Source: Getty Im,ages

Unilever Finds Growth More Elusive as Sales Meet Estimates

  • Currency fluctuations shave 7 percent off quarterly revenue
  • Pricing environment is `very, very mixed,' says finance chief

Unilever reported first-quarter sales growth in line with estimates as the consumer-goods maker grappled with lower prices and ebbing demand for its products around the globe.

Underlying sales increased 4.7 percent, Unilever said in a statement Thursday, compared with the 4.6 percent analyst estimate. Growth slowed from 4.9 percent in the fourth quarter, as the maker of Dove soaps and Axe body sprays struggled with weaker volumes and a deflationary environment that’s made it hard to raise prices.

“What we’ve got is a very, very mixed pricing environment around the world; it’s very important to focus in these times on volume and not price,” Chief Financial Officer Graeme Pitkethly said by phone. Europe is highly competitive due to heavy discounting from rivals and prices are lower than the historical averages in Asia, he said. Pricing increased 2 percent in the quarter, below the 2.4 percent analyst estimate.

Unilever and rivals such as Nestle SA are being hurt by deflation in Europe and North America for products such as margarines, beverages and soup mixes. To mitigate this, Chief Executive Officer Paul Polman is pushing out new, higher-margin deodorants, detergents and shampoos. He’s also appointed a new leader to reinvigorate the struggling spreads business, whose sales continued their multi-year decline in the quarter.

Currency volatility in emerging markets also hasn’t helped, as consumer spending power in countries like Brazil and South Africa has been crimped by local currencies declining against the euro. Unilever generates about 58 percent of sales from developing regions, and foreign-exchange fluctuations shaved 7.1 percent off Unilever’s revenue, which declined 2 percent to 12.5 billion euros ($14.1 billion), missing estimates.

“Currencies continue to be the clear negative factor, having an even more negative impact than anticipated so far,” analysts at Degroof Petercam said in a note. Pitkethly said he’s started to see currencies devalue in Asia, especially in economies that are dependent on China, which is experiencing its worst economic slowdown in a quarter century.

Unilever shares fell 0.6 percent at 11:28 a.m. in Amsterdam, and were little changed in London. Nestle gained 2 percent in Zurich.

Underlying sales exclude acquisitions, divestments, and currency fluctuations.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE