Unilever ups pricing to boost sales growth

18th Oct 2018 07:03

(Sharecast News) - Unilever reported an acceleration in underlying sales growth for the third quarter as the consumer goods colossus was able to nudge up prices while still expanding volumes.Fresh from the cancellation of its proposed move to a single Netherlands headquarters due to hostility from investors, the Anglo-Dutch group increased underlying sales 3.8% in the three months to the end of September, up from the 2.5% growth in the first half, when the FTSE 100 group was hit by a trucker strike in Brazil.If including the effect of hyperinflation in Argentina, this bumped up group sales growth to 4.5%, topping the average analyst forecast of 4.3%. Turnover was down 4.8% to €12.5bn for the quarter, however, weighed down by foreign exchange headwinds of 5.2%.Underlying sales volumes slowed slightly to 2.4% from the 2.5% in the first half but price growth jumped to 1.4% in the quarter from 0.2%. Volume and price growth was strongest in Asia, AMET (Africa, the Middle East and Turkey) and RUB (Russia, Ukraine and Belarus), but volumes were almost flat in the Americas and prices softened in Europe.Chief executive Paul Polman, who after a decade in the role and after the HQ debacle is facing extra pressure from investors, hailed accelerated growth across all divisions, with strongest volume growth coming from Beauty & Personal Care, led by skin care and hair care, and Food & Refreshment, led by ice cream and tea, while Home Care made the best gains in pricing, with good performances from Cif premium sprays and Sunlight soap, plus the launch of a new innovative dry wash spray Day 2 in India."We were able to increase prices whilst still maintaining good volume growth which reflects the strength of our brands and quality of our innovation programme," he said.He said the benefits of his Connected for Growth programme were coming through, "making us simpler, faster and better connected with our consumers" and helping accelerate growth in Asia AMET RUB, "manage" through the economic volatility in Latin America and shift the portfolio into faster growing segments and channels across all markets.For the full year he continued to expect underlying sales growth in the ongoing 3-5% guidance range, along with an improvement in underlying operating margin and strong cash flow. "We remain on track for our 2020 goals," Polman said.Unilever shares fell 2% to 3,931p on Thursday morning, returning close to last Friday's five-month low."It's a big moment for Unilever," said analyst Neil Wilson at Markets.com. "Management has been left bruised by the sole-listing affair, which was completely botched. They need to come up with fresh ideas and we question whether the leadership will remain the same for long."Lee Wild at broker Interactive Investor agreed it was time for Unilever to shift focus back to the numbers but felt that "management has not taken its eye off the ball judging by these decent third-quarter results" and he was reassured to see the 3-5% target for underlying sales growth repeated, along with further improvement in margin."Exposure to non-discretionary spending and a portfolio of mega brands helps Unilever navigate market cycles," Wild added. "A wide range of consumer goods spread across geographies mean it can keep growing and pay and reasonable dividend, even when the chips are down. Defensive attributes command a premium right now, so the shares do not come cheap. The shares have dipped today but, with numerous threats to the global economy and the UK racing toward Brexit, Unilever shares will be in demand among long-term investors."Analysts at Liberum pointed out that organic sales growth of 3.8% was modestly ahead of consensus.