Bloomberg News

Unilever Volume Rises at Slowest Pace in Almost Three Years

February 03, 2012

(Updates with closing share price.)

Feb. 2 (Bloomberg) -- Unilever, the world’s second-largest consumer-goods maker, reported the weakest volume growth in almost three years as higher prices deterred consumers, and said it expects “gloomy” economic conditions to persist this year.

The quantity of goods sold gained 0.1 percent in the fourth quarter, the London- and Rotterdam-based company said today, the least since the first quarter of 2009. That was below the 1.2 percent average estimate of 28 analysts compiled by the maker of Dove soap, Knorr soup and Magnum ice cream.

“Unilever have missed this morning on a closely watched metric that is at the heart of the company’s aspirations,” Martin Deboo, an analyst at Investec in London, said in a note.

Unilever dropped the most in about 18 months in Amsterdam trading. Volume growth has been affected by price increases made necessary by soaring costs of commodities such as edible oils, which Unilever and competitors such as Procter & Gamble Co. and Nestle SA say should dissipate this year. Prices increased 6.5 percent in the quarter, the company said, the steepest rise since the first quarter of 2009.

The shares fell 4.3 percent to 24.78 euros as of the 5:30 p.m. close, the steepest intraday drop since Aug. 5, 2010.

“We expect investors might be slightly disappointed with these results,” Andrew Wood, an analyst at Sanford Bernstein, said in a note to clients. Still, “broadly flat volume is a fairly good performance given the elevated pricing.”

Unilever said volume was hurt by a software system installation in North America that shifted sales into the third quarter. Excluding that, growth would have been 1 percent.

Higher Prices

Price increases fueled a 6.6 percent increase in so-called underlying sales, which exclude acquisitions and currency fluctuations, in the three months through December. That missed the 6.8 percent average estimate of 28 analysts.

For all of last year, net income was little changed at 4.25 billion euros ($5.6 billion), less than the 4.34 billion-euro average estimate of 26 analysts compiled by Bloomberg.

“We cannot recollect a more challenging year as 2011,” Chief Financial Officer Jean-Marc Huet said in a teleconference with reporters today. “The global economy is still in poor shape, and we expect it to continue.”

Underlying sales for the year rose 6.5 percent, led by growth in the home-care and personal-care categories, Unilever said. Personal-care brands such as Dove and Axe now account for more than one-third of total sales, Huet said.

Commodity Costs

The underlying operating profit margin narrowed by 0.1 percentage point as increased raw-material prices were mostly offset by reduced costs of running the business. The company expects underlying margins to widen “modestly” in 2012, Polman said in a separate teleconference with analysts.

Unilever forecasts commodity costs will rise by about 5 percent this year, down from about 15 percent in 2011, the CEO said. Raw-material costs increased 2.4 billion euros in 2011, one-third of which came from increased prices for edible oils.

“We do not expect to take much new pricing this year,” Huet said on the newswire call. “We need to take account of the fragility of the consumer.”

Full-year revenue rose 5 percent to 46.5 billion euros. Unilever has a goal to double sales and forecasts that more than 80 percent of the increase will come from emerging markets, which now make up 54 percent of the total.

Underlying sales growth was led by volume gains in Asia and Africa, particularly in South Africa, Indonesia and Vietnam, Unilever said. Revenue at that unit increased 11 percent in the quarter, and rose 5.3 percent in the Americas, fueled by Argentina and Mexico, offset by slower sales growth in Brazil.

Western Europe

“Even in emerging markets, we see some signs of softening in some of our more important markets,” Huet said. Polman said he was “not satisfied” with the hair care business in Russia.

Underlying sales in western Europe rose 0.9 percent, driven entirely by higher prices as volume fell 2.5 percent.

“The environment in Europe will get tougher before it gets easier,” Polman said in the teleconference.

Unilever spent 6.2 billion euros on advertising and promotions last year, an increase of about 150 million euros. Expenditure will be higher again this year, Huet said, with a focus on digital ads that have better returns on investment. He declined to give a precise amount.

--Editors: Paul Jarvis, David Risser

To contact the reporter on this story: Matthew Boyle in London at

To contact the editor responsible for this story: Sara Marley at

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