21st Jul 2016 13:45
LONDON (Alliance News) - Unilever PLC on Thursday reported growth in profit in the first half of 2016, but sales fell due to negative movements in foreign exchange rates, and the consumer goods giant warned on tough market conditions for the remainder of the year.
Unilever said pretax profit in the first half grew by 0.8% to EUR3.64 billion from EUR3.61 billion a year before, but sales fell by 2.6% to EUR26.28 billion from EUR27.0 billion. The consensus estimate was for a 1.8% sales decline.
Unilever said consumer demand remained weak in the period with slowing volumes, but underlying sales were driven by market share gains across each of the four categories of Personal Care, Foods, Home Care and Refreshment. On a constant currency basis, sales rose by 5.4%, while underlying sales rose by 4.7%, just beating the consensus estimate of 4.4% growth.
Profit also was boosted by a rise in other income from non-current investment and associates.
By category, Personal Care volume improved across all sub-categories driven by product innovations. Deodorants performed strongly, particularly following the roll-out of Rexona Antibacterial, while good growth in hair products was supported by the re-launch of Sunsilk and the TRESemme Beauty-Full Volume range.
Growth in Foods was accelerated by a good performance in savoury and dressings, but spreads continued to decline as a result of market contraction in developed countries, Unilever said. Stand-out performers included Knorr in the savoury category and Hellman's in the dressings category.
Home Care, meanwhile, continued to deliver growth ahead of the market, Unilever said, driven by innovations in higher margin segments and the continued roll-out of Omo pre-treater and stain remover products. Fabric conditioners grew at double-digit rates helped by new variants of Comfort Intense, Unilever said, while bathroom cleaner Cif and Domestos toilet products also performed well.
Finally in Refreshment, ice cream continued to deliver good growth driven by "margin-accretive innovations" behind premium brands including Magnum, Carte D'Or and Ben & Jerry's, Unilever said.
By geographic region, Latin America delivered double-digit underlying sales growth, underpinned by pricing to recover higher input costs. Unilever said volume in Latin America was "only slightly down in markets faced with substantial currency devaluation, high inflation and lower consumer confidence".
In North America, improved growth was driven by a strong delivery of innovations in deodorants, dressings and ice cream, Unilever said, while hair product sales were down in "an intensely competitive" market, but the rate of decline in spreads slowed.
Underlying sales in Europe were flat as volume growth offset continued price deflation. Personal Care, Home Care and ice cream delivered good volume-driven growth, but a contraction of the margarine market impacted the Foods performance, particularly in the UK and France.
Unilever will pay a dividend of EUR0.3201 for the second quarter.
"We have been preparing ourselves for tougher market conditions in 2016 and do not see any sign of an improving global economy. Against this backdrop, we continue to drive agility and cost discipline, implementing the key initiatives announced at the end of last year: net revenue management, zero-based budgeting and 'Connected 4 Growth' which is the next stage in our organisational transformation. Our priorities continue to be volume-driven growth ahead of our markets, steady improvement in core operating margin and strong cash flow," Chief Executive Paul Polman said in a statement.
Analysts were mixed on Unilever's performance. Liberum said growth will be capped in the near-term due to "sluggish" emerging markets and a deflationary European consumer environment. But UBS said Unilever's performance was "clearly strong and should prove to be best in class versus peers in terms of organic growth and margin delivery", although it did note that figures benefited from "easier" comparatives.
Shares in Unilever were trading down 1.2% at 3,531.00 pence on Thursday afternoon.
By Karolina Kaminska; [email protected] @KarolinaAllNews
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