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Unilever reports Q3'19 revenue rises 5.8% YOY

The Unilever Group on Oct. 17 reported third-quarter revenue jumped 5.8% year over year even though underlying sales growth was below expectations due to softening growth in China and India, nearly flat growth in North America, and a small decline in Europe.

The maker of Dove soap and Magnum ice cream said revenue for the quarter ended Sept. 30 rose to €13.25 billion from €12.53 billion, reversing a year-over-year decline of 4.8% 12 months ago. The result was boosted by sales growth and the impact of acquisitions and exchange rates.

Unilever said underlying sales growth fell to 2.9% year over year from 3.8%, missing expectations for 3% growth, based on a consensus of analysts' estimates provided by the Anglo-Dutch company.

In a reiteration of its earlier guidance, Unilever said it expects underlying sales growth for the full year to be in the lower half of its multiyear range of 3% to 5%.

For the first nine months of 2019, sales increased 1.5% year over year to €39.33 billion from €38.73 billion, and underlying sales grew 3.4%.

"Our progress on underlying operating margin continues through a focus on savings, waste and productivity," said CFO Graeme Pitkethly in a conference call with analysts. "And we'll target another year of strong cash flow while maintaining roughly our current level of gearing. Our outlook and all other items remain just the same."

In early trading on the London Stock Exchange, Unilever PLC's shares were up 94 pence, or 2.0%, at 4,705 pence.

In a statement, CEO Alan Jope said: "We have maintained momentum in the quarter, with a good balance between volume and price. Emerging markets and home care [products] have been the key growth drivers."

Underlying sales in the home care business, which includes products such as Cif surface cleaners and Sunlight dishwashing liquid, increased 5.4%. Underlying sales in beauty and personal care, which includes Rexona deodorants, Pond's skin cream and the Dermatological skin range, grew 2.8%. Underlying sales in food and refreshment, including Lipton tea, Hellmann's mayonnaise and Knorr soups, rose 1.7%.

Growth in Europe declined 0.3%, while underlying sales growth in the Americas was positive, helped by price growth. Growth in South Asia was strong despite a market slowdown in India, Unilever said.

"Our view is that our markets generally are growing around 3%, and we're going just a little bit faster than that," Pitkethly said during the call. "So it's a good solid performance, and we're pretty competitive." However, Pitkethly added, "We're not satisfied with our rates of growth currently."

Earlier in October, Unilever said it planned to halve the use of virgin plastic in its packaging by 2025 and to help collect and process more plastic packaging than it sells. It will be a big task. "To give you a sense on the cost," Pitkethly said, "our current plastic packaging spend is about 5% of Unilever's turnover, and our plastic packaging footprint is around 700,000 tons."

Pitkethly added, "This is a design challenge sitting around packaging and products. It's going to require us to introduce new packing materials, scale up new business models" and reuse some materials. "This may not always be attractive from a consumer perspective, and we're going to have to do that at unprecedented speed and intensity, so it's going to be challenging going forward."