Unilever, the Anglo-Dutch consumer products giant, saw its shares rise this morning despite having reported a disappointing set of second-quarter figures.
Underlying sales growth for both the three months to the end of June and the first half of the year were markedly below what analysts had been looking for.
Excluding the spreads business, which has just been sold, sales growth in the second quarter was 1.9%, against the 2.2% or 2.3% that had been hoped for.
Discounters and Amazon cast a long shadow
For the first half, the figure was 2.7%, against analysts’ expectations that had been closer to 3%.
The shares gained 24.5p or 0.58% in morning trading in London to reach 4,227.5p.
But while the strike in Brazil and adverse currency movements were immediate concerns during the first half of the year, a longer-term worry for Unilever may lie in the intensely competitive market in which it is having to operate. So-called hard discounters – retailers who cut prices to the bone and take customers from traditional supermarkets – and the threat of Amazon and other online operations have put heavy downward pressure on margins.
In this new landscape, sales growth is driven much more by volume growth than by an increase in the value of sales. In the first half of this year, sales volumes rose 2.2% but prices increased by just 0.2%, while in the second quarter, volume growth was 1.2% but price growth just 0.3%.
Shareholders to vote on move to Netherlands
Broken down into divisions, beauty and personal care saw 2.9% volume growth in the first half and 1.9% volume growth in the second quarter, but a decline in prices of 0.2% and 0.3% respectively.
Unilever makes some of the best-known consumer brands in the world, including Colman’s mustard, PG Tips tea, Ben & Jerry’s ice cream, Hellman’s mayonnaise, Dove soap and Sure deodorant.
Mr Polman and his colleagues have proposed ending the long-standing dual nationality of the company and locating its headquarters in the Netherlands. This will be put to a vote later this year, with some shareholders concerned that the move would mean Unilever shares will be removed from London’s blue-chip FTSE 100 index.
That, in turn, would reduce demand for the stock as fund managers tracking the FTSE 100 would no longer need to hold them.
Mr Polman added: “Our expectation for the full year is unchanged. We expect underlying sales growth in the 3% – 5% range, an improvement in underlying operating margin and strong cash flow.”