Unilever ends 2016 with sales growth below estimates in India, Brazil

By Martinne Geller

LONDON (Reuters) - Consumer goods maker Unilever reported lower-than-expected fourth-quarter sales on Thursday, blaming the demonetisation in India and weak economy in Brazil.

The maker of Dove soap, Knorr soup and Marmite spread said underlying sales rose 2.2 percent in the quarter. That compared with analysts' average expectation of 2.8 percent, according to a consensus compiled by the company, and growth of 3.2 percent in the third quarter and 4.7 percent in the first half.

For the full year, sales growth was 3.7 percent, below the 3.9 percent analysts were expecting.

The company's shares, up about 9 percent from the start of December through Wednesday, were down nearly 4 percent on Thursday at 0804 GMT in London.

Unilever Chief Financial Officer Graeme Pitkethly told Reuters the company was targeting growth in the range of 3 to 5 percent for 2017, but that results in the early part of the year would be below that, due to the issues in Brazil and India, and the timing of Easter.

"We do expect the first half and Q1 in particular to be slightly slower than that rate," Pitkethly said.

The company said growth in India was below historic levels, as consumer demand was limited by the government's decision in November to remove higher-value currency notes.

In Europe, fourth-quarter sales fell 2.3 percent, hurt by weak volumes and continued price deflation in many markets. Yet Pitkethly said European prices were starting to show recovery, due partly to price rises in Britain the company took in the wake of the Brexit-related fall in the pound.

"You are actually starting to see the impact of things like the devaluation in the UK pull through in terms of market growth," Pitkethly said.

The price increases Unilever sought to put through last year met resistance from major retailer Tesco, leading to a brief standoff now known as "Marmitegate".

(Reporting by Martinne Geller; editing by Susan Thomas)