Unilever Reports Slightly Better Than Expected Sales Growth But Remains Cautious On Outlook

Unilever has today reported a slightly better than expected rise in second-quarter sales, although the group remained cautious on trading for the months ahead amid weak consumer demand in key markets.

Underlying sales in the second quarter grew 4.7%, helped by higher prices.  However, volume growth slipped to 1.8%, compared 2.6% in the previous quarter.

For first half as a whole, underlying sales also rose 4.7% with volumes up 2.2%. However, actual sales fell 2.6% over the six-month period to €26.3bn, impacted by the weakness of emerging market currencies against the euro.

Net profit grew 2% to €2.7bn, whilst core operating margin was up 50bps to 15.0%, driven by an 80bps improvement in gross margin.

Unilever’s performance in its second quarter was driven by robust growth in its core Personal Care division where underlying sales rose 5.6%. Volumes rose a healthy 3.4% with the group saying they improved across all sub-categories driven by innovations in its core brands and its move into more premium segments.

Sales growth in its Foods division accelerated to 2.7% with a good performance in savoury and dressings.  However, volumes declined by 0.9%, due to further weak performance in its spreads business in developed countries.

Paul Polman, Chief Executive Officer, commented: “Our first half results further demonstrate the progress we have made in the transformation of Unilever to deliver consistent, competitive, profitable and responsible growth. Despite a challenging environment with slower global economic growth and intensifying geopolitical instability, we have again grown profitably in our markets, competitively and driven by strong innovations.

“This consistency of performance, achieved during a period of high volatility and accelerating change, shows that our long-term focus is paying off. We are seeing the benefits from delivery against the four differentiated category strategies that continue to guide investment in our brands, our infrastructure and our people.”

However, he warned of more difficult times ahead: “We have been preparing ourselves for tougher market conditions in 2016 and do not see any sign of an improving global economy. Against this backdrop we continue to drive agility and cost discipline, implementing the key initiatives announced at the end of last year: net revenue management, zero based budgeting and ‘Connected 4 Growth’ which is the next stage in our organisational transformation. Our priorities continue to be volume-driven growth ahead of our markets, steady improvement in core operating margin and strong cash flow.”

Unilever yesterday agreed a deal to buy US razor-maker Dollar Shave Club (DSC), helping it significantly expand its men’s grooming product portfolio.