Unilever Reports Weak Sales Growth on Price Declines, Strikes in Brazil

  By Saabira Chaudhuri 
 

LONDON--Unilever PLC (ULVR.LN) on Thursday reported anemic sales growth for the first-half of the year as results were capped by strikes in Brazil and prices declines in Europe and North America.

The Anglo-Dutch company, whose brands include Dove soap and Magnum ice cream, reported net profit of 3.04 billion euros ($3.54 billion) for the six months to June 30, down from EUR3.11 billion a year earlier. Revenue declined to EUR26.4 billion from EUR27.7 billion, it said.

For the first half, Unilever reported underlying sales growth of 2.5%, driven almost entirely by volume. The company in June warned first-half sales would be below its full-year target of 3% to 5% due to the truck driver's strike in Brazil.

"We think Unilever's sales performance is disappointing, particularly in light of hot weather in the Northern hemisphere which ought to have boosted ice-cream sales," said RBC analyst James Edwardes Jones.

Volumes grew just 1% in North America and declined in the second quarter, which Chief Financial Officer Graeme Pitkethly said was down to fewer innovations being launched compared to the same period a year earlier.

Mr. Pitkethly said Unilever was continuing to battle a heavily promotional environment in mayonnaise against Kraft Heinz Co. (KHC), leading to the lowest average retail price in North America in seven years.

"We're going toe to toe in a battle to provide consumer value," he said. The company is also fighting Procter & Gamble Co. (PG), which has followed Unilever to launch its own dry-spray deodorants. That innovation, designed for customers who complained about the wet feeling that accompanied traditional sprays, benefited Unilever sales for a string of quarters.

Overall, prices in North America fell by 0.3% in the first half.

Unilever, which currently operates as two separately listed companies--Unilever PLC and Unilever NV--is in the process of working to unify its dual British-Dutch legal structure. On Thursday, Mr. Pitkethly said a shareholder vote was slated for October and, despite opposition from "a small number of investors" he is "very confident" that Unilever will be able to move entirely to Rotterdam.

Unilever, like other consumer-goods companies, has long relied on selling new or improved versions of products at higher prices to boost growth. That practice has recently been challenged by weak inflation, Amazon.com Inc.'s (AMZN) rising prowess in selling more household staples, and a decline in brand loyalty as consumers use the internet to shop around. A shift to discount retailers, from dollar stores to Germany's Aldi, are further pushing down prices.

For the first half, Unilever reported underlying price growth of just 0.2% while volumes climbed 2.2%. Prices dropped in its beauty-and-personal-care division, but climbed slightly in food-and-refreshments and homecare.

Write to Saabira Chaudhuri at [e-mail]

(END) Dow Jones Newswires

July 19, 2018 03:39 ET (07:39 GMT)

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