Unilever, Nestlé Bog Down in U.S. -- WSJ
April 21 2017 - 3:02AM
Dow Jones News
Wary spending crimps consumer goods; emerging markets give hope
for growth
By Saabira Chaudhuri
Consumer goods stalwarts Unilever PLC and Nestlé SA reported
first-quarter sales that were weighed down by cautious spending in
the U.S. and Western Europe on Thursday, forcing both companies to
rely on emerging markets for growth.
Unilever, which is under pressure after rebuffing a $143 billion
bid from Kraft Heinz Co, reported that underlying sales -- which
strip out the impact of currency volatility -- grew by 2.9% from
the same quarter a year earlier, beating analyst estimates for
growth of 2%.
The growth was driven by emerging markets, where underlying
sales climbed by 6.1%. In developed markets, sales declined by
1.5%, as Unilever confronted an array of troubles in North America,
where sales dropped by 1%.
Unilever Chief Financial Officer Graeme Pitkethly described the
decline as "somewhat unexpected," citing a slowdown in tax refunds,
concerns in the Hispanic community after President Donald Trump's
election, bad weather and gas prices as possible factors.
Nestlé said first-quarter revenue grew by 2.3% on an organic
basis -- which strips out the effects of currencies, acquisitions
and divestments -- but was roughly flat from a year earlier. The
company is also struggling with sluggish consumer demand in North
America where its confectionery and pet care sales declined.
Both companies had particular issues in the U.S.: Nestlé faced
intense competition in bottled water that forced it to cut prices;
Unilever sales were hit by the resurgence of ice cream rival Blue
Bell Creameries LP. The Anglo-Dutch company also said it faced a
tough U.S. hair care environment, with competition from companies
like L'Oréal SA and Johnson & Johnson.
Unilever and Nestlé also struggled with consumers trading down
to cheaper brands in Brazil and with low inflation in mainland
Western Europe.
Overall, Unilever, whose brands include Dove soap and Ben &
Jerry's ice cream, reported a 6.1% rise in revenue to EUR13.3
billion ($14.3 billion), up from EUR12.5 billion a year
earlier.
Unilever recently announced plans to sell or demerge its
margarine and spreads division, combine its food and refreshments
businesses and boost shareholder returns with a higher dividend and
share-buyback program.
The revamp comes as Chief Executive Paul Polman tries to appease
investors after rejecting the acquisition attempt by Kraft Heinz.
The spreads division has struggled as consumers eat less bread and
opt for butter over margarine and investors have called for years
for its sale.
On Thursday, Unilever disclosed results from its spreads
business for the first time, saying that overall underlying sales
growth would have risen by 3.4% without the drag from that
unit.
Mr. Pitkethly said Unilever has just begun the auction process
for the spreads business and is hoping to attract interest from
both private equity players and other companies. If Unilever
doesn't get a high enough price it will choose to demerge the
business and spin it off rather than sell it, he said. Mr. Polman
had for years refused to sell the unit, saying no bidder had
offered his asking price.
Analysts have estimated the business could sell for between EUR7
billion and EUR8 billion.
Unilever reported flat first-quarter sales in its foods
division, including spreads, and 5.4% growth in refreshments, which
includes tea and ice cream. In personal care, Unilever reported a
3.1% rise in underlying sales, while in home care, sales rose by
4.1%.
Nestlé reported 3.1% growth on an organic basis in its waters
division, 1.1% acceleration in nutrition and double-digit growth in
skin health.
Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com
(END) Dow Jones Newswires
April 21, 2017 02:47 ET (06:47 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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