Unilever Tops Forecasts in Second Quarter Though Western Demand Wanes

Emerging markets drive growth at the consumer goods giant.
By Lisa Botter ,

Unilever (UL) - Get Report sales grew 4.7% in the second quarter to €13.7 billion ($15.1 billion), beating expectations from analysts for growth of 4.5%, as emerging markets growth stepped into the breach left by weakening European and North American demand.

The Anglo-Dutch consumer goods giant said sales also rose by 4.7% in the first half to €26.3 billion.

"Consumer demand remained weak and in the markets in which we operate volumes have slowed further, with market volume growth low in emerging markets and negative in Europe and in North America," the company said.

The company reiterated its guidance for organic sales growth in the range of 3% to 5% in the full year.

First-half growth was largely driven by emerging markets, which saw sales growth of 8% even though  volume growth was just 2.9%.

In the first quarter, sales had also risen by 4.7%, to €12.5 billion, which was in line with expectations, with personal care advancing ahead of the group average, with  5.8% growth.

Unilever had 2015 sales of €53.3 billion from more than 400 brands, of which 13 had sales above €1 billion.

CEO Paul Polman said in a statement, "This consistency of performance, achieved during a period of high volatility and accelerating change, shows that our long-term focus is paying off."

The maker of Dove products saw 5.6% growth in its personal care division and 6% growth in home care in the second quarter. The foods and refreshment divisions lagged, posting 2.7% and 4.2% growth, respectively.

On an investors' call this morning Polman said all four divisions are ahead of their competitors and they are working to make Unilever a resilient company in a challenging environment.

Polman said the company is preparing for tougher market conditions. "Against this backdrop we continue to drive agility and cost discipline... Our priorities continue to be volume-driven growth ahead of our markets, steady improvement in core operating margin and strong cash flow," he said.

Unilever announced this week that it was buying men's grooming company Dollar Shave Club, in a reported $1 billion deal. Unilever is taking a bet that it can take on Procter & Gamble's (PG) - Get Report Gillette, a giant in the sector.

Unilever shares were recently up 0.4% at 3,589 pence. Unilever is up 23.6% over the year.

Liberum rates Unilever a sell with a 3,150 pence price target. The analysts said, "High exposure to sluggish emerging markets (58% of sales) and a deflationary European consumer environment caps Unilever's growth near-term - we forecast 4% average organic sales growth over 2016 to 2018."

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