Unilever has released its Q3 2010 and nine months financial reports, highlighting a steady quarter for the company. For the third quarter of 2010, Unilever's underlying volume growth was 4.8% and underlying sales growth was 3.6%, with underlying price growth improving to (1.2)%. Also, in-quarter pricing was flat for the third successive quarter. Highlights in the nine months report include turnover up 10.9% at €33.4 billion, and underlying volume growth at 6.0%. Additionally, underlying sales growth was at 3.8% and underlying price growth was at (2.1)%.
The third quarter results reflected solid progress for Unilever, particularly given the combined headwinds of slow economic growth, weak consumer confidence in many markets and higher commodity costs. While market growth continued to be sluggish in developed economies, the company’s emerging markets continue to grow strongly albeit more slowly than the levels seen earlier in the year. Volume share improved in an environment of continuing high levels of competitive activity. In-quarter pricing was flat for the third successive quarter and gross margin declined in the face of higher input costs, although the company found this was partially mitigated by its strong cost savings initiatives. Its advertising and promotions spending was flat at constant exchange rates against the high comparators in the prior year quarter. Indirects were significantly lower in the quarter, reflecting the benefits of the company’s savings programs and phasing effects, some of which will reverse in the fourth quarter.
The transformation of the organization continues with the establishment of the global supply chain organization and the announcement of the proposed acquisition of Alberto Culver. Unilever also expects to complete the acquisition of Sara Lee’s personal care business during the fourth quarter of 2010.
Unilever CEO Paul Polman commented, “We have delivered another quarter of solid progress driven by our emerging markets business which again reported high levels of volume growth. This reflects the strength of our position in these markets where competitive activity is intense. Overall volume growth remained strong on the back of stronger innovations and the extension of our brands into new markets. In-quarter pricing was flat with increased prices in some categories offset by others where downward adjustments were needed to stay competitive. During the course of the first nine months we have significantly increased the investment in our brands and are spending in line with the timing of our in-market activities.
"These results confirm again that our strategy to focus on the consumer and to accelerate growth is working. Our priorities remain to drive profitable volume growth and strong cash flow along with steady and sustainable improvement in underlying operating margin for the year as a whole. We continue to expect underlying price growth to turn positive towards the end of the year,” said Polman.
In Personal Care
Deodorants continue to deliver strong results and global shares continued to improve. Dove Men+Care has been launched across Europe with encouraging results. Rexona continues to make good progress helped by the success of Rexona Clinical and relaunches in Japan and India. Sustained growth in hair reflected a strong performance in both North and Latin America and the success of the Dove Damage Therapy launch. The Lux Hair relaunch in Japan and China was received well and showed strong momentum. Skin reflects the continuing success of Dove Nutrium Moisture and Dove Men+Care. The rollout of Lifebuoy continued to do well and is now in 33 markets. Vaseline Sheer Infusion did not meet expectations but the Vaseline brand is growing well in emerging markets. In oral Unilever has now rolled out Pepsodent anti-cavity to 25 countries, and it is supporting with the successful ‘brush day and night’ campaign. Signal White Now continues to do well and is now in 30 markets with multiple launches completed in Q3 2010.
Across the Globe
Asia Africa CEE—The region grew ahead of the market and volume shares continue to improve, with particularly strong performances in South East Asia, Saudi Arabia, South Africa and India where the actions taken to respond to competitive pressure resulted in an improved performance across the portfolio. Asia and Africa continue to be the engine of growth in the region with double digit volume growth in the year-to-date. CEE markets remain stagnant but here too Unilever continued to gain volume share. Underlying operating margin was down, reflecting lower gross margins in the quarter and the continuing investment. A rollout of a regional IT platform progressed well, with the new platform deployed and running in China, Hong Kong, Taiwan, Australia and New Zealand.
The Americas—Volume growth in North America was greater than 2%, a solid performance given the difficult market conditions. In the US, the company’s performance in deodorants and hair was particularly encouraging with good performance from recent innovations. In the quarter, Latin American markets grew strongly, and Unilever gained volume share while delivering underlying sales growth at around 7% with a positive contribution from pricing. The performance in Mexico was strong and broad-based across the portfolio. Year-to-date Brazil remains the key driver of volume growth in Latin America with pricing now progressively improving.
Western Europe—Volume growth in Western Europe was positive in the quarter, and Unilever continues to gain volume share. Underlying price growth in the third quarter improved from the previous quarter but was still negative year-on-year due to the high level of promotional intensity in many markets. Conditions in Greece, Spain and Ireland remain difficult. Deodorants continued to progress well, and operating margin was again positive, primarily reflecting the benefits of the cost-saving programs.