Unilever boosts sales but forced to hold down prices

By Martinne Geller

Unilever, the Anglo-Dutch consumer goods giant, reported first-quarter sales figures that met expectations, helped mainly by increases in the volume of products sold, and maintained its full-year outlook.

The maker of Dove soap and Ben & Jerry’s ice cream also expressed confidence that shareholders will support its decision to change its corporate structure and have its main headquarters in the Netherlands.

Meanwhile, Procter & Gamble, the world’s largest consumer goods maker, narrowly beat quarterly earnings expectations, saying shrinking retailer inventories and higher commodities and transportation costs squeezed margins.

It also said it was buying Merck’s consumer health business for about €3.4bn, which includes vitamin brands such as Seven Seas.

Unilever, the maker of Ben & Jerry’s ice cream, is changing itsstructure and will have its headquarters in the Netherlands.

Unilever chief financial officer Graeme Pitkethly said that even though a small proportion of UK shareholders might be affected if Unilever shares were no longer in the Ftse-100 index, most shareholders understand the reasoning for the decision and are supportive.

Unilever’s London-listed shares fell by over 2%.

Unilever undertook a deep review of its business and structure last year after fending off an unwanted $143bn (€115.5bn) takeover offer from Kraft-Heinz.

The decision to sell its struggling spreads business also came from that review.

In light of the proceeds from the sale of spreads to private equity firm KKR, Unilever announced a new share buyback programme, for up to €6bn worth of stock, to start next month.

It also reported underlying sales growth of 3.4%, meeting an analysts’ consensus supplied by the company. Excluding the spreads business, underlying sales rose 3.7%.

Almost all of Unilever’s sales growth came from selling more products, with only a 0.1% boost from higher pricing.

This may concern the market, as a recent rise in oil prices and costs for transportation could eat into margins if not passed on to customers.

Consumer packaged goods companies are all under pressure to boost performance, as sales have slowed due to changing consumer tastes and shopping habits and a slew of upstart rivals.

Reported turnover fell 5.2% to €12.6bn, hurt by currency exchange rates. Analysts were expecting €12.84bn. The company stood by its forecast for 2018 sales growth of 3% to 5%.

Swiss food group Nestle confirmed its full-year guidance after organic sales growth accelerated to 2.8% in the first quarter of 2018, helped by improving volumes.

Reuters


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