20th Jan 2015 11:02
LONDON (Alliance News) - Anglo-Dutch consumer goods giant Unilever PLC Tuesday reported a higher 2014 profit as it managed to offset a currency hit with price rises and cost cutting, but its shares fell as its fourth quarter sales growth missed analysts' expectations and it gave a cautious outlook for 2015.
Unilever, the maker of consumer products including Lipton tea and Vaseline beauty products, said net profit rose 5% to EUR5.52 billion in 2014, as it grew volumes, raised prices, and introduced new product innovations that it charged more for. It also continued to cut overheads in its personal care and foods units.
It reported a pretax profit of EUR7.98 billion for 2014, up 7% at current exchange rates from EUR7.11 billion in 2013, even though revenue declined by 2.7% to EUR48.4 billion from EUR49.8 billion, hit by adverse currency movements. If exchange rates had stayed the same, Unilever said revenue for the year would have risen by 2%.
Its underlying sales growth was 2.9%, buoyed by volume increases of 1% and price increases of 1.9%.
Unilever reported underlying sales growth of 2.1% for the fourth quarter of the year, short of analyst expectations for 2.7% growth, as it was hit by slowing growth in emerging markets, particularly China. Overall volume in the quarter fell 0.4%, although it also raised prices by 2.5%.
"Growth was weak in emerging markets as economic pressures impacted consumer demand. Developed markets were flat, with a modest pick-up in North America partly offsetting market contraction in Europe. Globally, our markets grew by around 2.5% with flat volumes," the group said.
The weak fourth quarter came after the maker of Dove beauty products and Ben & Jerry's ice creams also missed expectations with weaker-than-expected third quarter sales growth. In October, Unilever blamed slowing emerging markets and volume and price declines in Europe for that miss. It said spreads and ice cream were the key culprits behind weaker trading in China, overshadowing some better trading news in North America.
Just six weeks later, the group announced that it would be spinning-off its struggling spreads business later this year. The spreads business, which includes the Flora and Bertolli brands, has been dragging down growth elsewhere in the group, such as in home care.
Unilever said Tuesday that in the fourth quarter, volume remained weak, while trade de-stocking in China led to a sales decline of around 20%.
"This particularly impacted Personal Care and Home Care. In many regions, competitive intensity remains high in all categories, and notably in Personal Care and Home Care," the group said, highlighting weakness in China, Thailand, Africa, and its weakest region Europe.
Unilever also said it expects similar market conditions and competitive pressure in 2015.
"We do not plan on a significant improvement in market conditions in 2015. Against this background, we expect our full-year performance to be similar to 2014 with the first quarter being softer but growth improving during the year. We remain focused on competitive, profitable, consistent and responsible growth," said Chief Executive Paul Polman in a statement.
Unilever's core operating margin improved by 40 basis points in 2014 to 14.5% at current exchange rates due to the overhead cost reductions, increased pricing and product innovation, although its gross margin declined by 20 basis points to 41.4% due to currency-related increases in emerging markets.
"In 2014 we grew ahead of our markets, both in volume and value. With weaker consumer demand, underlying sales growth in emerging markets slowed to 5.7% whilst developed markets declined by 0.8%. Home Care, Personal Care and Refreshment all grew but Foods was adversely impacted by spreads," the group said.
Unilever said it will pay in March a quarterly dividend of EUR0.285 per share, which compares to EUR0.269 the year before.
Unilever shares were down 1.7% at 2,684.00 pence mid-morning Tuesday, one of the worst performing stocks in the FTSE 100 index.
By Rowena Harris-Doughty; [email protected]; @rharrisdoughty
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