Unilever tops sales forecast, but sees markets worsening

Analysts were expecting 4.4% growth, according to a company survey of forecasts

Consumer goods group Unilever beat second-quarter sales forecasts on Thursday, helped by price rises, but kept its full-year target unchanged as some of its markets worsen and comparisons get tougher in the second half of the year.

The Anglo-Dutch maker of Dove soap, Lipton tea and Magnum ice creams predicted the economic environment in markets such as Brazil and Argentina would get worse before it gets better.

But Unilever expects to keep improving its own global performance with initiatives such as cost savings and a new organisational structure that it expects to save 1 billion euros ($1.1 billion) by 2018.

Despite economic volatility in major markets, Unilever reported underlying sales growth of 4.7 per cent in its second quarter, excluding the impact of foreign exchange moves, acquisitions and disposals.

On that basis analysts were expecting 4.4 per cent growth, according to a company survey of forecasts. “Companies like Unilever, which offer consistent growth even in difficult economic times, have come to be seen by investors as a safe port in a storm,” said Hargreaves Lansdown analyst George Salmon, noting Unilever trades at 22 times forecast earnings, more than 50 per cent higher than five years ago. Its London-listed shares were little changed at 0907 GMT. The company said consumer demand remained weak, with industry sales volume growth low in emerging markets and negative in Europe and in North America.

It sold 1.8 per cent more products in the second quarter, with the remaining rise in sales coming from higher prices due to a slight easing of deflation in Europe and price increases in Asia.

Finance chief Graeme Pitkethly told Reuters the company was sticking to its full-year sales growth target of 3-5 per cent, and margins for the full year would improve in the historical range of 0.3-0.4 percentage points, rather than the 0.5 points delivered in the first half.

On a reported basis, turnover in the first half fell 2.6 per cent to 26.3 billion euros. Net profit rose 2 per cent to 2.7 billion, with earnings per share up 1 per cent at 88 euro cents.

Regarding its purchase of U.S. brand Dollar Shave Club, announced on Wednesday, Unilever said it would use that company’s knowledge and expertise selling directly to consumers to expand its other brands.

The company said its profitable but poorly performing spreads business was showing signs of improvement, a year and a half after it announced plans to separate it into a stand-alone division.