Unilever Reports Good Progress in Slower Markets
24 Oct 2013 --- Unilever has released its results for the third quarter and first nine months of the year. Nine months highlights were: • Underlying sales growth 4.4% with emerging markets up 8.8%
• Underlying volume growth 2.4% ahead of our markets and pricing up 1.9%
• Turnover decreased (2.0)% to €38.0 billion including a negative currency impact of (5.0)%
Third quarter highlights
• Underlying sales growth 3.2% with emerging markets up 5.9%
• Underlying volume growth 1.9% and pricing up 1.3%
• Turnover decreased (6.5)% to €12.5 billion including a negative currency impact of (8.5)%
• Acquisitions & Disposals reduced turnover by (1.0)% reflecting the disposal of non-core businesses
Growth continued to slow in emerging markets as macro-economic headwinds and the consequences of currency weakness affected consumer demand across a significant number of the emerging countries. The developed markets have not recovered and remain flat to down, with little sign of any improvement so far. In this context we continue to see high levels of competition in many markets and promotional intensity remains high.
Against this background we continued to grow ahead of our markets, albeit at a slower rate, and maintained a good balance between volume and price. Emerging markets growth slowed to 5.9% whilst developed markets showed a progressive improvement but still declined in the quarter by (0.3)%. Volume growth was positive in both emerging and developed markets in the quarter but price growth moderated as we lapped prior year increases and took action to ensure that our brands remain competitive in key markets.
Commenting on the results, CEO Paul Polman said: “Underlying sales growth of 4.4% over the first nine months is ahead of our markets. Emerging markets continue to be the main driver of our growth and, despite the current slow-down, they remain a significant growth opportunity which the company is well-placed to capitalise on. We have not yet seen an improvement in market conditions in North America or Europe.
“We will continue to accelerate our innovations, backed with competitive support, to build long term growth and value. We expect to report a sequential quarterly improvement in underlying sales growth in the fourth quarter driven by a strong innovation pipeline. 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.”
Foods performance continued to be held back by spreads which, despite showing a progressive improvement, remained negative reflecting weakness in the market and lower pricing in a benign commodity cost environment. The company is taking action to enhance the naturalness of its products. In the United Kingdom Unilever relaunched Flora with new advertising emphasising the goodness of sunflower whilst in Germany the company launched Rama with Butter. In North America the company launched ‘Simply Delicious’ clean label variants of Country Crock and I Can’t Believe It’s Not Butter with no artifical colours or preservatives.
Dressings continued to grow, helped by the rollout of the new innovative Hellmann’s squeezy packaging in Brazil. Knorr cooking products continued to grow well, driven by increased penetration of the core range and the success of jelly bouillon and baking bags.
Refreshment was disappointing due to a number of unrelated factors. In ice cream, sales benefited from good summer weather in northern Europe but this was offset by weaker performance in southern Europe and particularly in Italy, the biggest European ice cream business. North America was impacted by the company’s decision to withdraw from some low margin products. Despite these headwinds, key innovations such as the launch of Fruttare in North America, the global relaunch of Cornetto and Magnum ‘5 Kisses’ continued to do well.
Tea growth included the launch of Lipton single serve K-cups in the United States and the extension of the Lipton Yellow Label core range in Russia, adding new flavours to the range of better tasting Lipton teas. South Asia continues to see rapid growth with a good performance from the Brooke Bond brand. Sales of Ades soy drinks were impacted by a product recall in Brazil. The underlying issue has been resolved and action is now underway to re-build the growth momentum of the brand.
