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Unilever hampered by Brazil truckers’ strike

Unilever8FMCG global giant Unilever has performed solidly in some of its businesses but hampered by the truckers’ strike in Brazil.

“Our first half results show solid volume-driven growth across all three divisions, which was achieved despite the effects of an extended truckers’ strike in Brazil, one of our biggest markets. Growth was driven by strong innovation and continued expansion in future growth markets,” said Unilever CEO Paul Polman.

“The Connected 4 Growth change programme – which makes our organisation more agile and resilient – is driving the step-up in our innovation and savings programmes. As part of the continued portfolio evolution, we completed the exit from spreads on 2 July 2018. In anticipation of the disposal proceeds, we have already returned €3 billion as part of our €6 billion share buyback programme that will complete before the end of the year. We have also signed an agreement to acquire a 75% stake in the Italian personal care business Equilibra.”

However, growth was adversely affected by the situation in Brazil which reduced USG in the first half by around 60bps and 120bps in the second quarter. Emerging markets grew by 4.1% with an improved contribution from volume of 3.3%, while price growth was modest in a lower inflation environment. Sales in developed markets were slightly up as volume growth was mostly offset by continued competitive price deflation in Europe and North America. Turnover decreased 5.0% to €26.4 billion, which included an adverse currency impact of (8.9)% and 1.9% from acquisitions net of disposals.

Unilever said its food and refreshment division has continuously built its presence in emerging markets and sustained a strong performance in food service channels.

“We continued to modernise the portfolio by responding to consumer needs in fast-growing segments such as organic, natural, vegan, health and wellness,” added Polman.

The FMCG company has launched its new Magnum Core & Praliné variant and rolled out Ben & Jerry’s non-dairy in Europe. Knorr grew as it launched mini meals in Europe and Knorr Selects side dishes in the US. Meanwhile, Unilever’s Beauty & Personal Care has strengthened but growth in the second quarter was negatively impacted due to the truckers’ strike in Brazil as well as challenging competitive conditions in Europe.

‘‘Unilever’s second quarter results indicating strong volume growth, but weak pricing growth, shows how the company needs to keep evolving its brand portfolio to increase its exposure to premium personal care categories and emerging markets. Building brands with purpose will be key to long-term pricing growth,” commented Ronan Stafford, lead analyst at GlobalData.

“Unilever’s sale of the spreads business to KKR, completed in July 2018, and heavy M&A activity with 24 new deals signed since the start of 2015, show that Unilever’s product portfolio is in flux.”

Skin cleansing delivered good growth helped by new premium formats. These included aerosol mousse’s launched across five brands in Europe and the launch of Dove body polish in North America. In hair care, volume-led growth was majorly driven by Sunsilk and Dove.

“We are also uptrading consumers into the liquids segment in emerging markets, for example with Surf Excel Matics in India, and into premium formats in developed markets, such as the launch of Persil triple chamber liquid capsules in the UK,” said Polman in a statement.

Comfort delivered double-digit growth, helped by the roll-out of the ultra-concentrated Comfort Perfume Deluxe from Southeast Asia to the UK.

”Price competition will stay strong in most developed economies in the coming years, and is a major threat facing Unilever. This will be driven by the continued strength of discounters, strategic alliances in supply chains between large players such as Tesco and Carrefour, and disruption from online players such as Amazon, and direct to consumer sites like Dollar Shave Club, which Unilever acquired in 2016,” added Staford.

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