Broker snap: Price cuts in pipeline at Unilever

5th Nov 2009 12:35

Hints during a conference call about price cuts in the pipeline may have contributed to a negative reaction to third quarter figures from Anglo-Dutch consumer goods giant Unilever on Thursday morning.Warren Ackerman of Evolution Securities said Unilever management indicated it would initiate price cuts of two or three per cent in the fourth quarter, versus a 0.2% reduction in the second quarter.'Some of this relates to an exceptional 9% pricing comparison in the fourth quarter of 2008 but they are also admitting that they probably took too much pricing in categories like spreads (+18%) and laundry (+16%) and dressings relative to competition which they are now dealing back,' Ackerman reports. 'Pricing is not likely to move positive until the middle of 2010,' he added.Despite the fourth quarter having two fewer trading days this year than in 2008, Evolution is still expecting Unilever to deliver a 4-5% increase in volumes in the three months to end-December.'Given a likely positive investor seminar in mid-November and lowered fourth quarter expectations, further weakness may be an interesting entry point to continue to play the medium term recovery of the stock,' the broker suggests.