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Unilever highlights resilience after sales growth miss

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(Globalpost/GlobalPost)

By Rosalba O'Brien

LONDON (Reuters) - Anglo-Dutch consumer goods company Unilever <ULVR.L> said its breadth of businesses and markets will enable it to ride out the tough environment in Europe after reporting weaker than expected first-quarter growth on Thursday.

The maker of products from detergent and soap to margarine and ice cream posted underlying sales growth of 4.9 percent for the three months to March 31, against a consensus forecast of 5.6 percent in a company-supplied poll of analysts.

It was a tale of two markets, with sparkling outperformance in emerging markets dragged down by weakness in the United States and Europe.

The company's performance in emerging markets was in contrast to some of its consumer goods rivals, who have run into faltering demand in Latin America and Asia.

In Europe, however, sales fell 3.1 percent as consumer confidence was eroded by the economic backdrop, the company said. Performance was also affected by an unusually cold spring that hit sales of its ice-creams, which include Ben & Jerry's and Magnum.

Trading in crisis-ridden southern Europe had been particularly difficult, but northern Europe was not much easier, Chief Financial Officer Jean-Marc Huet told Reuters.

"We're improving and strengthening the competitiveness of our business but we have realistic expectations and just want stable performance from that part of our portfolio," he said.

Unilever's food operation slipped 0.5 percent, held back by its declining spreads business. Sales of products such as Flora margarine were driven lower by a tough promotional environment and consumers' increasing preference for butter.

"We think spreads must be reaching the point now where it is on notice that if it doesn't improve it will be considered for disposal," Panmure Gordon analysts said.

EMERGING GROWTH

Unilever <UNc.AS> - born 83 years ago out of the merger of Dutch group Margarine Unie and Britain's Lever Brothers - has outpaced rivals in recent quarters thanks to its focus on high-growth regions such as Latin America and Asia.

It said on Thursday that growth in emerging markets - which now provides about 57 percent of turnover - was a better than expected 10.4 percent, led by sales of soaps, shampoos and deodorants such as Lifebuoy, Tresemme and Axe.

Some of the company's multinational rivals, meanwhile, have fared less well amid difficult conditions in the first quarter.

Drinks maker Diageo <DGE.L> last week flagged signs of slowing growth in markets like Brazil.

On Wednesday Procter & Gamble <PG.N>, the world's largest household products maker, downgraded its fourth-quarter profit outlook, citing factors including volatility in Venezuela, Argentina, Egypt, Syria and South Korea.

But Huet said Unilever had built-in resilience, supported by its broad range of markets, with no individual country making up more than 8 percent of its total.

"What I do think is that there is a premium to having a portfolio with many emerging markets because they will not all perform at the same time," he said.

Huet pointed to tough comparatives compared to last year and a 10.7 percent rise in its quarterly dividend as a sign of the company's continued confidence in its momentum.

"Yes, macro environments are difficult, yes, competitive intensity is here to stay and yes there's the number game between quarters."

But Unilever regarded 4.9 percent growth as showing that it maintained strong underlying momentum, he said.

The company's shares, which have been trading at record highs since it beat growth expectations in its full-year results in January, fell 1.9 percent by 1044 GMT on Thursday.

They trade at about 19.2 times estimated earnings for the next 12 months, at a premium to Nestle <NESN.VX> at about 18.5 but a discount to L'Oreal <OREP.PA> at 25.0.

(Editing by Kate Holton and David Goodman)

http://www.globalpost.com/dispatch/news/thomson-reuters/130425/unilever-sales-growth-misses-forecasts