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Unilever shares sink in spite of underlying sales jump

Unilever results restore confidence

Unilever, the British consumer goods company, has today announced a rise of 3.5% in underlying sales for the fourth quarter. 

The company’s positive performance was buoyed by strong demand in emerging markets and was in line with analysts’ forecasts. 

Sales grew by 1.9% over the full year with turnover falling by 2.4%. 

Underlying profit fell to €9.4bn, down 5.8% from the year before, due to currency movements. 

In early morning trading Unilever’s share price fell by 4.4%. 

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Chief executive of Unilever Andy Jope looked ahead cautiously while taking the positives from the year gone. 

“While volatility and unpredictability will continue throughout 2021, we begin the year in good shape and are confident in our ability to adapt to a rapidly changing environment,” Jope said.

“As a result, we are winning market share in over 60% of our business in the last quarter, on the basis of measurable markets. The business also generated underlying operating profit of €9.4 billion and free cash flow of €7.7 billion, an increase of €1.5 billion.”

The pandemic caused a rise in demand for hygiene goods to the benefit of Unilever. 

Sales of Domestos bleach rose by over 25% year-on-year, while sales of Lifebuoy soap went up by 50%. 

However, the pandemic has caused a sharp fall in foods served in public places, another of the company’s many products and services. 

Strong recoveries in emerging markets helped too, including China and India, where demand picked up during Q4. 

“Unilever is seen as the market’s old reliable friend, trustworthy and dependable no matter the economic backdrop. Coming in short of full year sales forecasts is not the done thing and so Unilever is somewhat punished by investors today for not delivering the required goods” said Russ Mould, investment director at AJ Bell. 

“Full year sales of €50.7 billion is slightly below the expected €51.6 billion figure, which is disappointing but far from disastrous. In its defence, €7.7bn free cash flow is better than €6.7bn expected by analysts as the company has paid more attention to ensuring it is paid efficiently by third parties.

The company has laid out future growth plans which include a major focus on the US, India and China, and making more of the e-commerce channel. Restructuring costs of around €2 billion for the next two years may [be] hard for some Unilever fans to stomach but the company is also targeting €2 billion annual cost savings,” said Mould.

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