Unilever is aiming to eliminate fossil fuels from its operations. © 123RF
Unilever is aiming to eliminate fossil fuels from its operations. © 123RF

Unilever braced for high volatility in 2016

Unilever is preparing for a tough 2016 after growing turnover in volatile markets last year.

The company, whose brands include PG Tips and Ben & Jerry’s, reported a 10% increase in turnover to €53.3bn (£41bn) for the full year 2015.

Underlying sales growth was 4.1%, while in emerging markets it was 7.1%. Core operating profit rose 12%, with operating profit down 5.8%, reflecting profits on disposals in the previous year.

Unilever CEO Paul Polman said the results demonstrated the progress the firm had made transforming itself into a more resilient company. However, he predicted difficult conditions this year.

“We are preparing ourselves for tougher market conditions and high volatility in 2016, as world events in recent weeks have highlighted,” said Polman. “Therefore it is vital that we drive agility and cost discipline across our business.

“We are further strengthening our innovation funnel while shortening innovation cycle times, stepping up our digital capabilities and rolling out a global zero-based budgeting programme. Our priorities continue to be volume-driven growth ahead of our markets, steady improvement in core operating margin and strong cash flow.”

Unilever announced last November that it intended to become “carbon positive” by 2030 by “eliminating fossil fuels” and using 100% renewable energy across its operations. The company will also support the generation of more green energy than it consumes.

Unilever said that it had grown “ahead of our markets” despite a challenging year in 2015, with slower global economic growth, fragile consumer demand, intensifying geopolitical instability and high currency and commodity volatility.

Many emerging markets continued to be weak, Unilever said, especially those dependent on oil and other commodity exports and those where currency devaluation is pushing up the cost of living.

Growth in the company’s personal care market improved from the slower growth of the previous year, driven by innovation and extending into more premium segments.

In the food sector, savoury products showed good volume-driven growth led by cooking products in emerging markets and by natural and health products. Home care growth was driven by higher margins, while strong growth in the ice cream sector was driven by premium brands.

The company said it was building its presence in the premium leaf tea segment by opening more T2 stores.

Underlying sales growth in Asia, Africa, the Middle East, Turkey, Russia, Ukraine and Belarus rose 4.6% over the year. Turkey and the Philippines delivered broad-based double-digit growth, while India showed solid volume-driven growth with lower pricing as commodity costs eased.

Volumes were down in Russia as high inflation put pressure on consumer demand but growth improved throughout the year. China recovered from the prior year trade de-stocking and Japan grew again, helped by a strong performance in hair products.

In the Americas, underlying sales growth rose 6.6% with Latin America delivering double-digit expansion, driven by strong pricing to recover higher input costs but also modest volume growth despite challenging macro-economic conditions and with consumer incomes squeezed by a higher cost of living.

Europe returned to growth in 2015, as good volume growth more than offset price deflation across Unilever’s markets.

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