Emerging markets rebound lifts Unilever results, shares

Written by Reuters | London | Updated: Jan 21 2014, 21:52pm hrs
UnileverUnilever turnover for the full year fell 3 percent, hit by foreign exchange rates and divestments. Reuters
A fourth-quarter recovery in emerging markets sales boosted consumer goods maker Unilever's 2013 results and sent its shares higher on Tuesday morning as investors greeted the news with relief.

Unilever generates more than half of its sales in developing and emerging markets. It was hit hard in the third quarter by slower economic growth in countries such as Indonesia and the devaluation of a handful of currencies including the Brazilian real and the Indian rupee - all of which crimped consumer demand.

However, the Anglo-Dutch firm, which makes a vast array of products from Ben & Jerry's ice cream and Lipton tea to Dove soap, said sales in emerging markets rose 8.4 percent in the fourth quarter, up from a 5.9 percent rise in the third quarter.

Chief Executive Paul Polman said the company was not changing its strategy in emerging markets, despite last year's economic slowdown, and pointed out that growth there remained well above that in developed markets.

"The good news ... is that a big proportion is just good volume growth - we're selling more products," Chief Financial Officer Jean-Marc Huet told Reuters in an interview.

He cited strength in Latin America and Southeast Asia. "From where we were in September, we're pleased with the performance of emerging markets."

By 1008 GMT Unilever shares were up 3.4 percent at 2520 pence. The company's shares have been about flat over the past year, underperforming an average 12 percent increase for its global consumer staples rivals, according to Thomson Reuters data.

"Investors appear to be breathing a sigh of relief," said Hargreaves Lansdown Stockbrokers analyst Keith Bowman. "Importantly, sales in the emerging markets have seen a rebound, with Russia, Turkey, China and Indonesia notable performers."


Polman told a conference call the group stood by his goals for 2014, which call for volume growth ahead of its broader markets and improvements in operating margin and cash flow.

He noted however that developed markets, which include the United States, had not seen any pick-up in consumer demand despite improving economic indicators.

Unilever posted core earnings of 1.58 euros per share, above analysts' average estimate of about 1.53 euros per share.

Turnover for the full year fell 3 percent, hit by foreign exchange rates and divestments. But underlying sales rose 4.3 percent, slightly ahead of analysts' expectations for a 4.2 percent gain.

Excluding the impact of foreign exchange, acquisitions and divestitures, overall underlying sales grew 4.1 percent for the fourth quarter, topping analysts' consensus of 3.9 percent, according to a company-supplied consensus.

That is up from growth of just 3.2 in the third quarter, after devaluations of certain emerging market currencies hurt demand.

Chief Financial Officer Huet cited contributions from equity stakes in other companies and a favorable tax rate in addition to growth.

Foreign exchange rates should reduce sales growth by about 5 percent in 2014, the company said.