Unilever quarterly sales slow as volumes grow but prices stodgy

Unilever sales growth slowed in the first quarter, but solid volume growth gave the consumer goods colossus confidence of hitting its full-year sales and margin targets in spite of flat prices.

Directors, who are coming in for flack from institutional shareholders over their decision to move the Anglo-Dutch group's corporate headquarters to Rotterdam, said they would raise the quarterly dividend 8% "reflecting confidence in our outlook" and begin the €6bn share buyback next month after agreeing to sell the spreads business for €6.8bn late last year.

Underlying sales growth in the first quarter of 3.4%, or 3.7% if excluding the spreads business, for which a full exit is expected towards the middle of the year. This compares badly to 4.3% growth excluding spreads in a strong fourth quarter but is an improvement on the full year growth of 3.5% from last year and in-line with analyst expectations.

Emerging markets underlying sales grew 5.1% with volume growth of 4.3% and price 0.8%. This is mostly down from the fourth quarter but compares to 5.9%, 1.6% and 4.2% growth across 2017, respectively.

Chief executive Paul Polman, for whom a successor is reportedly being sought after almost a decade in charge, said the first quarter demonstrated "another good volume-driven performance across all three divisions".

Beauty & Personal Care turnover of €4.9bn came from 3.9% underlying sales growth, as volumes grew 4% and price fell 0.2%. Home Care turnover hit €2.6bn as sales grew 4.9% from 4.8% volume growth as sales were flattish at 0.1%. Foods & Refreshment turnover of €5.1bn came from 2.3% sales growth a volumes rose 2.1% and price 0.2%.

Polman said the strong growth in emerging markets showed his 'Connected 4 Growth' programme was working, with further investment in the quality and speed of innovation at a central and local level "as a result of a more agile, consumer-facing organisation", while also focusing on making cost savings.

"For the full year, we continue to expect underlying sales growth in the 3-5% range and an improvement in underlying operating margin and cash flow that keep us on track for our 2020 goals. We intend to start a share buy-back programme of up to €6 billion in May to return the expected after-tax proceeds from the spreads disposal. We are raising the dividend by 8%, reflecting confidence in our outlook."

After the decision to choose the Netherlands for its corporate HQ, many UK-based investors and institutional shareholders have expressed concerns. Overnight, with three major shareholders saying they are “extremely worried” about the proposal that could see the company excluded from the FTSE 100 index, the Financial Times reported that Unilever had set up meetings with shareholders to convince them of the benefits of simplifying the business into one corporate entity based in Rotterdam, rather than London.

Unilever is also facing a number of ongoing investigations by competition authorities in countries including Italy and South Africa, along with other consumer goods companies. "Where appropriate, provisions are made and contingent liabilities disclosed in relation to such matters," the company said, having taken an €80m provision in the second half of last year.