By Peter Evans
LONDON-- Unilever PLC is getting a big boost from the U.S.
dollar, joining a clutch of European multinationals starting to
benefit from dramatic currency shifts since the start of the
year.
Unlike their U.S. rivals, many of Europe's biggest companies are
cheering the recent surge in the dollar. The euro is down around
12% against the dollar in 2015, and European firms with big
exposure to the U.S. are already seeing sharp increases in the
value of their sales.
Last year, many European consumer-goods companies blamed
currency devaluations--especially in emerging markets--for reducing
the value of their sales when translated back into euros. But now,
a weak euro is becoming their most potent weapon in the quest for
earnings growth.
Unilever, the Anglo-Dutch maker of Dove soap and Axe deodorant,
said its first-quarter sales rose 12%, largely on the back of a
strong dollar. The company said full-year earnings would swell by
8% to 9% this year at current exchange rates.
"Currencies have been all over the place, but we are now
starting to see a benefit," Jean-Marc Huët, Unilever's chief
financial officer, said in an interview. "The euro is weaker
against all our main currencies, except the ruble."
Unilever isn't alone. France's Danone SA, which makes Evian
water and Activia yogurt, said Wednesday that the dollar had
contributed to a 3.7% boost from exchange rates in the first
quarter. Analysts expect Nestlé SA, which reports sales Friday, to
get a lift from the U.S., its biggest market, even though the
robust Swiss franc is otherwise taking a toll on its results.
Meanwhile, U.S. companies are suffering against their European
rivals.
The value of consumer-goods companies on the euro-denominated
Stoxx Europe 600 has risen nearly 40% in the last six months,
compared with only 11% in the equivalent sector on the S&P 500,
according to FactSet.
Colgate-Palmolive Co. said foreign exchange had a 9% negative
impact on sales in its most recent quarter. Procter & Gamble
Co.--the world's biggest consumer-products maker, and Unilever's
chief rival across most major markets--said in January it was
expecting currency swings to curb profit by 12% in the year ending
in June. P&G said it was the "most significant fiscal-year
currency impact" it has ever incurred.
Unilever's fortunes highlight the divergence between U.S. and
European companies. Unilever said Thursday that currency movements
boosted sales by 10.6% in the first quarter. The euro's decline
against the yuan, Brazilian real and Indian rupee also provided a
boost.
Unilever has gained more than others because it combines large
exposure to the U.S.--where it makes around 14% of its EUR48.4
billion ($51.9 billion) annual sales--with reporting in euros.
SABMiller PLC and Diageo PLC also have large U.S. businesses but
report in dollars and pounds, respectively, and haven't seen any
notable currency boosts.
Analysts say other European companies also stand to make big
gains. Zara owner Industria de Diseño Textil SA, known as
Inditex--the world's biggest clothes retailer--will benefit from
lower sourcing costs than U.S. rivals who pay in dollars, said
Andrew Hughes, an analyst at UBS.
Inditex has a "long-term competitive advantage if the dollar
stays strong," Mr. Hughes said.
Currency tailwinds are providing much-needed momentum for
European consumer companies trying to revive growth.
After years of soaring sales growth, Unilever has struggled of
late as the developing markets in which it makes most of its sales
have stalled. Sales in emerging markets increased 5.4% in the first
quarter, down from 6.6% a year earlier.
Unilever has helped mitigate slowing markets by raising prices
and releasing premium versions of its products, such as gel-capsule
versions of OMO laundry detergent in Brazil and a range of
high-price Axe deodorants in the U.S. Overall, Unilever increased
prices by 1.9% across the company in the quarter.
Write to Peter Evans at peter.evans@wsj.com
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