Unilever shares tumble after scraps targets
LONDON (Reuters) - Consumer goods giant Unilever scrapped all its targets due to global economic uncertainty on Thursday, despite beating forecasts with a 7.3 percent rise in fourth-quarter underlying sales.
Anglo-Dutch Unilever, the world's third-biggest food and consumer goods group and maker of Knorr soups, Lipton tea and Dove soap, said it could not give a specific outlook for 2009 in current conditions, sending its shares spinning lower.
"No-one can be clear about the exact extent of the current recession or the speed of recovery ... 2010 targets were set at very different times in very different circumstances," new Chief Executive Paul Polman told an investor briefing after results.
He added the group was planning on the basis that it would not see any significant improvement in economies around the world in the next 18-24 months, and would not be pushed into changing its guidance "every five minutes" like its competitors.
Unilever's long-term targets had been for underlying annual sales growth of 3-5 percent and an improvement in operating margin. Polman added the group was also abandoning its target for a 15 percent operating margin by 2010.
Unilever shares had slipped 6.3 percent to 13.89 pounds by 10:30 a.m., making it the FTSE 100 Index's biggest faller, with analysts disappointed by the lack of outlook, and weaker profit margins and media spending in the fourth-quarter.
This dragged down the shares of rivals Reckitt Benckiser, down 3.8 percent at 26.71 pounds, and Danone, down 2.3 percent at 39.31 euros, both of which report next week.
"While fourth-quarter sales growth was better than we had expected, margins were weaker ... and the failure to give any guidance for 2009 or to reconfirm 2010 targets suggest to us margin forecasts will be coming down," said analyst Graham Jones at broker Panmure Gordon.
Analysts say Unilever will come under pressure this year from slowing global growth and competition from retailers' cheaper own brands produced by companies such as McBride, which expects a strong first half, helped by falling costs and shoppers switching out of branded goods to save money.
Unilever's worldwide rivals such as Procter & Gamble (P&G), Kraft and Danone have all cut their targets due to the consumer slowdown and retailer destocking, but Polman said giving specific guidance was not helpful.
This wrong-footed analysts who, despite the slowdown, had expected something from Polman, who joined Unilever last month after working for its two bigger rivals P&G and Nestle.
"Given the lower raw material backdrop and the restructuring savings coming through, it is a surprise that Unilever has withdrawn this (2010) target," said analyst Charlie Mills at Credit Suisse.
For the Oct-Dec quarter, Unilever's 7.3 percent underlying sales rise compared with analysts' forecasts of 4.5 percent to 7 percent and a consensus of 6 percent, while its underlying 2008 annual sales rose 7.4 percent, beating forecasts that ranged from 6.7 to 7.3 percent and averaged 7 percent.
In the fourth-quarter, sales volumes fell 1.6 percent as price increases peaked at over 9 percent, with volumes in Western Europe and the U.S. down sharply as economies slowed, while growth is slowing in developing markets, which make up around half of Unilever's group sales.
"In developing markets, we still see growth, but demand is slowing down as a result of the rapidly changing economic environment and the impact of cost inflation," Polman said.
The group, whose 400 brands include Sunsilk shampoo, Omo detergents and Ben & Jerry's ice cream, posted annual earnings per share of 1.79 euros, compared with forecasts of 1.15 euros to 1.70 euros and a consensus of 1.38 euros.
Full-year dividends on the company's Dutch-listed shares rose 3 percent to 0.77 euros, while the London listing's dividend rose 19 percent to 60.74p.
(Additional reporting by Mark Potter, editing by Will Waterman)
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