News Column

Unilever First Quarter Revenue Declines On Currency Hit, Emerging Market Slowdown

April 24, 2014

Rowena Harris-Doughty

LONDON (Alliance News)- Anglo-Dutch consumer goods giant Unilever PLC Thursday reported another drop in revenues in the first quarter, as currency movements and weakness in emerging markets continued to weigh on its performance.

Unilever, the maker of consumer products including Dove soaps and Ben & Jerry's ice cream, managed to report growth in sales and volumes helped by price increases, innovation and slight improvements in its food and refreshments businesses, however it said it faced slowing markets and a tough competitive environment in the first quarter.

The group also raised its quarterly dividend by 6% to EUR0.285.

In the past, Unilever was reporting double-digit growth in emerging markets on a regular basis, however as demand has slowed, so has sales and volume growth.

"Emerging markets are currently passing through a period of slower demand and economic volatility but our strategy remains unchanged," said Chief Executive Paul Polman in a statement.

The group reported a 6.3% fall in revenue for the first quarter to EUR11.40 billion, down from EUR12.16 billion a year earlier, a slightly larger decline than analysts had been expecting, which was for a 6% decline, on both a slowdown in emerging markets and weaknesses in developed markets. Unilever also said that currency movements wiped 8.9% of its revenue in the first quarter, as foreign-exchange rates continued to go against the firm during the period.

Unilever reported underlying sales growth of 3.6% for the period, driven by its personal care division and boosted by 6.6% growth in emerging markets. It reported 1.9% growth in underlying volumes, with pricing up 1.6%.

"We saw a continuation of the competitive performances in Home Care and Personal Care and a strong start to the year in Refreshment," said Polman.

The group has continued to invest in its brands, and has been pumping money into its under-invested Spread business, in hopes of improvement within the division.

"We are now gaining market share in margarines in Europe and North America in response to our investment in communicating the improved taste and naturalness of our brands," said Polman in a statement.

During the quarter, Unilever said that North America has a slow start to the year, compared with Europe which held up well. It said it saw continued strong growth from its home care division boosted by an increase in volumes and new product launches with its Small & Mighty liquid detergents and Skip multi-action capsules.

Unilever said it saw a robust performance in its personal care division, driven by innovation products like its new compressed aerosols, and again brands like Dove, Lux, and Vaseline.

Unilever blamed the timing of Easter for its decline in sales within its food division, as well as weak markets, particularly in regards to its Spreads business, as well as weak sales in dressings, which has been dragging on the group's performance as of late.

"Despite the successful launches of great-tasting products like Rama with Butter in Germany, the decline of the margarine market remained a drag on our spreads growth," the company said.

Within its refreshments division, Unilever said that strong growth in the quarter was driven by ice cream in Brazil and Australia, as well as a good start to the ice cream season in Europe.

Unilever said it said strong growth in Asia, particularly in China, Turkey and Indonesia, as well as improvement in Japan, whereas it said markets in Russia and South Africa remained weak.

It said that North America declined despite competitive growth from its personal care brands, compared with Latin America which delivered another quarter of strong growth, boosted by good volume growth and strong price growth.

"In Europe, broad-based growth in ice cream, personal care and home care was largely offset by a decline in foods. The key markets of the UK and Germany grew ahead of their respective markets. A return to growth in Greece and Spain underlines the improving conditions in southern Europe," the company said.

Unilever shares were down 1.56% Thursday morning at 2,592.7 pence per share.

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Source: Alliance News