21st Jan 2014 11:48
LONDON (Alliance News) - Shares in Unilever PLC were trading higher Tuesday morning, after the consumer goods giant reported a drop in revenues in the fourth quarter as expected, but beat analysts expectations for underlying sales growth, margin improvements, and core earnings per share, for both the fourth quarter and the financial year as a whole.
For the fourth quarter, Unilever reported total revenues of EUR11.8 billion, in line with analysts' consensus, and driven by its personal-care division, which more than offset softness in its food division and its under-invested Spreads business. It reported underlying sales growth of 4.1%, with volume up 2.7% and pricing up 1.4%.
Chief Executive Officer Paul Polman said looking forward, he still expects ongoing volatility in the external environment, and told analysts in call after the full-year results were released, that he doesn't see the competitive pressures easing up in 2014.
"We are focusing on core operating margin improvement, and we need to re-invest in our food business. We expect food and refreshments to pick up," Polman told analysts.
In 2013, the group's food business saw underlying volumes decline by 0.6%, and its refreshment division decline by 1.8%. While its food business managed to maintain a 20 basis point improvement in its core operating margin for the year, the refreshment division posted a 20 basis point decline.
Growth in its personal care division in the fourth quarter was driven by strong performances from brands like Dove, Clear, and TRESemmé hair products.
Unilever reported a pretax profit of EUR7.11 billion for the financial year ended December 31 2013, up 9% at current rates and 16% at constant rates from EUR6.53 billion the prior year.
Operating profit for the year came in at EUR7.51 billion, up 8% at current foreign-exchange rates and 15% at constant currencies, when compared with EUR7.0 billion a year earlier.
For the full-year, the maker of brands from Dove soap to Ben & Jerry's ice cream said revenues fell by 3% to EUR49.8 billion, hit by a slowdown in emerging markets and currency headwinds, as foreign-exchange rates went against it during the year.
"Developed markets remained weak with little sign of any overall improvement despite the more positive macro-economic indicators in recent months," the company said in a statement.
Unilever reported underlying sales growth of 4.3%, with volume up 2.5% and prices up 1.8%. Despite a slowdown in emerging markets, the company said that emerging markets underlying sales growth was 8.7%, with volume up 4.8%.
"Emerging markets used to grow more than 6% to 7%, but now it's growing at 4% to 5%, we just have to deal with that," Polman told analysts in a call.
Polman highlighted that although markets in Europe remain flat, it has begun to see early signs of stabilisation in southern Europe, although at the moment this is being offset by slowing growth in northern Europe.
The group said that the sales performance in Europe, whilst negative, was competitive. It said declines in spreads weighed on its performance in Germany and the Netherlands, but the UK delivered the twenty fifth successive quarter of growth.
Latin America finished the year strongly, with double digit underlying sales growth in the fourth quarter, boosted by volume growth. The group said that North America declined in weak markets mainly due to lower volumes in spreads and ice cream, but personal care continued to grow ahead of the market, building on a high comparator in the same period in 2012.
Unilever said that growth improved in the final quarter, with a step up in growth from other major markets like in Russia, Turkey, China and Indonesia. However, it said that growth in other countries such as Vietnam, Thailand and South Africa remained below historical run rates as a result of the weaker markets.
Cost cutting during the year and product innovation protected group margins, it said, despite the decline in total revenues, with core operating margin for the year up 40 basis points at 14.1%, driven by gross margin up 110 basis points. The combination of product innovation and costs is something the group is calling "maxing the mix."
In Europe for example, its full-year core operating margin was up 70 basis points, driven by higher gross margin and lower overheads largely due to the group's restructuring activities.
Unilever said core earnings per share for the year rose by 3% to EUR1.58 per share. Analysts were expecting flat core earnings per share of EUR1.52 a share. It also declared a quarterly dividend of EUR0.269 per share.
Unilever shares were amongst the biggest gainers on the FTSE 100 throughout Tuesday morning, trading 3.7% higher at 2,526.65 pence per share.
By Rowena Harris-Doughty; [email protected]; @rharrisdoughty
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