners in Vietnam only 5 months after launch. Domestos continues to do well in Italy and growth in India reflects strength across the household cleaning portfolio.
