London, UK / Rotterdam, NL. (ul) Unilever PLC announced the results for the full-year 2019, which show underlying sales growth of 2.9 percent, led by Unilever’s emerging market business which grew 5.3 percent and its Home Care division which grew 6.1 percent. Other highlights:
- Underlying sales growth was 2.9 percent with 1.2 percent volume and 1.6 percent price
- Underlying operating margin increased 50bps
- Turnover increased 2.0 percent
- Free cash flow increased EUR 0.7 billion to EUR 6.1 billion
- Underlying earnings per share increased 8.1 percent
Comment from CEO Alan Jope
«In 2019 we delivered underlying sales growth of 2.9 percent, balanced between price and volume, a further year of good margin and earnings progression, and strong free cash flow. We saw strong growth from emerging markets and our Home Care division. Overall growth was slightly below our guided range for the year due to the slowdown we saw in the fourth quarter.
«We are now stepping up execution against our fundamental drivers of growth. These are to: increase penetration by improving brand awareness and availability; implement a more impactful innovation programme; improve our performance in faster growing channels; drive purpose into all our brands; and fuel growth through cost savings.
«We are continuing to evaluate our portfolio and have initiated a strategic review of our global tea business.
«In 2020, our underlying sales growth is expected to be in the lower half of the multi-year 3-5 percent range and will be second-half weighted. While we expect an improvement from the fourth quarter of 2019 into the first half of 2020, first half underlying sales growth will be below 3 percent. The impact of the coronavirus outbreak is unknown at this time. As we near the completion of our three-year strategic plan, we expect continued improvement in underlying operating margin and another year of strong free cash flow, remaining on track for our 2020 goals.»
There has been a significant slowdown during 2019 in South Asia and we have seen some market softening in China. While parts of Latin America have been volatile, we have seen signs of improvement in Brazil. South East Asian markets maintained good growth while developed markets, in particular Europe, remained challenging.
Unilever overall performance
Underlying sales grew 2.9 percent with 1.2 percent from volume and 1.6 percent from price. Growth was led by a strong performance in Home Care. Emerging markets grew 5.3 percent, driven by performance in Asia/AMET/RUB, despite a slow end to the year in West Africa, South Asia and the Middle East. Latin America returned to growth while Africa declined. Developed markets declined with Europe lapping a very strong ice cream season from the previous year. In the fourth quarter, price growth decelerated, driven by price reductions in India, significantly lower inflation in Türkiye and increased promotional spend in Europe.
Turnover increased by 2.0 percent which included a positive 1.5 percent impact of currency related items and a negative net acquisitions and disposals impact of 2.3 percent, mainly driven by the disposal of spreads.
Underlying operating margin improved by 50bps to 19.1 percent. The improvement was driven by 30bps of gross margin, a result of our 5S savings programme and positive mix while overheads contributed 20bps. We continued our zero-based-budgeting and change programmes, which are ensuring we transform our organisation to be future-fit. Brand and marketing investment as a percentage of turnover was flat and in constant currencies investment increased EUR 70 million, excluding spreads, with increased spend in the second half. Constant underlying earnings per share increased 5.8 percent and underlying earnings per share increased 8.1 percent, including a positive impact of 2.3 percent from currencies. We delivered free cash flow of EUR 6.1 billion and improved our cash conversion.
Beauty + Personal Care
Underlying sales grew 2.6 percent, with 1.7 percent from volume and 0.9 percent from price.
Underlying sales again grew strongly delivering 6.1 percent, with 2.9 percent from volume and 3.1 percent from price.
Foods + Refreshment
Underlying sales grew 1.5 percent, with volumes down 0.2 percent and pricing of 1.7 percent.
Ice cream grew, however volumes declined due to a strong comparator from a particularly good European summer in the prior year. Growth was supported by plant based and ‘better for you’ offerings, including Magnum vegan and Ben + Jerry’s lighter Moophoria variants.
Tea saw price-led growth, however volumes declined due to subdued consumer demand for black tea in developed markets. We continued to focus on the growing segments of premium black tea, black tea in emerging markets and fruit and herbal variants, with our premium herbal brand Pukka performing well.
In dressings, Hellmann’s grew, with the US business returning to growth in the second half of the year. The Hellmann’s vegan mayonnaise variant is now on shelves in over 20 countries while Sir Kensington’s premium ranges of mayonnaise and salad dressings have now more than doubled in size since the acquisition.
Price-led growth in savoury was supported by Knorr’s portfolio in scratch cooking and the launch of snacking ranges which address the convenience trend. Knorr launched the Future 50 Foods report in partnership with the WWF, highlighting the next generation of plant-based foods that can boost nutritional value whilst reducing environmental impact.
Newly-acquired brand The Vegetarian Butcher entered a partnership with Burger King® to offer the Rebel Whopper® across 25 countries in Europe.
Underlying operating margin decreased by 20bps driven by a reduction in gross margin.
Tea Strategic Review
As well as reporting our full year results, we are announcing a strategic review of our global tea business, as we continue to evolve our portfolio to higher growth spaces.
Unilever has a long-established position as the biggest tea business in the world with brands such as Lipton, Brooke Bond and PG Tips; and has expanded into the premium, fruit and herbal market in recent years. However, sales of traditional black tea, the largest segment of the category, have been in decline in developed markets for several years due to changing consumer preferences.
The strategic review will consider all options for Unilever’s tea business and is expected to conclude by mid-year.