03 Nov 2008
(Bloomberg) -- Unilever, the world's second-largest consumer-products company, reported stagnant demand from cash- strapped western European consumers after raising prices, offsetting optimism about growth in emerging markets.
Western Europe was the worst-performing region, with growth ``behind the rest of the market'' and shrinking market share for goods where price increases were highest, such as shampoos and spreads, James Allison, head of investor relations, said on a call following today's third-quarter earnings report. Executives also said there were no ``immediate'' plans for stock buybacks.
Unilever shares swung between gains and losses. Analysts said price increases are turning western European shoppers to discount brands as higher bills and sinking house prices weigh on confidence. The maker of Lipton tea and Dove soap beat analysts' sales and profit estimates, and said it will likely exceed its own sales target on emerging-market demand.
``The underlying picture shows quite a stark slowdown in both Western Europe and North America,'' said Richard Withagen, an analyst at SNS Securities in
Third-quarter sales excluding acquisitions and currency swings rose 8.3 percent in the quarter, the London- and Rotterdam-based company said today, above the median analyst estimate of 6.6 percent. Net income in the quarter rose 63 percent to 1.64 billion euros ($2.16 billion), also beating estimates, on gains from asset sales.
Unilever, which jumped as much as 4.8 percent in early
Europe vs. Asia,
Underlying sales in
``We see continued down trading and shift to private-label in the more mature markets,'' said Paul Linssen, an analyst at Petercam in
Asian and African growth accelerated to 15.7 percent as the company pushed through higher prices and planned new product introductions, such as bringing Knorr bouillon jellies to
To help overcome a jump in commodity costs of almost 2 billion euros in the first nine months of the year, the 78-year- old company raised prices of products such as Omo detergent in
Faster Competitors
Chief Executive Officer Patrick Cescau said sales growth, excluding acquisitions and currency swings, will be ``well in excess'' of the company's long-term 3 to 5 percent target range. Unilever had last said growth would be ``ahead'' of that range.
Unilever has sold slower-growing units to catch up with Nestle, Groupe Danone SA and P&G, whose revenue is rising faster. Cescau completed the sale of Lawry's seasonings in July and the disposal of North American laundry brands two months later. Shareholders in
Nestle last week raised its revenue growth forecast to 8 percent. Cincinnati-based Procter & Gamble, the world's biggest consumer-products company, yesterday reported first-quarter profit that beat estimates after adding hand conditioners to its Dawn Plus dish detergent.
``Nestle and Danone have put more into brand marketing, into giving their products an edge, and you can see it has paid off,'' SNS Asset Management's Corne van Zeijl said yesterday. ``Unilever has to find more new products and put money behind marketing them.'' Van Zeijl manages about $1.4 billion, including Unilever shares, from the Dutch town of
Third-quarter net income rose to 1.64 billion euros, or 57 cents a share, from 1.01 billion euros, or 34 cents, a year earlier, and beat the 1.49 billion-euro median estimate in a survey of seven analysts.
Source : Bloomberg
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