UPDATE: Unilever May Permanently Scrap Fiscal Year Guidance
07 Mai 2009 - 3:21PM
Dow Jones News
Unilever PLC (UN, UL) may permanently abandon the practice of
providing the market with full-year sales and profit guidance, as
it encourages short-term thinking and may hinder the consumer goods
group's long-term prospects, its chief executive said Thursday.
There is an increasing move out of providing sales and profit
guidance, said Paul Polman at a briefing with reporters in London.
"Companies end up chasing short-term objectives when it's not
necessarily in the interests of the company long term."
Polman, a former Nestle SA (NESN.VX) executive, replaced Patrick
Cescau at the turn of the year and used his first presentation to
the market in February to scrap its sales and profit targets,
citing the uncertain economy. At the time, analysts assumed the
company would return to providing guidance once clarity had
returned.
However, Polman said Thursday that with salary and bonuses often
dependent on the company reaching its sales and profit guidance,
the issuing of guidance often led to short-term thinking by
management.
"We don't run the business in quarters," he said.
He pointed out that a number of Unilever's competitors had
followed its lead in not providing guidance after volatility in the
market led to a "continual restatement of guidance."
Instead. Polman said the company would focus on growing sales
consistently ahead of the market over the long term.
"People should not judge just on numbers but on the long term
strategy and the capabilities of the management," he said.
Chief Financial Officer Jim Lawrence said the company was
providing information on the drivers of its growth rather than
specific guidance. To that end, he said operating margin was likely
to fall in the second quarter of the year before rising once again
in the second half as commodity cost pressures eased.
-By Michael Carolan, Dow Jones Newswires; 44-20-7842-9278;
michael.carolan@dowjones.com