Shares in packaged consumer goods colossus Unilever (ULVR) fell 3.6% to £41.80 on Thursday as full year sales of €50.7 billion fell short of the €51.6 billion the market was looking for.
Sales in emerging markets grew by 1.2% in 2020 as China and India returned to growth, though revenue progress was constrained by strict lockdowns in the first half of the year and declines in Thailand, the Philippines and in Indonesia in the fourth quarter.
Though the annual revenue miss proved a disappointment, the Anglo-Dutch maker of everything from Dove soap and Marmite to Ben and Jerry’s ice cream delivered creditable fourth quarter organic sales growth of 3.5%.
Unilever also issued a positive multi-year outlook, guiding towards underlying sales growth in the 3% to 5% range with ‘profit growth ahead of sales growth’.
MARKET SHARE GAINS
Chief executive Alan Jope insisted that in a volatile and unpredictable year, ‘we have demonstrated Unilever’s resilience and agility through the Covid-19 pandemic.
‘We have delivered a step change in operational excellence through our focus on the fundamentals of growth, added Jope.
‘As a result, we are winning market share in over 60% of our business in the last quarter, on the basis of measurable markets.’
CONSERVING CASH
During 2020, Unilever’s underlying operating profit declined by 5.8% to €9.4 billion after a negative hit from currency, though free cash flow rose by a bumper €1.5 billion to €7.7 billion amid efforts to protect cash.
Full year underlying sales growth amounted to 1.9%, driven by hand and home hygiene products such as Lifebuoy and Domestos, as well as laundry products and food and drink sold for consumption at home, with organic growth strengthening to 3.5% in the final quarter.
Strict lockdowns in China and India led to market declines in the first and second quarters respectively, although both markets subsequently returned to growth during the year.
‘China has normalised in many categories, while economic activity in India picked up particularly in the final quarter. In North America and Europe, elevated demand for food consumed at home has continued to drive market growth, whilst consumer usage of most beauty and personal care categories remains subdued,’ said Unilever, which also reported encouraging 61% e-commerce growth for the year.
THE EXPERT’S VIEW
Russ Mould, investment director at AJ Bell, said Unilever has ‘laid out future growth plans which include a major focus on the US, India and China, and making more of the e-commerce channel. Restructuring costs of around €2 billion for the next two years may be hard for some Unilever fans to stomach but the company is also targeting €2 billion annual cost savings.
‘Fundamentally Unilever’s ability to keep thriving despite operating in a highly competitive marketplace is down to the strength of its brands, distribution power and marketing expertise.
‘Achieving a target of underlying sales progression of 3% to 5% a year will take hard work and the shape of the business is likely to keep changing as it focuses on more prosperous areas. That means a mixture of acquisitions and disposals in the coming years.’
