Unilever faces weak emerging markets

CONSUMER goods giant Unilever reported lower than expected fourth-quarter underlying sales growth due to weak emerging markets, bringing a disappointing end to the sector’s most difficult year in recent memory.

The maker of Ben & Jerry’s ice cream, Dove soap and Lipton tea said that underlying sales - excluding any impact from foreign exchange, acquisitions or disposals - rose 2.1 per cent in the fourth quarter. Analysts on average were expecting a 2.6 per cent rise. Following a dramatic weakening of emerging markets last year that made Unilever’s third quarter the weakest in five years, its full-year underlying sales growth came in at 2.9 per cent, versus analysts’ estimates for growth of 3.1 per cent.

The firm said growth had remained weak in emerging markets where economic pressures were hitting consumer demand. Developed markets were flat, with a modest pick-up in North America being partly offset by a shrinking market in Europe.

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“We do not plan on a significant improvement in market conditions in 2015,” chief executive Paul Polman said. “Against this background, we expect our full year performance to be similar to 2014 with the first quarter being softer but growth improving during the year.”

Full-year core operating profit was however slightly above estimates, at 7.02 billion euros, compared with the forecast of 6.9 billion euros, helped by cost cuts.

Unilever gets more than half its sales in emerging markets and so was hit hard by events such as a slowdown in China, a recession in Brazil and Western sanctions on Russia.

As companies find sales growth harder to come by, they have sought to cut costs and simplify their businesses. Last year, Unilever cut 1,400 jobs, dramatically reduced the number of products it sells and sold underperforming businesses. The company has recently sold its Slim-Fast brand, its Ragu and Bertolli pasta sauces, Skippy peanut butter and Wishbone salad dressings.

Last month, it said it would form a separate unit for its struggling spreads business, to put more focus on turning it around. Some analysts saw the move as a precursor to a sale or spin-off, but the company denied it.