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Unilever shares fall as final quarter sales miss expectations

Unilever expects underlying sales growth in 2019 to be at the lower end of its forecast range

Unilever
It is Unilever's first set of results under new boss Alan Jope

Unilever plc (LON:ULVR) shares dropped as the consumer goods giant reported fourth quarter sales that missed expectations and said it anticipates challenging market conditions to persist this year.

The maker of Marmite, Dove soap and Ben & Jerry’s ice cream posted a 2.9% rise in underlying sales for the final quarter to €12.2bn, compared to analysts’ expectations for a 3.5% increase.

Underlying prices rose 2.1% while volumes edged up 0.8%.

READ: Unilever CEO Polman to retire in wake of investor revolt over headquarters U-turn

The beauty and personal care division delivered underlying sales growth of 3.0% to €5.4bn. Underlying sales in the food and refreshments business increased 1.3% to €4.2bn while the home care unit grew 5.3% to €2.6bn.

Full year underlying sales boosted by ice-cream demand during summer heatwave

For the 2018 financial year, total turnover was €49.6bn, excluding the divested spreads business, down 2.3% on a year ago.  On an underlying basis, full year sales rose 2.9% with prices up 0.9% and volumes up 1.9%. 

Underlying sales in the food and refreshments, home care and beauty and personal care divisions rose 2.3%, 4.2% and 3.1%, respectively. 

Ice-cream sales were strong again, helped by last year's summer heatwave and new product launches such as a Magnum praline ice-cream and a non-dairy range of Ben & Jerry's.

Other robust performers were household soap Sunlight, Dove, Vaseline, Domestos toilet blocks and Comfort fabric softener. 

The underlying operating margin increased 90 basis points to 18.4%, boosted by the group’s cost savings programme.

Free cash flow hit by currency fluctuations 

Free cash flow fell to €4.96bn from €5.36bn, reflecting the impact of foreign exchange headwinds and costs related to the disposal of the spreads business.

“In 2019 we expect market conditions to remain challenging,” said new boss Alan Jope.

“We anticipate underlying sales growth will be in the lower half of our multi-year 3-5% range, with continued improvement in underlying operating margin and another year of strong free cash flow.

“We remain on track for our 2020 goals."

Shares fell 2.9% to 3,945p. 

Dividend yield looks 'a bit limp', says analyst

Last year the company abandoned plans to leave its UK headquarters and move its primary listing to the Netherlands following a backlash from shareholders.  

"The controversy over Unilever’s failed bid to switch its headquarters from London to Rotterdam hasn’t dented its performance," said Laith Khalaf, senior analyst at Hargreaves Lansdown.

"Nor would we expect it to, Unilever’s corporate structure has no bearing on the propensity of global consumers to buy Marmite or PG Tips tea bags."

Khalaf added: "Unilever isn’t a cheap stock by any stretch of the imagination, though what underpins that price tag is the company’s ability to churn out consistent growth.

"Likewise a dividend yield of just over 3% looks a bit limp when compared to the wider UK stock market, but that’s because it’s expected to grow by 18% in the next two years, and the market puts a premium on that sort of rising income stream, particularly when it’s comfortably covered by cash flows."

Quick facts: Unilever PLC

Price: 4529.5 GBX

LSE:ULVR
Market: LSE
Market Cap: £119.05 billion
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