Unilever falls on fears over competition

FOOD and household goods giant Unilever reported forecast-beating sales growth for 2009 yesterday, but saw its shares slide on doubts over increased competition in Europe.

The company, whose brands include Persil detergent and Lipton tea, increased full-year sales to 3.5 per cent – 10 basis points ahead of analyst expectations. Fourth quarter sales expanded 1.8 per cent as Unilever cut prices by an aggressive 3.1 per cent.

Throughout the year, trading was underpinned by an 80 basis point boost in advertising spend. Net profit was down 31 per cent to €3.7bn (£3.2bn), with earnings per share at €1.2 in a set of results generally greeted as positive by stockbrokers.

However, shares in Unilever closed three per cent down at 1,867p as investors showed concern over the prospect of rivals flexing their muscles on the continent and beyond.

Unilever chief executive Paul Polman said: “We expect continued pressure on consumer spending power and heightened levels of competitive activity in 2010.”

Western Europe was an area of particular worry. It was the only region where underlying sales contracted, by 4.2 per cent in the fourth quarter and by 1.9 per cent for the full year.

Evolution Securities held its “neutral” rating and price target of £18 per share. Analyst Warren Ackerman said: “Unilever’s volume momentum is positive – however some may suggest this is only due to a huge level of re-invesment.”

Panmure Gordon was more bullish, raising its price target from £18.70 to £20 in the belief an improved flow of innovation would come through in due course. “Paul Polman is working hard to address Unilever’s lack of competitiveness,” said Graham Jones.