Unilever reports widespread sales growth for third quarter

Anglo Dutch foods to personal care conglomerate Unilever reported increased underlying sales growth of 3.8% for its latest three month period, today.

However, turnover in the same period fell 4.8% to £11bn.

On a nine month basis, underlying sales growth was 2.9% ahead, while turnover was 5.3% down at £34bn.

Earlier this month the group bowed to shareholder pressure and withdrew plans to axe its UK base.

It had planned to switch to the Netherlands to “simplify Unilever’s structure” which it said would bring “clear strategic benefits for shareholders, including even stronger governance and the move to a ‘one share one vote’ principle.”

But major investors, including Royal London Asset Management, and shareholder advice group Pirc, railed against the proposal.

Announcing figures today, the group said growth was high quality with an improvement in all three of its divisions and strong volume growth in Asia AMET RUB (Africa, Middle East, Turkey; Russia, Ukraine, Belarus).

Turnover was impacted by a currency fluctuation impact of 5.2%.

Chief executive Paul Polman said: “Growth accelerated in the third quarter across all divisions.

“We were able to increase prices whilst still maintaining good volume growth which reflects the strength of our brands and quality of our innovation programme.

“Our focus on building our business for the long-term continues to deliver high quality growth.”

He added: “We are progressively reaping the benefits of our Connected for Growth programme, which is now well embedded throughout the organisation, making us simpler, faster and better connected with our consumers.

“It is helping us accelerate growth in Asia AMET RUB, manage through the economic volatility in Latin America and shift our portfolio into faster growing segments and channels in all of our markets.

“Our innovation pipeline continues to strengthen and in the third quarter alone we have launched four new brands.

“We have now successfully completed the disposal of our spreads business and continue the acceleration of our efficiency programmes.”

“We continue to expect underlying sales growth in the 3%-5% range, an improvement in underlying operating margin and strong cash flow. We remain on track for our 2020 goals.”

Beauty & Personal Care underlying sales growth of 4% was helped by improved price growth.

Home Care underlying sales growth in the quarter was 4.5%.

And Foods & Refreshment underlying sales growth in the quarter improved to 3.2%.

In Asia/AMET/RUB, underlying sales growth was 6.6%, with 4.3% from volume.

In North America, underlying sales growth improved to 1.9%, driven by a pick up in price growth. In Latin America underlying sales growth was 1.5%.

Europe grew modestly in the quarter, mainly driven by strong ice cream sales that were helped by both innovations and good weather in Northern Europe.

Port Sunlight, in Wirral, is the centre for Unilever’s home care and personal care research and development, with more than 750 scientists based there.

World famous brands such as Dove, Sunsilk, Rexona, Axe, Domestos, TRESemmé, Comfort, Dirt is Good, Surf and Signal all have Port Sunlight technology inside.

The group has also created a pilot plant at the site that allows it to manufacture prototype shampoos, fabric conditioners, toothpastes, deodorants and laundry liquids.

Unilever says the plant also works with three local strategic partners – The University of Liverpool, Manchester University and Daresbury Laboratory.

Nearby, the group operates a detergents factory in Warrington.

Russ Mould, investment director at Manchester investment platform AJ Bell, said: “Positive sentiment created by consumer goods giant Unilever ditching a plan which would have led to an exit from the FTSE 100 may be starting to wane after today’s third quarter update.

“Trading is improving after a difficult start to the year and there is at least some evidence of the group’s pricing power.

“Price increases contributed just 1.4% of the 3.8% underlying sales growth, which itself was below consensus forecasts for growth of 4.2%.

“The company can be given some credit for stripping out the impact of price growth in Argentina, a country in the grip of hyperinflation, which would have taken growth to 4.5%.

“Management are sticking with their 2020 targets and guidance for organic growth of 3% to 5%, but they may need to do more to get the market back on side after botching their plans for a restructuring of the business.

“Their leadership must be called into question after so clearly misjudging the market mood in the run-up to a proposed move of its headquarters to Rotterdam and shift to a sole-listing.

“Chief executive Paul Polman makes no mention of the affair in the commentary alongside the quarterly numbers; he may need to do rather better when Unilever reports its full year results in early 2019.”