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Full year results show continued profitable growth in volatile markets


Average read time: 6 minutes

Today, Unilever announced its results for the full-year 2018, which show continued profitable growth despite volatile market conditions.

Dove products
  • Underlying sales growth excluding spreads was 3.1% with 2.1% volume and 1.0% price
  • Price growth in Argentina is excluded from underlying sales growth from July due to hyperinflationary status. Reported growth would otherwise have been 3.4%
  • Underlying operating margin increased 90bps
  • Underlying earnings per share increased 5.2%
  • Turnover was impacted by an adverse currency impact of 6.7% and the disposal of spreads

Comment from CEO Alan Jope

“2018 was a solid year for Unilever, with good volume growth and high-quality margin progression.

“Looking forward, accelerating growth will be our number one priority. With so many of our brands enjoying leadership positions, we have significant opportunities to develop our markets, as well as to benefit from our deep global reach and purpose-led brands.

“We will capitalise on our strengthened organisation and portfolio, and our digital transformation programme, to bring higher levels of speed and agility. Strong delivery from our savings programmes will improve productivity and fund our growth ambitions.

“In 2019 we expect market conditions to remain challenging. We anticipate underlying sales growth will be in the lower half of our multi-year 3–5% range, with continued improvement in underlying operating margin and another year of strong free cash flow. We remain on track for our 2020 goals.”

Our markets

Market conditions have been challenging throughout the year, particularly in the second half where currency devaluations and rising commodity costs put pressure on consumer demand. The economic crisis in Argentina led to the economy being classified as hyperinflationary.

Unilever overall performance

In 2018, we again delivered profitable growth with another year of strong gross margin progression and double-digit growth of constant underlying earnings per share. Underlying sales excluding spreads grew 3.1% with 2.1% from volume. Price growth in Argentina, which was excluded from USG from 1 July 2018, would have contributed 50bps. The deterioration in the conditions for consumers in Argentina resulted in a full year underlying volume decline of -10% which had a -30bps impact on Unilever volume growth. Emerging markets grew by 4.6% with 2.8% from volume driven by another year of strong growth in Asia AMET RUB. Sales in developed markets grew modestly, helped by a stand out year for ice cream in Europe as well as the continued transformation of our portfolio towards faster growing segments. Turnover decreased 5.1% which included an adverse currency impact of 6.7% and the disposal of spreads which was completed on 2 July 2018.

Underlying operating margin improved by 90bps to 18.4%. The improvement was high-quality with gross margins up 50bps driven by margin-accretive innovation and continued strong delivery from our ‘5-S’ savings programmes. Brand and marketing investment was 10bps lower, whilst absolute spend in local currencies increased by €60 million, even after productivity gains from zero based budgeting. Overheads were down 30bps. Constant underlying earnings per share increased 13% and underlying earnings per share increased 5.2% after an adverse impact of 7.6% from currencies. Over €10 billion was returned to shareholders through share buy-backs and dividends.

Beauty & Personal Care

Underlying sales grew 3.1% with 2.5% from volume. Our biggest brand Dove delivered another year of broad-based growth.

Skin care grew strongly helped by innovations including a new Vaseline range with clinical strength moisturisation, as well as new brands such as Love, Beauty & Planet which is helping us to address the fast-growing naturals trend. Growth in skin cleansing was helped by innovations on the core such as the relaunch of Lifebuoy with Active Silver, new premium formats including Dove Exfoliating Body Polishes as well as our new cleansing brands such as Korea Glow which launched in the fourth quarter.

Deodorants delivered good volume growth helped by strong performance on Dove but pricing in deodorants was muted. The newly acquired Schmidt’s grew strongly.

Sales in oral care were flat due to ongoing competitive pressures.

Prestige performed well with double digit growth on Hourglass, REN, Living Proof and Kate Sommerville as well as improved momentum on Dermalogica and Murad. Dollar Shave Club grew double digits and continued to build scale in the US.

Underlying operating margin increased 80bps mainly reflecting brand and marketing efficiencies as a result of our zero based budgeting programme.

Foods & Refreshment

Underlying sales excluding spreads grew 2.3% with 1.6% from volume.

Ice cream had another strong year helped by innovations on our premium brands which included a new Magnum Praline variant and a non-dairy range of Ben & Jerry’s. The launch of Kinder® ice cream and good weather helped to deliver strong ice cream growth in Europe.

Sales in tea grew modestly. Our emerging markets growth was driven by good performance on our core brands like Brooke Bond in India. In developed markets, challenges in black tea offset good growth from Pukka and our new organic Lipton range.

In savoury, Knorr was helped by good performance of cooking products in emerging markets, and more organic and natural innovations such as a new ‘soup in glass’ range.

In dressings, campaigns centred around Hellmann’s purpose to fight food waste helped to increase brand equity, but sales were held back by promotional intensity, particularly in the US. Our actions to transform the portfolio are working. Strong innovations including Knorr rice and pasta pots as well as our new brands Red Red, Prep Co and Mãe Terra helped us build scale in the fast-growing snacking segment and we announced an agreement to buy Horlicks in India, Bangladesh and 20 other markets.

Underlying operating margin increased 80bps as a result of strong gross margin improvement and lower overheads, despite an adverse impact from the spreads disposal.

Home Care

Underlying sales grew 4.2% with 2.3% from volume.

Home and hygiene grew strongly, led by Sunlight which was helped by a new communication focused on building functional awareness, as well as the continued success of Domestos Toilet Blocks.

In fabric sensations, Comfort was helped by market development in India and China as well as the launch into Germany.

Fabric solutions also grew strongly helped by our strategy to encourage consumers in emerging markets to uptrade to premium formulations like Surf Excel Matics in India and innovations such as Omo Eco Active with recycled packaging, plant extracts and naturally derived fragrances. Seventh Generation grew well.

Underlying operating margin increased by 80bps driven by lower overheads and also helped by zero based budgeting driven brand and marketing efficiencies.

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