Unilever Q4: Sales up 5.1%; but operating margins hit by commodity price hikes
The sales figures were very encouraging, particularly because they were entirely volume-driven, said Panmure Jones director of equity research Graham Jones.
“For the year as a whole, like-for-like sales growth was 4.1%, with volumes at 5.8%, which is, in our view, an extremely impressive performance, and evidence of Unilever’s new-found competitiveness.
“The all-important outlook statement continues to reiterate [chief executive Paul] Polman’s objectives of profitable volume growth ahead of its markets, sustainable underlying margin improvement and strong cash flow.”
Margin hit
However, Investec Securities analyst Martin Deboo said margins in the fourth quarter were behind expectations, adding: “The margin miss was after disinvestment in advertising and promotions ahead of our expectations. So despite the volume beat, we think the quality of the profit result will preoccupy the market this morning.”
And this was not a great position to be in as input costs continued to rise, he said. “With Unilever struggling for margin in the face of what we think are only the foothills of input cost inflation, we expect even bigger challenges when it faces the peaks to come in full-year 2011.”
Polman: Emerging markets the engine of growth
Unilever's strongest growth in the fourth quarter came from Asia, Africa and Central and Eastern Europe (up 8.5%), followed by the Americas at 4.6% and Western Europe at 1.1%.
Full-year turnover was up 11.1% at €44.3bn (with 7.3% due to currency), while underlying volume growth was up 5.8% and underlying sales growth up 4.1%.
Full-year operating profit was up 26% to €6.34bn.
Datamonitor analyst Joseph Robinson said the outlook for Unilever was very positive, despite the challenge of commodity cost inflation: “We look very positively at the outlook for Unilever. The company, as with its peers in the sector such as P&G and Colgate-Palmolive, faces short term cost pressures associated with prevailing commodity price rises.
"However, Unilever’s focus on price cutting is further improving its competitiveness and it will continue to benefit from its aggressive focus on expansion in emerging markets."
