Unilever posts first-quarter sales growth amid spreads sell-off

Date: 24/04/2017 Comments: 0
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Unilever posts first-quarter sales growth amid spreads sell-off

Unilever has reported first-quarter turnover of 13.3 billion euros– up 6.1% – just two weeks after confirming that it would sell its spreads business. The company confirmed at the start of the month that it would sell brands like Flora, Stork and Bertolli as part of a major structural review prompted by Kraft Heinz’s 143 billion dollars approach. It had been under pressure to prove to investors that it could deliver success on its own.

Unilever’s latest update also shows that emerging markets contributed sales growth of more than 6% – particularly Asia; Africa, the Middle East and Turkey; and Russia, Ukraine and Belarus.

Tellingly, the company has reported separate figures for food and refreshments that exclude sales of spreads for the first time. They show turnover of €4.7 billion, with underlying sales growth across the rest of its food and refreshment portfolio of 3.5%.

That, of course, gives us a unique insight into Unilever’s struggling spreads business. With spreads included, its underlying sales growth across food and refreshments was 2.2% – driven largely by refreshments. But take the troubled spreads away and sales growth leaps to 3.5%. That shows the problems that brands like Flora and Stork are facing, with consumers slowly ebbing away from the margarines category amid changing health perceptions, and provides a first glimpse into Unilever’s reasoning for offloading the business.

Unilever chief executive Paul Polman said: “The first quarter shows growth once more ahead of our markets. This reflects our continued investment in both innovations and brand support, and reconfirms the strength of our long term sustainable compounding growth model. Alongside the sell-off, Unilever’s corporate review included a share buy-back programme worth 5 billion euros to appease investors and satisfy them that the company can be successful on its own.

It will establish a net debt to pre-tax earnings ratio of 2:1, and will also look at the ‘dual-headed structure’ that sees it listed separately in two countries. It remains unclear whether that means delisting the company in the Netherlands; Unilever’s global headquarters are located in London.

The food giant will also combine its food business with its refreshments division, which includes its beverage and ice cream brands like Ben & Jerry’s and Lipton. The move, it said, would help it “unlock future growth and faster margin progression”.

Source: www.foodbev.com

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