Higher prices, volume growth and strength in emerging markets has helped Unilever post a stronger-than-expected 3.1% rise in underlying sales growth for the first quarter of the year.
The growth was relatively balanced, with 1.9% coming from pricing and 1.2% from volume gains. Some of price increases were enacted to offset rising commodity costs.
Overall turnover decreased 1.6% to €12.4bn due to the disposal of its spreads unit last year.
Underlying sales growth picked up in emerging market business, growing 5%, led by South East Asia and Brazil. However, growth remained subdued in developed markets, edging up 0.3%. Whilst volumes grew in Europe (+0.8%), sales were held back by negative pricing.
Unilever’s Home Care division was the star performer with underlying sales growing 6% – driven by fabric solutions and home & hygiene.
Its Beauty & Personal Care division grew 3.1% with skin care and deodorants said to have had a good start to the year. However, hair and skin cleansing grew “modestly”, whilst sales in oral care declined due to “challenging market conditions”.
Meanwhile, the group’s Foods & Refreshment division grew 1.5%, boosted by strong ice cream sales. Sales in tea and savoury were said to be flat, whilst dressings declined due to continued high promotional activity and the later timing of Easter.
Unilever today stood by its outlook for the full year but stated that underlying sales growth would be in the lower half of a 3 to 5% range. It also reiteriated its 2020 target for an underlying operating margin of 20% set by its former Chief Executive Paul Polman in the wake of 2017’s rebuffed takeover offer by Kraft Heinz. Unilever’s underlying operating margin was 18.4% in 2018.
New boss Alan Jope is tasked with trying to boost Unilever’s sales growth amid changing consumer habits and competition from new upstart brands building their businesses online.
Jope said today: “Accelerating growth is our number one priority. It requires both great execution and a continued strategic shift into faster growth segments and channels. We saw good performance in key growth channels including out-of-home and e-commerce and benefited from stronger global innovations and faster and more relevant local innovation.”
He added: “With the leadership changes announced in March, we are building the right team to drive our growth agenda.”
Commenting after the results, Russ Mould, investment director at AJ Bell, said: “New chief executive Alan Jope has now been in the hot seat since January and he’s delivered a satisfactory first quarter, although nothing spectacular.
“Now comes the hard part – he needs to find a way to stop the company’s sales growth from slowing down and adapt Unilever for the new era of retail where online shopping and the rise of discounters are driving down prices.
“Jope needs to decide the shape of Unilever for the next phase of its life – whether that means slimming down the business further to concentrate on the strongest parts, or making acquisitions to further increase scale in certain product lines.”
