Full year highlights
- Underlying sales growth 2.9%, ahead of our markets, with volume 1.0% and price 1.9%
- Turnover declined (2.7)% to €48.4 billion including a negative currency impact of (4.6)%
- Core operating margin up 40bps at current exchange rates
- Free cash flow of €3.1 billion after €0.8 billion of tax on disposal profits
- Core earnings per share up 11% at constant exchange rates, up 2% at current exchange rates to €1.61
Fourth quarter highlights
- Underlying sales growth 2.1% with volume (0.4)% and price 2.5%
- Turnover increased 2.4% including a positive currency impact of 1.6% and net acquisitions & disposals (1.3)%
Commenting on the results, Unilever CEO Paul Polman says: “Despite a very challenging year for our industry with significant economic headwinds and weak markets we have delivered another year of competitive underlying sales growth and margin expansion. This consistency, now established over the last six years, has been achieved during a period of unprecedented volatility as we have built a more resilient company.
“We do not foresee a significant improvement in market conditions in 2015. Against this background, we expect our full year performance to be similar to 2014 with the first quarter being softer but growth improving during the year.”
Market growth was weak in emerging countries as economic pressures impacted consumer demand. Developed markets were flat, with a modest pick-up in North America partly offsetting market contraction in Europe. Globally, our markets grew by around 2.5% with flat volumes.
In 2014 we grew ahead of our markets, both in volume and value. With weaker consumer demand, underlying sales growth in emerging markets slowed to 5.7% whilst developed markets declined by (0.8)%. Home Care, Beauty & Personal Care and Refreshment all grew but Foods & Refreshment was adversely impacted by spreads.
In the fourth quarter underlying sales grew 2.1% with a higher contribution from price but volumes remained weak. As expected, the trade de-stocking in China continued and led to a sales decline of around 20%. This particularly impacted Beauty & Personal Care and Home Care. In many regions, competitive intensity remains high in all divisions, and notably in Beauty & Personal Care.
For the full year core operating margin improved 40bps to 14.5% at current exchange rates. Gross margin declined by 20bps to 41.4%. This was largely driven by currency related cost increases in emerging markets, partly offset by pricing, savings and mix such as margin-accretive innovation. Significant efficiencies in the cost of producing advertising allowed us to increase our share of spend whilst maintaining brand and marketing investment at 14.8%. Overheads were reduced by 60bps, benefiting from Project Half savings.
Beauty & Personal Care
Beauty & Personal Care grew ahead of weaker markets helped by a strong set of new product launches. Deodorants benefited from the success of the compressed aerosol range in Europe, continued growth from Dove innovations and most recently from the cross-brand launch of dry sprays in North America. Skin cleansing growth was driven by strong performances from Lifebuoy and the improved Dove Nutrium Moisture body wash. The launch of Baby Dove in Brazil has been well received by consumers. In December we announced the acquisition of the Camay and Zest brands which will strengthen our portfolio in emerging markets, particularly in Mexico.
In hair, the Dove Advanced Hair series successfully established the premium Oxygen Moisture range in North America and this has now been extended to Europe. Hair growth was also underpinned by strong performances from Sunsilk Naturals in Asia, the TRESemmé 7 Day Keratin Smooth range and the successful introduction of Clear in Japan.
Foods & Refreshment
Savoury and dressings both grew but spreads declined due to lower consumer demand for margarine in Europe and North America. Savoury growth was backed by successful market development campaigns for cooking ingredients in emerging markets. In India and Pakistan, Knorr built further scale driven by good performances in stock cubes, soups and noodles. Indonesia saw strong growth of Royco and Bango, both of which are well adapted to meet local needs. Dressings continued to grow helped by the launch of Hellmann’s in the Netherlands and Portugal.
In spreads we launched blends of vegetable oil and butter such as Gold from Flora. We gained market share in margarine but this was insufficient to offset the decline of the category which also saw price deflation in a benign commodity cost environment. We continued the pruning of our Foods & Refreshment portfolio in 2014 with a number of disposals, including Ragu and Bertolli pasta sauces in North America and the meat snacks business under the Bifi and Peperami brands in Europe.
Good growth in ice cream was driven by a strong innovation programme. The United States returned to growth and gained market leadership with good contributions from Ben & Jerry’s Cores and Breyer’s Gelato. This will be enhanced with the recent acquisition of Talenti gelatos and sorbettos. Magnum celebrated its 25th anniversary with activities that reinforced the chocolate credentials of the brand.
Leaf tea grew although performance was mixed. We saw growth in the United States driven by the success of Lipton K-Cups® and new liquid concentrate but weaker sales in Russia and Poland. In the United Kingdom we launched a range of fruit and green teas under the PG Tips brand to target this growing segment.
Laundry had another year of broad-based growth, driven by sustained investment in innovation, market development and white spaces expansion. We have successfully extended the Omo brand into Saudi Arabia and the Gulf, and we have launched a range of Omo stain removers and pre-treaters in Brazil. Fabric conditioners grew well through super-sensorial variants like Comfort Aromatherapy in South East Asia and Latin America.
Household cleaning growth continued to outpace the market. Cif, Domestos and Sunlight delivered strong growth and innovations such as Sunlight Nature landed well in South East Asia. The expansion into new geographies and formats continued in 2014 as we launched Domestos in several countries in Africa.