Unilever reports declines in annual revenues and profits

Alan Jope

Consumer goods giant Unilever reported declines in annual revenues and profits for the year 2020 today.

Turnover fell by 3.5%, on constant currency exchange rates, to €50.724bn, while pre-tax profits of €7.996bn represented a 3.9% decline.

The group said it achieved underlying sales growth of 1.9%, while free cash flow was up €1.5bn to €7.7bn, reflecting its objective to protect cash.

The dividend has been maintained through the year and increased in the fourth quarter by four per cent to €0.4268 per share.

Unilever operates a key home and personal care manufacturing site at Port Sunlight, Wirral, and a tea making site at Trafford Park in Greater Manchester, which could be sold as part of plans announced in January last year.

The plant makes the PG Tips and Lipton brands, and is part of a strategic review by Unilever.

Chief executive, Alan Jope, said: “In a volatile and unpredictable year we have demonstrated Unilever’s resilience and agility through the COVID-19 pandemic.

“I would like to thank the Unilever team, whose dedication and hard work has delivered a strong set of results under the most difficult of circumstances.

“Early in the year, we refocused the business on competitive growth, and the delivery of profit and cash as the best way to maximise value.

“We have delivered a step change in operational excellence through our focus on the fundamentals of growth. As a result, we are winning market share in over 60% of our business in the last quarter, on the basis of measurable markets.

“The business also generated underlying operating profit of €9.4bn and free cash flow of €7.7bn, an increase of €1.5bn.”

He said the group progressed its strategic agenda, building on its existing sustainability commitments with ambitious new targets and actions, most recently with plans to help build a more equitable and inclusive society.

Unilever also completed the unification of its legal structure under a single parent company and continues to work on separating out the tea business as it evolves its portfolio.

He added: “Today we are setting out our plans to drive long term growth through the strategic choices we are making and outlining our multi-year financial framework.

“While volatility and unpredictability will continue throughout 2021, we begin the year in good shape and are confident in our ability to adapt to a rapidly changing environment.”

Russ Mould, investment director at Manchester investment platform AJ Bell, said: “Unilever is seen as the market’s old reliable friend, trustworthy and dependable, no matter the economic backdrop.

“Coming in short of full year sales forecasts is not the done thing and so Unilever is somewhat punished by investors today for not delivering the required goods.

“Full year sales of €50.7bn is slightly below the expected €51.6bn figure, which is disappointing but far from disastrous.

“In its defence, €7.7bn free cash flow is better than €6.7bn expected by analysts as the company has paid more attention to ensuring it is paid efficiently by third parties.

“The company has laid out future growth plans which include a major focus on the US, India and China, and making more of the e-commerce channel. Restructuring costs of around €2bn for the next two years may be hard for some Unilever fans to stomach, but the company is also targeting €2bn annual cost savings.

“Fundamentally, Unilever’s ability to keep thriving, despite operating in a highly competitive marketplace, is down to the strength of its brands, distribution power and marketing expertise.

“Achieving a target of underlying sales progression of three per cent to five per cent a year will take hard work and the shape of the business is likely to keep changing as it focuses on more prosperous areas. That means a mixture of acquisitions and disposals in the coming years.”

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