Unilever NV, maker of Ben & Jerry's ice cream and Dove soap, said Thursday that fourth quarter earnings fell by 27 percent and warned that cautious consumers and aggressive competitors would make business conditions tough in 2010.
Net profit was euro831 million ($1.15 billion), down from euro1.14 billion a year earlier, when Unilever sold Bertolli olive oil to Spain's Grupo SOS for euro630 million. Fourth quarter sales fell 5 percent to euro9.66 billion, also due in part to the Bertolli sale.
Unilever said that stripping out the impact of disposals and restructuring, fourth quarter operating profit would have risen 4 percent. Sales measured on the same basis rose 1.8 percent, with volume growth of around 5 percent outweighing price falls of 3.1 percent.
Over the past year, Unilever has cut prices in order not to lose market share as customers showed a preference for cheaper brands during the recession. Chief Executive said that had led to market share gains "that were broad-based and improved throughout the year."
In 2010 "consumers will be even more demanding, and rightfully so," Polman said on a conference call. "Our priorities therefore for 2010 are to drive volume growth while providing a steady improvement in underlying profit margin."
However, he warned that competition from rivals such as Procter & Gamble and Nestle SA would intensify this year.
Shares fell 3.8 percent to euro21.635 in Amsterdam.
Analysts say that if consumer product companies continue to push advertising and cut prices to chase market share, eventually margins will suffer.
"Unilever has delivered a solid if not inspirational performance," said analyst Keith Bowman of Hargreaves Lansdown in a note on the earnings.
He praised the company's sales growth, particularly in Asia and Africa. There sales rose 7.4 percent and are now substantially larger than in either the Americas and Europe. Sales growth in the Americas was 1.2 percent, while sales fell 4.2 percent in Europe.
However Bowman warned that Unilever's costs could rise this year, threatening the company's plans to continue improving both sales and margins. "On the downside, commodity prices remain volatile, while a recent recovery in advertising volumes for the media industry could see a bounce back in prices," Bowman said.
He repeated a "Hold" rating on shares.
Unilever's full year net profit was euro3.66 billion, down 33 percent from 2008, on sales of euro39.8 billion, which were down 2 percent.
Among major product lines, Unilever gave only full year sales growth data.
Personal care products such as Dove soap and Axe deodorants grew 5.3 percent. Laundry and cleaning products such as Surf, Omo and Cif, grew 7.1 percent. And ice cream and beverages such as Ben & Jerry's, Magnum and Lipton tea brands, grew 4 percent. Polman noted that sales of Klondike bars grew more than 10 percent in the U.S.
Sales of dressings and spreads such as Hellmann's mayonnaise and Knorr soups fell 0.1 percent.
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