Weak euro helps Unilever deliver better-than-expected sales growth
The figures
The slowdown in emerging markets hasn't stopped Unilever from recording a 12.3 per cent increase in turnover to €12.8bn (£9.22bn) in the first quarter of 2015. Even when your economy isn't growing as rapidly as it once did – looking good still remains a priority.
Shares rose by over three per cent in the first half hour of trading on Thursday as investors signalled their approval.
The consumer goods giant beat expectations with underlying sales growth of 2.8 per cent, but a 5.4 per cent jump in emerging markets. Chief executive Paul Polman had warned of a tough 2015 of slow sales growth in January, yet favourable currency movements such as the weak euro made it cheaper to sell in emerging markets and drove a small recovery.
Unilever makes a broad range of products, from Hellman's mayonnaise to Tresemme shampoo, however it was its personal care brands – which also includes Dove soap – that provided the biggest contribution with a 15.3 per cent jump in revenue to €4.2bn.
Sales in Russia deteriorated as consumer incomes were squeezed, yet turnover grew in most emerging markets.
Why it's interesting
Unilever's spreads business – which includes mayonnaise and Flora margarine – is underperforming and investors are putting pressure on the company to get rid. The company said performance in the business improved in the quarter but also noted "continued drag from market contraction in the United States and in Europe".
Personal care brands are seen as the way forward. Last month the group snapped up UK cosmetics brand Ren Skincare to bolster the business, following the purchase of Procter & Gamble's Camay soap in December last year.
However, these results may relieve the pressure to sell and give investors reason to pause: personal care growth delivered big turnover but remained below historic levels in competitive markets and did not grow as much as the foods or home care parts of the business.
What Unilever said
Polman said:
Despite high levels of currency and commodity volatility, we are now starting to see more tailwinds in or markets, and expect our initiative to deliver a further improvement in volume growth in the remainder of the year. We remain focused on competitive, profitable, consistent and responsible growth. Our priorities continue to be volume growth ahead of our markets, steady improvement in core operating margin and strong cash flow. This is our model for long-term creation, as evidenced by today's consistent dividend increase.
In short
A better-than-expected start to the year thanks to a weak euro.