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Unilever Shows Resilience

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Unilever Shows Resilience

Unilever Shows Resilience
January 27
10:04 2017

Unilever increased operating profit by 3.8% to €7.8 billion and net profit by 5.5% to €5.5 billion in 2016 as turnover, due to a negative currency impact, declined by 1.0% to €52.7 billion. However, underlying sales grew 3.7%, with price up 2.8% and volume up 0.9%, as all four categories delivered good progress against their strategic priorities. Personal Care and Foods achieved improved growth while maintaining strong profitability and cash flow. Home Care and Refreshment improved margins while continuing to grow ahead of their markets.

Emerging markets grew 6.5% mainly driven by volume growth in Asia and price growth in Latin America. Developed markets declined by 0.2% with volume growth in North America offset by price deflation in Europe.

Gross margin improved by 50bps to 42.7% driven by margin-accretive innovations and acquisitions as well as savings programmes. Core operating margin at 15.3% was up 50bps and operating margin improved by 70bps to 14.8%. In local currencies, brand and marketing investment was sustained at the absolute level of the prior year and as a percentage of turnover was down by 40bps due to sales leverage and efficiencies from zero based budgeting.

Paul Polman, chief executive of Unilever.

Paul Polman, chief executive of Unilever, comments: “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. We have again grown ahead of our markets, driven by strong innovations that support our category strategies.”

He continues: “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.”

Unilever’s Foods category sustained its return to growth with good performances in dressings, driven by the squeezy packs with easy-out technology and organic variants, and savoury, led by cooking products in emerging markets. Hellmann’s and Knorr both delivered another year of strong growth by successfully modernising their ranges, with extensions into organic variants and with packaging that highlights the naturalness of their ingredients. Knorr’s digital campaign ‘Love at First Taste’ reached more than 100 million people. Sales in spreads declined, as modest growth in emerging markets was offset by the continued but slowing decline in developed markets. Food sales in 2016 were €12.5 billion with underlying sales growth of 2.1%. Core operating margin was 30bps lower due to higher overheads that included higher restructuring costs.

The Refreshment category achieved underlying sales growth of 3.5% to €10.0 billion and core operating margin was up 50bps primarily due to further improvements in the gross margin in ice cream. Growth in ice cream was driven by margin-accretive innovations behind Unilever’s premium brands. These included the Magnum Double range, the Ben & Jerry’s ‘Wich sandwich and dairy free range, as well as new variants of Talenti, the premium gelato brand which has grown 60% since acquisition two years ago. In leaf tea, growth improved in emerging markets but was held back by Unilever’s black tea business in developed markets. Unilever is continuing to build its presence in more premium segments with good growth from T2 and specialty teas. Unilever introduced Pure Leaf, already well-established in ready-to-drink tea, as a premium brand in our leaf tea portfolio in the US.

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