Unilever Reports Slowest Quarterly Sales Growth in Two YearsMatthew Boyle
Unilever, the world’s second-biggest consumer-goods company, reported the slowest quarterly growth in two years as demand in Europe was held back by weaker consumer confidence and sales of ice cream and spreads faltered.
So-called underlying sales, which exclude acquisitions, disposals and currency fluctuations, rose 4.9 percent from a year earlier, the London- and Rotterdam-based maker of Dove soap said today. The average estimate of 12 analysts surveyed by Bloomberg was for a 5.5 percent gain. Units sold increased 2.2 percent, less than the 3 percent gain estimated by analysts.
Sales fell 3.1 percent in Europe, the steepest rate of decline in more than three years, as “difficult markets” and cold spring weather sent ice cream sales plunging by more than 10 percent, Chief Financial Officer Jean-Marc Huet said in an interview. Europe makes up about 25 percent of revenue.
“This is a disappointing start to the year, with weaker than expected progress in particular in Europe and in the spreads category globally,” Graham Jones, an analyst at Panmure Gordon, said today in a note to clients.
Unilever shares dropped as much as 3.5 percent in Amsterdam trading, the steepest intraday decline in more than a year. They were down 1.9 percent at 31.91 euros as of 10:09 a.m.
Unilever’s sales growth still topped that reported this month by Nestle SA, the world’s largest food maker, and Procter & Gamble Co., the world’s biggest consumer-product company. Nestle’s so-called organic sales growth was 4.3 percent in the first quarter, while P&G’s revenue on that basis rose 3 percent. All three trailed Danone, which posted a 5.6 percent gain.
Unilever’s food revenue fell 0.5 percent, hurt by a decline in its margarine business, which includes brands like Flora and Becel. Huet said the business “is taking longer than we would like” to turn around, as consumers opt for lower-priced butter.
“We can do a better job,” he said. “This is self-inflicted and we need to rectify it. It’s no quick-fix.”
Unilever has been pruning its food business to focus on faster-growing beauty products. The company sold its Skippy peanut butter brand earlier this year.
“Spreads was the real area of weakness, and we question whether it is getting to the stage when Unilever needs to start considering disposals in this persistently disappointing category,” Panmure Gordon’s Jones said.
First-quarter sales in North America rose 0.3 percent, Unilever said, a deceleration from previous quarters, with gains in personal-care offset by lower growth from food.
Sales in developing markets such as China and Indonesia rose 10 percent. The company has said they will account for more than 90 percent of its annual sales growth this decade.
“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,” Chief Executive Officer Paul Polman said in the statement.
Unilever is also seeking acquisitions, mainly of companies worth 1 billion euros to 2 billion euros.
Underlying sales rose 8.3 percent in the personal-care segment, the company’s largest business, fueled by deodorants, shampoos, and skin care products. Revenue rose 9.4 percent in the home-care unit during the quarter, helped by laundry detergents in emerging markets like Brazil and the Philippines.
Sales in the quarter advanced 0.2 percent to 12.2 billion euros. Analysts had estimated revenue of 12.5 billion euros.