Unilever forecasts improved sales as it reforms structure

LONDON (Reuters) - Unilever ULVR.LUNc.AS expects sales growth to accelerate in the second half of the year, as it pushes through price rises to offset higher commodity costs and works to collapse its dual-headed structure.

FILE PHOTO: The company logo for Unilever is displayed on a screen on the floor of the New York Stock Exchange (NYSE) in New York, U.S., February 17, 2017. REUTERS/Brendan McDermid /File Photo

The Anglo-Dutch maker of Dove soap and Ben & Jerry’s ice cream also updated investors on Thursday on its consolidation into a single entity, saying it was “very confident” of getting the shareholder support required to complete the transition at the end of the year.

An increasing number of UK-based shareholders are voicing concern about the plan to make Rotterdam its headquarters, which will likely seen Unilever drop out of Britain's blue chip FTSE 100 index .FTSE. That could cause forced selling by UK funds mandated to track the index.

“We don’t think the changes, as they currently stand are in the best interests of the company’s UK investor base and we will be urging the group to reconsider its plans,” Hargreaves Lansdown portfolio manager Steve Clayton said on Thursday.

Clayton manages the HL Select funds, which have more than 3 percent of their assets in Unilever stock.

Shareholders will vote on Oct. 25 and 26 on the move, aimed at simplification and giving Unilever more flexibility for big-ticket M&A.

The company launched a review of its structure in 2017 after fighting off a $143 billion takeover from Kraft Heinz KHC.O triggering a battle between Britain and the Netherlands.

Under the new entity, Unilever said corporate governance would be stronger and shareholders would have more rights, such as an ability to call a general meeting with a smaller stake.

Unilever also reported better-than-expected earnings and said it would complete a second tranche of announced share buybacks, worth 3 billion euros, by the end of the year.

Its shares were up more than 2 percent at 1200 GMT.


Unilever is one of the first big consumer goods companies to report, and its results are seen as setting the tone for a packaged goods sector struggling with slow growth and increased competition both among brands and at retail levels.

First-half underlying earnings per share were 1.22 euros, helped by cost-savings and new products, and beating estimates of 1.18 euros.

Yet sales disappointed overall, rising only 1.9 percent in the quarter, excluding the recently divested spreads business. Analysts on average were expecting 2.3 percent.

For the first half, sales excluding spreads rose 2.7 percent, below estimates of 3 percent.

Raising prices has been a problem for all consumer companies, as grocery chains fight to keep costs low to compete with the growing threat of

Unilever warned last month that a truckers strike in Brazil would reduce second-quarter sales. It expects to recover half of its lost Brazilian sales in the third and fourth quarters.

The bulk of Unilever’s growth came from selling more products, rather than getting higher prices for them.

For the first half, volume rose 2.2 percent while pricing edged up only 0.2 percent, hurt by declines in North America where there is aggressive promotion by rival makers of shampoo, deodorant and dressings.

But price increases have already gone through in places like Argentina and Brazil, which should help the second half, along with a dwindling impact from an Indian tax change.

Reporting by Martinne Geller; Editing by Emelia Sithole-Matarise and Keith Weir