London: Consumer goods group Unilever warned of increasing competition from rivals trying to attract cash-strapped shoppers, overshadowing a forecast-beating 1.8% rise in quarterly underlying sales.
Chief executive Paul Polman’s policy to spend more on marketing and to cut prices drove a third successive quarter of sales volume growth at the world’s third-biggest food and consumer goods group. But prices were cut more than forecast stoking fears over competition.
Shares in the maker of Ben & Jerry’s ice cream, Knorr soup and Dove soap were down 3.5% to £18.66 by 1027 GMT on Thursday.
Polman warned that competitors are increasing their activities in many markets trying to regain share on the back of more brand support and innovation. More pressure will come from increased taxes and the reduction in stimulus packages, he added.
“We expect the environment for our business in 2010 to continue to be tough.... Unemployment will continue to stay high and consumer confidence is likely to remain low,” Polman told investors at a presentation after the annual results.
Analysts were concerned about pressure from key rivals such as Procter & Gamble which showed a strong final quarter of 2009. Unilever had to cut it prices by 3.1% in the fourth quarter, deeper than analysts had forecast, to match its rivals.
“The market might be worried about the comment about increased competition in 2010,” said analyst Warren Ackerman at brokers Evolution Securities.
Anglo-Dutch Unilever Plc/NV said fourth-quarter underlying sales rose 1.8% compared with a consensus forecast of 1.4%, while 2009 saw a rise of 3.5% against a consensus of 3.4%.
The maker of Hellmann’s mayonnaise, Omo detergent and Sunsilk shampoo saw underlying volume growth of 2.3% in 2009 which reached 5% in the fourth quarter with this seen across most key categories and countries as it cut prices to reflect the fall in commodity price like edible oils and tea.
Polman, who took over at the start of 2009, having previously worked at larger rivals Procter & Gamble and Nestle has targeting reigniting volume growth after the group relied on price rises for its sales growth in 2008.
But West Europe was Unilever’s one region to show annual sales and volumes down as challenging conditions continued in Southern Europe and the weakness of the pound and increases in marketing saw regional profit margins slip.
The results come after US rivals Procter & Gamble and Colgate-Palmolive reported strong growth in the final quarter of 2009, and European rival Henkel posted a strong close of 2009 due to cost cutting.
Unilever posted underlying 2009 earnings 7% lower at €1.33 per share, beating a consensus forecast of €1.29 collated by Thomson Reuters, with the decline down to a net charge for pensions after a credit the previous year.
The group is moving to quarterly dividend and will make a payment for fourth quarter of €0.1950 per Dutch listed Unilever NV share and 17.04 pence for its London Plc shares.
Unilever Plc shares outperformed the UK market by 8% in 2009 as Polman’s strategy gained favour, but have only traded in line with the FTSE 100 index and the DJ European Food and Beverage index so far this year.
Unilever’s European rivals Danone and Nestle are set to report results over the next two weeks.