Latest News / Unilever expects slow start to 2017 as challenges continue

Unilever expects slow start to 2017 as challenges continue

Consumer goods giant Unilever has warned of a "slow start" to 2017 after currency headwinds and economic challenges in India, Brazil and Europe dragged on full-year earnings.

The Marmite, Dove soap and PG Tips firm said annual net profit rose 5.5 per cent to 5.5 billion euros (£4.7 billion), but revenues dropped 1 per cent to 52.7 billion euros (£44.7 billion), while underlying sales rose by a lower-than-expected 3.7 per cent.

The company said it suffered from severe disruptions from the economic crisis in Brazil and India's demonetisation drive, which saw huge banknotes taken out of circulation.

Unilever - whose vast array of brands also includes Flora spread, Magnum ice cream and Lipton tea - said price deflation in Europe also continued to weigh on sales in developed markets, which dropped 0.2 per cent despite growth in North America.

The company also blamed the drop in turnover on negative currency impacts.

Chief executive Paul Polman said: “Our priorities for 2017 continue to be volume growth ahead of our markets, a further increase in core operating margin and strong cash flow.

“The tough market conditions which made the end of the year particularly challenging are likely to continue in the first half of 2017. Against this background, we expect a slow start with growth improving as the year progresses.”

The company still notched up a rise in pre-tax profit to 7.47 billion euro (£6.3 billion) for 2016 against 7.2 billion euro (£6.1 billion) in 2015.

But investor disappointment over the results saw Unilever shares fall more than 4 per cent, making the group the biggest faller on the FTSE 100 Index.

The company came under fire in the wake of the Brexit vote after warning that prices would have to rise as a result of the pound’s collapse.

Tesco was left grappling with a shortage of store cupboard staples – including Marmite, Pot Noodle and Persil – after reportedly refusing to bow to Unilever’s demands for a 10 per cent price rise following the collapse of sterling.

Unilever later said the dispute had been resolved, but warned that consumers would still have to stomach more pain in the new year.

The pound is currently trading 16 per cent lower against the US dollar compared to its pre-referendum peak, and 10 per cent lower against the euro.


Chris Radburn/PA Wire

Shares