Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Unilever's back to the future goals disappoint

Published 04/02/2021, 07:09
Updated 04/02/2021, 12:05
© Reuters. FILE PHOTO: Unilever headquarters in Rotterdam

© Reuters. FILE PHOTO: Unilever headquarters in Rotterdam

By Siddharth Cavale

(Reuters) - Unilever (LON:ULVR) restored its pre-pandemic sales growth target on Thursday, underwhelming investors seeking more ambitious goals amid strong consumer demand for plant-based food products and home care brands.

The Ben & Jerry's ice cream and Dove soap maker said it would be "laser focused" on driving top line sales growth and would invest 1 billion euros in each of 2021 and 2022 in high growth areas including business to business e-commerce retailing, plant-based food and beauty products.

This would help Unilever to achieve a long-term underlying sales growth target of 3% to 5%, restoring a previous forecast set in 2020 but pulled in April due to uncertainty caused by the coronavirus pandemic.

Unilever shares were down about 4%.

"Even though we have come close to hitting the 3-5% target range in 2020, it is not enough," Unilever chief executive Alan Jope said.

Jope also said the company would be focused on making acquisitions in hygiene, skin care, functional nutrition and plant based foods.

Rival consumer goods group P&G last month raised its fiscal 2021 sales growth forecast to a range of 5% to 6%, from 3% to 4%, mainly on the back of a strong first half.

The coronavirus pandemic has boosted sales of packaged food companies such as Unilever, Nestle and Kraft Heinz (NASDAQ:KHC), but there have also been sharp declines in foods served in public places such as on beaches and at restaurants.

Unilever Chief Financial Officer Graeme Pitkethly said the company expected the food service business to continue to be hit in Europe, where a spike in cases has led to stringent lockdowns.

Pitkethly also said he expects a mid-to-high-single digit rise in raw material costs in the first half of 2021, which Unilever hopes to offset by raising prices.

"Looking forward the group sees a return to more predictable sales growth as we move beyond the pandemic later this year," Steve Clayton, fund manager at Hargreaves Lansdown (LON:HRGV) said.

"Ongoing restructuring to position the group further toward digital commerce will hold back earnings in the near term, perhaps explaining the market’s lack of enthusiasm for the numbers this morning," Clayton said.

Unilever's full-year underlying sales growth came in at 1.9%, in-line with market estimates. Emerging market sales rose 1.2% in the full-year.

China returned to growth in the second quarter as restrictions were eased, while India returned to growth in the third quarter. Sales accelerated into the high single digits in the fourth quarter in these two markets.

"Slower EM's (emerging markets) in Q4 is the root cause of the top line miss to Jefferies estimates, playing out against a background of extended lockdown activity worldwide," Jefferies analysts wrote in a note. The brokerage expected fourth quarter underlying sales growth of 4.4%.

Developed market sales rose 2.9% in 2020, driven by strong demand for in-home foods, ice-cream and hygiene products in North America. In Europe, sales were driven by home care products.

The company's results end a historic year for the company which in November ditched its Anglo-Dutch dual-headed structure in favor of a single corporate entity based in London.

Turnover for the quarter came in at 12.1 billion euros ($14.53 billion), versus analysts' estimates of 12.16 billion euros. Full-year 2020 turnover came in at 50.7 billion euros, slightly lower than the 50.81 billion euros, analysts had expected.

Adjusted earnings per share for the year were 2.48 euros, one cent lower than analysts' estimates.

© Reuters. FILE PHOTO: TRESemme products, a Unilever Plc brand are seen on a shelf

($1 = 0.8328 euros)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.