Unilever posts ‘Nestle-like’ results

By Rod Addy

- Last updated on GMT

Related tags Sales growth Unilever

Paul Polman, Unilever chief executive: "For 2012 we remain on track to deliver a modest improvement in core operating margin."
Paul Polman, Unilever chief executive: "For 2012 we remain on track to deliver a modest improvement in core operating margin."
Unilever has become “Nestle-like” in its delivery of strong and consistent results, according to Andrew Wood, senior research analyst at Sanford C Bernstein.

He was commenting on the publication of second quarter/first half results for the global food, personal and home care products manufacturer. He drew the comparison to indicate that Unilever, like Nestle, was defying the tough economic climate to post results that were outperforming the market.

Wood acknowledged that from a negative standpoint, underlying margins for the period were down by 20 basis points. However, he added: “... we believe that this is more a function of looking for a negative, rather than appreciating that Unilever has become Nestle-like in the delivery of strong and consistent results, in line with its own guidance”.

Real surprise

Darren Shirley, analyst at the UK’s Shore Capital, told FoodNavigator: “The only real surprise is that [Unilever] has come out ahead of expectations. That’s really positive.”

However, he referred to Unilever’s own admission that a big driver for the company’s strong value sales growth had been increased product prices. “It is ahead of expectations on sales primarily because of the price contribution.”

Unilever's food sales volume growth did take a hit during the first half of the year, declining by 1%. The company blamed increased prices in spreads to keep pace with "significant commodity cost inflation"​ as well as some impact from bad weather in Northern Europe on ice cream sales. ​However, it said it delivered positive growth in the first half and continued to innovate with the successful Latta aerated product now launched in the Netherlands.

Liquid margarines

Liquid margarines continued to do well in Europe. Dressings delivered another quarter of growth, reflecting a strong performance by Hellman's in Latin America driven by the 'Inspire' campaign to encourage new uses of mayonnaise.

Ice cream performed well overall in the second financial quarter, despite the adverse weather conditions in some areas and the comparison with the company's strong performance in the category last year.

Magnum had delivered high single digit growth, building on the successful launch in the US with the introduction of Magnum Minis, and the recent launch of Magnum in the Philippines and Thailand. Cornetto had also grown strongly on the back of its Angels and Devils promotion and a successful digital campaign in China.

Beverages performed strongly in Africa and the Middle East and improved performance in Russia, driven by the Lipton relaunch and good initial response to the launch of Lipton Tea & Honey powdered ready to drink tea sachets in the US.

Savoury foods

But the company reported growth in savoury foods, driven by strong performances in Knorr cooking products and soups. Knorr jelly bouillon continued to grow as it supported the addition of gravy to the range, it said.

Overall turnover for the company rose by 11.5% to €25.4bn and underlying sales growth rose by 7%, comprising volume growth of 2.8% and price growth of 4.1%. Underlying sales growth in emerging markets grew by 11.4% in the first half of its financial year. Net profit rose 1% to €2.4bn.

"Despite deteriorating global economic conditions and a competitive environment which remains intense, we again delivered volume growth ahead of our markets and gained value share across the majority of our business,"​ said Unilever chief executive Paul Polman.

"Looking forward we expect continued volatility, especially in commodity costs and economic conditions. For 2012 we remain on track to deliver a modest improvement in core operating margin."

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