UN Unilever NV

When Paul Polman took the helm of Anglo-Dutch consumer goods giant Unilever PLC (UN,UL) in January 2009, he pledged a reversal of the company's strategy. A year on, and his quest to put volume growth ahead of raising prices is paying off, as the company Thursday reported strong volume growth and an increase in margins, despite lower revenues and earnings.

In driving sales and profits, consumer goods companies always have to choose a balance between volumes and prices and, prior to Polman's arrival, Unilever was criticized for allowing volumes to slip as it aggressively raised prices.

"We will continue to focus on volume growth as the main driver of long-term value creation, whilst delivering steady and sustainable year-on-year improvement in operating margin and strong cash flow," Polman said Thursday as the maker of Ben & Jerry's ice cream, Dove soap and Lynx deodorant said sales excluding acquisitions, disposals and currency movements grew 1.8% in the fourth quarter.

The growth was slower than the 3.4% rise the company reported in the previous three months, but was in line with analysts' forecasts.

This measure of sales is closely watched because it's a directly comparable measure of how the company's products are selling.

The sales rise was wholly a result of a 5% increase in volumes, which followed a 3.6% volume rise in the previous three months. Prices in the fourth quarter fell 3.1%.

Still, Unilever's operating margin was up one percentage point in the period, compared with expectations of a 1.1 percentage point rise, helped by a sharp drop in commodity prices in the past year.

The fall in commodity prices allowed the company to absorb the price decreases and to significantly boost spending on advertising and promotions. A&P spend grew 2.4 percentage points in the fourth quarter despite cheaper media rates.

The company's shares have risen almost 30% in the past year, as Polman's strategy change generated quick results. But at 0810 GMT, the shares were down 34 pence, or 1.7%, at 1901 pence in a lower London market.

Its total sales in the fourth quarter dropped 5% to EUR9.66 billion due to unfavorable exchange rates and because it sold some business units, while net profit dropped to EUR831 million, from EUR1.14 billion a year ago when a number of disposals boosted the bottom line.

Polman warned that consumer spending would continue to be pressured this year due to the economic downturn, and said competition for that spending would increase.

Shore Capital's Darren Shirley said price deflation would remain a feature of Unilever's business for at least the first half of 2010.

While most regions experienced growth in both underlying sales and volumes, if not prices, Unilever's performance in Western Europe continues to be sluggish, with underlying sales down 4.2% and volumes down 0.7%.

The company said Western Europe had actually shown an improving trend but that the numbers were impacted by two fewer trading days in the period than in the fourth quarter last year. Volume growth would have been between 1% and 2% but for this impact, it said.

Unlike the rest of Unilever's business, Western Europe's operating margin fell during the period, down 2.4 percentage points on the year, as the company ramped up marketing investment and absorbed the impact of a weak U.K. currency.

Unilever named Jean-Marc Huet as its chief financial officer in December, replacing Jim Lawrence. Lawrence was believed to be in the running for the top job at Unilever until Paul Polman was appointed chief executive officer from rival Nestle SA (NESN.VX).

-By Michael Carolan, Dow Jones Newswires; 44-20-7842-9278; michael.carolan@dowjones.com

Unilever NV (NYSE:UN)
Historical Stock Chart
Von Jun 2024 bis Jul 2024

Unilever NV (NYSE:UN)
Historical Stock Chart
Von Jul 2023 bis Jul 2024