The fast-moving consumer products giant
) recorded underlying sales growth of 3.2% (in local currency) in
the third quarter of 2013. The increase was driven by underlying
volume and pricing gains of 1.9% and 1.3%, respectively.
Increased investment in innovation and expansion of brands to new
markets contributed to top-line growth.
The company's underlying sales increased only 5.9% (in local
currency) in the emerging markets compared to 10.3% growth
recorded in the second quarter of 2013. The company generates a
substantial portion of its revenues from the emerging markets.
Hence, a slowdown in sales in this region in the recent past
resulted in a soft top line.
Continued weakness in Brazil, Russia, India and China as well
as weaker exchange rates, particularly in Brazil, India, South
Africa, Argentina and Indonesia, hit the company's sales in the
quarter. In addition, there was no improvement in Europe and
North America. The developed markets showed some improvement.
Though sales declined 0.3% in the third quarter due to global
macroeconomic headwinds, the rate of decline moderated from the
The segment posted solid results on the back of strong
performances in all its sub-categories. In the Hair section, the
company launched Dove Repair Expertise across most of its markets
and introduced Toni&Guy into new markets. Hair products like
Clear, TRESemme, and Sunsilk also progressed well.
Skin cleansing products growth was driven by Dove, Lifebuoy
and Vaseline. Deodorants also grew on the back of strong
performance by Dove and Rexona brands. Despite increased
competition, the oral business improved owing to its 'Brush Day
and Night' campaign and new product launches.
In this segment, dressings continued to grow while the spreads
performance remained negative. Though spreads showed little
improvement in the quarter, it was sluggish due to weakness in
the market and lower pricing.
In this segment, the laundry section grew on the back of
increased volumes and the success of premium formats such as
liquids. Household care continued to grow driven by Domestos and
Segment performance was mixed in the quarter. In the ice-cream
category, sales benefited from good summer weather in northern
Europe, offset by weaker performance in southern Europe and
particularly in Italy. The Tea category benefited from new
launches, which was offset by a product recall in Brazil.
During the third quarter, Unilever completed the sale of its
Wish-Bone salad dressing business to
Pinnacle Foods Inc
) for $575 million in cash. The deal was announced on Aug 12. The
sale does not include Unilever's facility in Missouri, where the
brands are produced. Post-acquisition, the facility will continue
to manufacture brands for Pinnacle Foods under a third-party
Of late, Unilever has been divesting its businesses to focus
its resources on the core food portfolio. In Jan 2013, the
company sold its Skippy peanut butter business to Austin,
Minn.-based producer of branded food and meat,
Hormel Foods Corporation
) for $700 million in cash. In Aug 2012,
ConAgra Foods Inc.
) bought Unilever's Bertolli and P.F. Chang's frozen meals brands
for $265 million.
We remain concerned about the uncertain macro-economic
environment, particularly in Europe. Though the company forecasts
volume gains and strong free cash flow in the near-term,
commodity cost inflation will continue to be a headwind. Unilever
holds a Zacks Rank #3 (Hold).
CONAGRA FOODS (CAG): Free Stock Analysis
HORMEL FOODS CP (HRL): Free Stock Analysis
PINNACLE FOODS (PF): Free Stock Analysis
UNILEVER N V (UN): Free Stock Analysis Report
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