Unilever First-Quarter Sales Fall; Looks to Raise Prices -- 2nd Update

By Peter Evans 

LONDON-- Unilever PLC said it would raise prices in emerging markets across its range of consumer goods and food products as it attempts to tackle currency weakness amid falling sales.

The maker of Magnum ice cream and Axe deodorant on Thursday posted sales of EUR11.40 billion ($15.75 billion) in the quarter ended March 31, compared with EUR12.16 billion in the same period last year, a decline of 6.3%.

Like other consumer-products companies, Unilever has suffered from the devaluation of emerging-market currencies in the past year, reducing the value of its sales. The company said the Argentine peso and Russian ruble had been especially weak in the most recent quarter.

But Unilever Chief Financial Officer Jean-Marc Huët said some of the impact could be offset by increasing prices in emerging markets, where consumers are increasingly willing to trade up to more expensive products in categories such as laundry detergent and ice cream.

"If you look at our pricing in emerging markets, it's happening as we speak," Mr. Huët said in an interview, pointing to a 7% rise in prices across Latin America in the first quarter. "We expect to take more pricing as the year progresses."

The comments come a day after Procter & Gamble Co. Chief Financial Officer Jon Moeller said the U.S.-based consumer-products company also is trying to raise prices in countries where currencies have risen significantly against the U.S. dollar or that have recorded high inflation, in an effort to help offset the hit.

P&G in February cut its projection for full-year core earnings growth by two percentage points on each end to 3% to 5%, a reflection of foreign-exchange impacts.

Unilever's underlying sales--which are adjusted for the impact of exchange rates, acquisitions and disposals--rose 3.6% in the quarter, slightly beating analysts' expectations of 3.3%. The company posted growth of 4.9% in the first quarter last year.

Unilever also said it would conduct a strategic review of its North American pasta-sauce business and Slimfast brand of weight-loss supplements. Mr. Huët said the review may result in a sale. Last month, Unilever hired Morgan Stanley to help sell its Ragú pasta-sauce brand for around $2 billion.

Any divestments would fit in with Chief Executive Paul Polman's focus on higher-margin personal-care brands that appeal to consumers in emerging markets, rather than food brands that often struggle to gain a foothold in countries such as China and India.

Personal-care products now account for 36% of Unilever's EUR49.8 billion in annual sales, up from around 27% in 2008, the year before Mr. Polman became CEO.

Mr. Polman has said that he wants to have a stable of 20 brands with sales of more than EUR1 billion a year by 2020. Unilever currently has 16 such brands, including Axe deodorant and Lipton tea, but in recent years it has sold several brands that had little prospect of reaching the EUR1 billion goal.

Write to Peter Evans at [e-mail]

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