Jan. 21 (Bloomberg) -- Unilever, the maker of Magnum ice cream and TRESemme shampoo, said decelerating growth in emerging markets and stagnant demand in developed countries will continue after quarterly sales provided some respite for investors.
First-quarter underlying sales will rise at the “low-end” of 3 percent to 5 percent, Chief Financial Officer Jean-Marc Huet told analysts today, as economic uncertainty weighs on demand for soaps and spreads. That follows the fourth-quarter’s 4.1 percent growth, which beat analyst estimates.
Unilever is weathering a slowdown in emerging markets such as India and China, where it gets about 57 percent of revenue. At the same time, it is contending with declining sales in North America and Europe, which the company said are showing few signs of improvement as consumers remain wary.
“Uncertainty for 2014 is higher and market growth is slowing,” Marco Gulpers, an analyst at ING Bank, said in an e-mail. Still, today’s results “come as a relief to the market.”
Unilever shares rose as much as 4.9 percent, the most since July 2012, and traded at 29.9 euros at 11:52 a.m. in Amsterdam. Before today, the stock had fallen 1.5 percent this year, among the five worst performers in the Dutch benchmark AEX Index.
The fourth quarter benefited from an improved performance in emerging markets, where growth had been slipping.
Sales in those regions rose 8.4 percent, better than the third-quarter’s 5.9 percent gain. That outcome was “pleasing,” despite slower markets and depreciating currencies, Huet said.
Indonesia, Brazil and India, which combined make up 18 percent of Unilever’s sales, have each seen their currencies fall more than 10 percent versus the euro over the past year, according to data compiled by Bloomberg.
“There is a weakness in discretionary spending, but non-discretionary categories like skin cleansing and laundry are heating up,” Huet said by phone. Fourth-quarter sales rose more than 10 percent in China and by 12 percent in Latin America.
“Emerging markets bounced back in the fourth quarter -- few expected that,” Warren Ackerman, an analyst at Societe Generale in London, said in a note. “This is a decent performance given that emerging markets continue to slow and developed markets are weak. We always felt that one bad quarter didn’t make a bad company.”
The 4.1 percent growth in underlying sales exceeded the 3.9 percent median estimate of 14 analysts surveyed by Bloomberg. Underlying revenue in developed markets fell 1.7 percent.
Personal-care was the best-performing product category in the quarter, with underlying sales growth of 7.3 percent. TRESemme benefited from the introduction of new shampoos in countries such as India and Indonesia, the company said.
Sales of home-care products such as laundry detergents and fabric conditioners rose 6.5 percent, outpacing growth of 1 percent in foods. The underperforming foods division “is now ready to grow again,” Chief Executive Officer Paul Polman said on a conference call, helped by new products like Rama spreads with butter, which “have gotten off to a great start.”
Revenue in the refreshments division fell 1.2 percent as the company discontinued some less-profitable ice-cream products in North America. More broadly, the company wants to shed 30 percent of its product portfolio this year.
The so-called core operating profit margin widened 0.4 percentage point to 14.1 percent, helped by new products that tend to be more profitable, including Dove Repair Expertise skin cream and concentrated laundry detergents. Analysts polled by Bloomberg had estimated a 14 percent margin.
Unilever has said it is looking to generate an additional 500 million euros ($676 million) of cost savings in 2014 to help it step up brand investment in more difficult markets.
Net income at the maker of Lipton tea and Knorr soups increased 11 percent to 4.84 billion euros ($6.55 billion) in 2013, beating the 4.72 billion-euro average estimate of 14 analysts compiled by Bloomberg.
Free cash flow in the year fell 11 percent to 3.89 billion euros. Huet said he’d “like to do more deals” in 2014, with a focus on smaller “bolt-on” acquisitions, aided by low rates of financing.
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