Maker of Ben & Jerry's and Magnum fails to meet analyst expectations after cold weather
*Unilever* has fallen back after the Anglo-Dutch consumer goods group suffered from weakness in Europe and poor ice cream sales thanks to the recent cold weather.
The company, whose products range from Bovril to Dove soap to Ben & Jerry's and Magnum, said underlying first quarter sales rose 4.9%, helped by a 10.4% rise in emerging markets. Analysts had expected growth of around 5.6%.
In Europe, underlying sales fell 3.1% as the eurozone struggled to deal with austerity. As well as disappointing ice cream sales, the margarine business was hit by increased promotional activity and consumers switching to alternatives. Paul Polman, the chief executive, said:
Emerging markets delivered double digit growth for the eighth successive quarter and represented over 57% of our turnover.
Developed markets growth remained sluggish. Europe faced a particularly strong prior year comparator and whilst the overall performance was solid, the reported growth was held back by the slow start to the ice cream season and weakness in spreads.
The news has sent Unilever shares 55p lower to £27.90, a near 2% decline which makes the company the second worst performer in the FTSE 100 behind another company reporting disappointing figures, *AstraZeneca*, down 89p at £33.01.
Analyst Marco Gulpers at ING said the slow start for Unilever meant the 6.2% growth for the full year might be too high:
In our view expectations are too bullish for Unilever and we expect the shares to see some profit taking today.
Darren Shirley at Shore Capital said:
After a sustained period of outperforming market expectations, today's update is the first miss for a number of years and as such we may see a notably weakness in the share price today. However, we remain positive in the merits of Unilever and reiterate our buy recommendation.
Martin Deboo at Investec was also positive:
Unilever have missed expectations in the first quarter on weak volumes and weak Europe. We expect this to be negative for the shares this morning, but observe that i) Unilever's emerging market story remains intact and ii) the first quarter volume consensus was somewhat naïve, to our eyes. Meanwhile developing market growth remains robust. Buy on any early weakness.
Liberum Capital said a weak performance in food - which includes the spreads business - could lead to a wholesale disposal of the division, leaving the company to concentrate on personal care:
We continue to advocate that Polman should consider a wholesale divestiture of the food lines (we argue the probability of this happening is higher post 3G/Heinz, and higher with weak results in food by Unilever). So we keep the buy on valuation despite the slower home and personal care sales growth this quarter (for Unilever standards).
Elsewhere *British American Tobacco* is 71p better at £36.19 after the cigarette maker said it expected to grow earnings this year as it reported a 5% rise in first quarter revenues.
But *J Sainsbury* has dropped 5.9p to 381p as Credit Suisse issued a downbeat note. Analyst Andrew Kasoulis said:
After recent share price strength and ahead of 2012/13 full year results on 8 May, we reiterate our underperform rating and 285p target price (25% potential downside).
Earnings downgrades at Tesco and Morrison have been severe. It is to Sainsbury's credit that it has resisted so far. But that could change. Our analysis shows similar hot pressures building as those preceding the Tesco warning – Sainsbury's staff levels per square foot have fallen along the same lines (down around 20% in six years) as at Tesco, and Sainsbury's sales per full time equivalent are as high as Tesco pre-warning and much higher than Morrison. Reported by guardian.co.uk 2 days ago.
*Unilever* has fallen back after the Anglo-Dutch consumer goods group suffered from weakness in Europe and poor ice cream sales thanks to the recent cold weather.
The company, whose products range from Bovril to Dove soap to Ben & Jerry's and Magnum, said underlying first quarter sales rose 4.9%, helped by a 10.4% rise in emerging markets. Analysts had expected growth of around 5.6%.
In Europe, underlying sales fell 3.1% as the eurozone struggled to deal with austerity. As well as disappointing ice cream sales, the margarine business was hit by increased promotional activity and consumers switching to alternatives. Paul Polman, the chief executive, said:
Emerging markets delivered double digit growth for the eighth successive quarter and represented over 57% of our turnover.
Developed markets growth remained sluggish. Europe faced a particularly strong prior year comparator and whilst the overall performance was solid, the reported growth was held back by the slow start to the ice cream season and weakness in spreads.
The news has sent Unilever shares 55p lower to £27.90, a near 2% decline which makes the company the second worst performer in the FTSE 100 behind another company reporting disappointing figures, *AstraZeneca*, down 89p at £33.01.
Analyst Marco Gulpers at ING said the slow start for Unilever meant the 6.2% growth for the full year might be too high:
In our view expectations are too bullish for Unilever and we expect the shares to see some profit taking today.
Darren Shirley at Shore Capital said:
After a sustained period of outperforming market expectations, today's update is the first miss for a number of years and as such we may see a notably weakness in the share price today. However, we remain positive in the merits of Unilever and reiterate our buy recommendation.
Martin Deboo at Investec was also positive:
Unilever have missed expectations in the first quarter on weak volumes and weak Europe. We expect this to be negative for the shares this morning, but observe that i) Unilever's emerging market story remains intact and ii) the first quarter volume consensus was somewhat naïve, to our eyes. Meanwhile developing market growth remains robust. Buy on any early weakness.
Liberum Capital said a weak performance in food - which includes the spreads business - could lead to a wholesale disposal of the division, leaving the company to concentrate on personal care:
We continue to advocate that Polman should consider a wholesale divestiture of the food lines (we argue the probability of this happening is higher post 3G/Heinz, and higher with weak results in food by Unilever). So we keep the buy on valuation despite the slower home and personal care sales growth this quarter (for Unilever standards).
Elsewhere *British American Tobacco* is 71p better at £36.19 after the cigarette maker said it expected to grow earnings this year as it reported a 5% rise in first quarter revenues.
But *J Sainsbury* has dropped 5.9p to 381p as Credit Suisse issued a downbeat note. Analyst Andrew Kasoulis said:
After recent share price strength and ahead of 2012/13 full year results on 8 May, we reiterate our underperform rating and 285p target price (25% potential downside).
Earnings downgrades at Tesco and Morrison have been severe. It is to Sainsbury's credit that it has resisted so far. But that could change. Our analysis shows similar hot pressures building as those preceding the Tesco warning – Sainsbury's staff levels per square foot have fallen along the same lines (down around 20% in six years) as at Tesco, and Sainsbury's sales per full time equivalent are as high as Tesco pre-warning and much higher than Morrison. Reported by guardian.co.uk 2 days ago.