Unilever, the maker of brands including Dove, Vaseline and Timotei, has been slapped down by the slowest growth in five years – underlying sales expansion was clipped to just 2.1% for the last quarter.
CEO Paul Polman pins the blame on weak Chinese growth – sales here fell 20% – not to mention deflationary pressures across Europe. The wider Asian picture is particularly poor: sales grew at just half the rate that much of the analyst community had anticipated, a mere 3.1%.
Personal Care growth slowed in the third quarter – to 3% valued at €4.5bn – although Unilever cited strong performance from Dove, Sunsilk and Lux. For some time Polman has been attempting to shift the company away from lower-margin food and household goods and further into the personal care sector; Unilever’s new oral care brand, Regenerate Enamel Science, experienced a positive UK start, according to Unilever.
RBC Capital Markets analyst James Edwardes Jones stated that the one bright spot was the Americas: Unilever saw 6.8% growth in the region, with Latin America up 12.4% and North America up 0.6%. “What is more,” said Jones, “the company states that ‘conditions in North America started to improve’. That said, Unilever does ‘not expect any material improvement in our markets for the remainder of the year’.” All in all, a difficult set of numbers. As a result of the concern about Unilever, its share price slumped by 2.53% in early trading to 2,468p, although its share price was worth 2729p in early September – almost a 10% drop.
However, not everyone was so bearish about Unilever’s prospects. Analysts at Sanford Bernstein have a 3,050p price target on the stock – potentially an increase of 20%. “We expect markets,” said Polman, “to remain tough for at least the remainder of the year. We have further accelerated our initiatives to remove unnecessary cost, simplify the business and ensure Unilever is both agile and resilient. We are confident that we will achieve another year of profitable volume growth ahead of our markets, steady and sustainable core operating margin improvement, and strong cash flow.”
