Unilever puts accent on growth for remainder of the year

Anglo-Dutch conglomerate Unilever said its focus on the second half of the year is to accelerate growth.

Announcing figures for the first half year today it revealed that revenues fell slightly from €26.352bn to €26.126bn. Pre-tax profits of €4.354bn compared with €4.329bn.

On an underlying basis, it said sales grew 3.3% with volume 1.2% and price 2.1%.

Emerging markets underlying sales growth was 6.2% with volume 2.5% and price 3.6%.

It said the decline in turnover was due to the sale of its spreads business, partially offset by a 1.1% currency benefit.

Growth in Unilever’s markets was mixed, it said. Market growth in Europe and North America was held back by the impact of weather on ice cream sales.

In the emerging markets it continued to see good momentum, particularly in China and South East Asia.

India saw strong market growth, though it moderated, as expected.

Argentina remains hyperinflationary and high levels of pricing continue to weigh on consumer demand.

Underlying sales in the Asia markets grew 6.2%, while Latin America grew 4.9%. North America sales growth was flat.

In Europe, underlying sales declined 0.6% with volumes down 0.2% and price down 0.4%.

The European business faced challenges from continued price deflation and adverse weather in the second quarter.

Unilever’s e-commerce and discounters channels grew strongly, helped by its channel-focused divisional strategies.

The broader retail environment remains difficult, particularly in Germany where the group saw significant decline.

Southern Europe performed strongly, helped by growth in home care and foods & refreshment. Central and Eastern Europe continued to grow well, with good performance in all categories, particularly fabric sensations.

Chief executive Alan Jope said: “We have delivered consistent growth within our guided range for 2019, led by our emerging markets.

“Accelerating growth remains our top priority and we continue to evolve our portfolio and seek out fast growth channel and geographical opportunities, as well as address those performance hotspots where growth is falling short of our aspirations.

“For the full year, we continue to expect underlying sales growth to be in the lower half of our multi-year 3-5% range, an improvement in underlying operating margin that keeps us on track for the 2020 target and another year of strong free cash flow.

“Our sustainable business model and portfolio of purpose-led brands are key to delivering superior long-term financial performance.”

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 company AJ Bell, said: “Unilever is developing a pattern with a good performance in emerging markets and a struggle in developed markets. Ideally you want strength in both regions.

“It is also disappointing to see the consumer goods giant say that full-year underlying sales growth will be in the lower half of its 3% to 5% multi-year target, continuing the trend seen in the first half of the year.

“Increasingly, you have to question whether developed market consumers are shunning the big name brands and are happy with retailers’ own brands or less expensive versions of products.

“Unilever, like many other large cap consumer goods providers, has enjoyed many years of stellar earnings thanks to the strength of its brands and the public automatically flocking to its products because they stand out on the shelves.

“Now there is so much more choice and the consumer is increasingly value-driven and so will try alternative products, rather than simply rely on the big-name brands.

“Unilever will have lower-priced versions of many of its products such as shampoo, yet those items are likely to come with lower profit margins. In order to protect and grow margins, it will have to accelerate new product development and capitalise on brand strength of its higher margin businesses.”

He added: “We’re already seeing this brand extension at work with examples such as the Hellmann’s brand being taken beyond its core focus of mayonnaise and used for different types of sauces.

“This innovation is essential to keep its brands fresh. However, relatively new chief executive Alan Jope will equally have a close eye on emerging markets where the dynamics are more favourable to Unilever and plentiful opportunities to accelerate sales growth.”