Unilever braced for tough market conditions to continue in 2017 as it reveals subdued sales

 
Rebecca Smith
BRITAIN-EU-ECONOMY-RETAIL-BREXIT
Source: Getty

Unilever is keen to remind everyone it is - and has been for a while now - battling challenging market conditions.

The food manufacturing giant has reported lower than expected sales in the fourth quarter and is braced for these "tough market conditions" to continue, at least for the start of 2017. Brazil's economic slowdown and demonetisation in India also stirred up "significant additional headwinds" for the company.

The figures

The consumer giant - and Marmite maker - said underlying revenue growth was 2.2 per cent. Analysts had expected about 2.8 per cent.

Sales growth for the year was 3.7 per cent. Due to a negative currency impact of 5.1 per cent, turnover fell one per cent to €52.7bn (£44.8bn).

This time last year it reported a full-year turnover of €53.3bn, up 10 per cent against 2014.

Quarterly sales dropped 2.3 per cent in Europe, but fared better in Asia and the Americas.

Emerging markets grew 6.5 per cent (mainly driven by volume growth in Asia and price growth in Latin America).

Shares in the company were down 4.3 per cent by mid-afternoon.

Why it's interesting

Analysts had expected the firm to reveal tepid news from Europe - and the firm has confirmed those predictions.

Among the companies that reacted to the Brexit vote, Unilever had one of the more highly publicised moves, when it announced prices were going up in the UK. It wanted to offset the climbing cost of imported materials thanks to the plummeting pound.

A pretty public row with Tesco over a potential 10 per cent hike to the price of Marmite, Ben & Jerry's etc. caused quite the furore in October last year - though that was resolved, much to the relief of British consumers.

What the company said

Chief executive Paul Polman said:

We have delivered another good all-round performance despite severe economic disruptions, particularly in India and Brazil, two of our largest markets.

This further demonstrates the progress we have made in transforming Unilever into a more resilient business.

Our priorities for 2017 continue to be volume growth ahead of our markets, a further increase in core operating margin and strong cash flow.

The tough market conditions which made the end of the year particularly challenging are likely to continue in the first half of 2017. Against this background, we expect a slow start with growth improving as the year progresses.

In short

A solid enough performance, though ongoing rough market conditions look set to disrupt growth for at least the start of 2017.

Related articles