Consumer products giant Unilever PLC (LON:ULVR) saw its 2016 revenues fall as the Anglo-Dutch firm continues to battle adverse movements in foreign exchange rates and tough conditions in Latin America and India, although profits rose thanks to volume growth.
The maker of Dove soap, Knorr soup and Ben & Jerry's ice cream, said its 2016 pretax profit increased to €7.47bn (£6.33bn), up from €7.22bn (£6.11bn) in 2015, even though its revenues decreased to €52.71bn (£44.67bn) from €53.27bn (£45.14bn).
Underlying sales rose 2.2% in the fourth-quarter, compared with consensus expectations of 2.8%, down from growth of 3.2% in the third quarter and 4.7% in the first half of the year.
For the full year, Unilever’s sales growth was 3.7%, below the 3.9% figure analysts were expecting.
Unilever said revenue was hit by negative movements in foreign exchange rates, although at constant currencies underlying revenues rose 3.7%, thanks to a 2.8% rise in prices and 0.9% growth in volume.
The FTSE 100-listed firm - which controversially tried to hike prices for its Marmite spread in the UK following sterling’s post-Brexit slump - noted that conditions were particularly tough in Brazil and India, the latter which suffered from the Indian government's demonetisation programme.
Tough conditions …
Unilever chief executive Paul Polman said: "“The tough market conditions which made the end of the year particularly challenging are likely to continue in the first half of 2017. Against this background, we expect a slow start with growth improving as the year progresses."
He added: “Our priorities for 2017 continue to be volume growth ahead of our markets, a further increase in core operating margin and strong cash flow.”
In early trading, Unilever shares in London dropped over 4%, or 142p to 3,206.5p.
Liberum negative …
Analysts at Liberum reiterated their “sell’ stance on Unilever shares with a price target of 2,950p.
In a note to clients, they said: “Despite an uptick in raw material inflation, we expect pricing will continue to decelerate in 2017 as Unilever seeks to shore up flagging volume growth, particularly in emerging markets.
“With consensus already forecasting 2017E organic sales growth of 4% and 40bps margin expansion in-line with guidance issued at Unilever's 2016 Capital Markets days we see limited scope for EPS upgrades absent material M&A.”