Emerging Markets Drive Sales of Consumer Goods Companies Unilever and Nestlé

Date : 04/18/2019 @ 12:40PM
Source : Dow Jones News
Stock : Unilever Dr (UNA)
Quote : 53.14  -0.57 (-1.06%) @ 2:00AM
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Emerging Markets Drive Sales of Consumer Goods Companies Unilever and Nestlé

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By Saabira Chaudhuri 

Unilever PLC and Nestlé SA both reported higher first-quarter sales buoyed by stronger results in emerging markets.

Rising sales in developing countries for years have helped consumer-goods companies offset sluggish growth in developed markets. But the industry has faced a bigger challenge of late because of volatile currencies and political uncertainty. That's particularly been the case in Latin America where Argentina is enduring an economic crisis and Brazil's economy continues to recover from a truckers' strike last year.

However, those issues appeared to abate for Nestlé and Unilever in the first three months of the year, with both reporting an uptick in emerging-market growth driven by volumes and prices.

Unilever, which sells Dove soap and Hellmann's mayonnaise, reported underlying sales growth -- which strips out acquisitions, disposals and currency movements -- of 5% in emerging markets, up from 4.5% in the fourth quarter. It grew 0.3% in developed markets.

Nescafe coffee maker Nestlé reported sales growth of 6.3% in emerging markets, stripping out acquisitions, disposals and currency moves. Developed market growth was 1.2%.

Both companies flagged an improving situation in Brazil, although Unilever Chief Financial Officer Graeme Pitkethly cautioned the country's economy was still "very difficult."

Unilever said sales in Brazil rose by mid-single digits as it pushed through higher prices even as volumes declined.

Nestlé reported an even stronger improvement in the country -- its fourth biggest market -- saying sales rose by a double-digit percentage with both pricing and volume up. The world's biggest packaged-foods maker said Latin America overall saw mid-single digit sales growth helped by dairy, confectionery and petcare.

Overall, Nestlé reported total first-quarter sales of 22.18 billion Swiss francs ($21.98 billion), up from 21.26 billion francs in the same period a year earlier. Comparable sales rose 3.4%, beating the 2.8% gain analysts had expected.

Nestlé said sales in the Americas improved -- up 3.4% compared with 2% in prior-year period -- driven by higher prices in the U.S., as well as Brazil.

Overall revenue at Unilever fell to EUR12.4 billion from EUR12.6 billion reflecting the sale of the company's spreads business last summer. Unilever reported underlying sales growth -- which strips out the impact of currency and acquisitions and disposals -- of 3.1%, beating the 2.8% analysts were expecting.

The company called out Indonesia, Thailand and Vietnam as having performed well and said both China and India had a strong quarter.

However, the company is still facing a tough environment in some key emerging markets. In Turkey, Unilever is "battling with high inflation and tricky economics," Mr. Pitkethly said on a call with reporters.

Results also continued to be hit by hyperinflation in Argentina where companies have been forced to significantly increase prices, causing volumes to drop. Consumer prices in Argentina jumped 54.7% in March from a year earlier, according to Argentina's National Institute of Statistics and Censuses.

Unilever said its volumes in Argentina dropped 11% in the quarter.

Given the abnormal nature of the price rises in Argentina, Unilever strips these out, an accounting measure it said makes comparing its results with those of peers difficult since different companies are adopting various accounting approaches for Argentina.

Brian Blackstone contributed to this article

Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com


(END) Dow Jones Newswires

April 18, 2019 07:25 ET (11:25 GMT)

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