UN Unilever NV

By Saabira Chaudhuri 

LONDON -- Unilever PLC bucked a trend hitting its American rivals, selling more products at higher prices during the final quarter of 2017.

The results come after rival Procter & Gamble Co., Kimberly Clark Corp. and Colgate-Palmolive reported weak sales as brick-and-mortar retailers like Walmart Inc. push for steep discounts as they compete with Amazon.com Inc. and input costs rise. P&G, the maker of Tide detergent and Pampers diapers, last week said that average prices on its products fell in the most recent quarter for the first time since 2011.

Unilever reported 0.7% growth in prices for the fourth quarter on the back of volume growth of 3.2%, helping it deliver quarterly sales growth of 4% on an underlying basis -- which excludes acquisitions and disposals and strips out currency moves -- to EUR12.8 billion.

Unilever's focus on emerging markets, coupled with a portfolio that includes high-end skin-care products and fancy mustard, means the company has more of a buffer from price pressures than its rivals, Unilever's Chief Financial Officer Graeme Pitkethly said in an interview.

"We have less reliance than our rivals like P&G on categories under pressure like razorblades and diapers," he said. "We see the same trends but we don't see the same impact."

The company in 2014 created a prestige division and has since acquired a string of premium skin care and other brands to strengthen this unit.

Mr. Pitkethly says he thinks Unilever will continue to push through higher prices in North America in 2018, but warned that as the company's e-commerce sales grow, price pressures will mount. Unilever currently makes about 5% of its North America sales online and these are growing at 50%. "That brings the pressure on," said Mr. Pitkethly.

While Unilever often has relied on making higher sales by raising prices, for the fourth quarter the company's strong volume growth impressed analysts. Price-led growth is generally frowned upon by investors as being less healthy than when a company drives sales by recruiting more customers or just selling more to existing ones.

"This is a much improved performance from Unilever," said RBC analyst James Edwardes Jones.

For the year, Unilever reported sales grew 1.9% to EUR53.72 billion or 4.9% at constant currency. Net profit grew 17% to EUR6.05 billion.

Like rivals, the maker of Magnum ice cream and Dove shampoo, has been grappling with a double whammy of headwinds. Consumers in big, developed markets are increasingly opting for niche, organic, local brands they see as more desirable. In emerging markets Unilever and its peers are facing more competition from increasingly sophisticated local players while coping with macroeconomic disruptions in big markets like India and Brazil.

The tumult has attracted activist investors like Nelson Peltz to P&G and Daniel Loeb to Nestlé SA, and created an opening for Kraft Heinz Co. last year to approach Unilever with an unwelcome $143 billion acquisition attempt. Since then, Unilever has agreed to sell its spreads arm, where sales growth has long been declining. It has launched a share buyback, set a new operating margin target of 20% by 2020 and is exploring ways to simplify its dual-listed structure, which holds it back from making big acquisitions.

Unilever also has embarked on a companywide restructuring to become more agile to local trends, giving increased autonomy to its local managers. It made 11 acquisitions in 2017, buying hair and skin care company Sundial Brands in the U.S.,and organic herbal tea brand Pukka Herbs in the U.K.

The company launched five new personal care brands last year, including Hijab Fresh -- a shampoo aimed at Muslim women that wear head coverings -- and Love, Beauty and Planet -- an eco-friendly hair and bodycare brand aimed at millennials.

Thursday, the company's home-care arm reported underlying fourth-quarter sales growth of 6.5%. Personal care, an area Unilever has been bulking up in, reported growth of 4.4%. The foods business saw sales rise 1.4% and refreshments -- which houses tea and ice cream -- rose 4%. After being hit by rival HaloTop in the U.S. Unilever's ice cream sales returned to growth in the fourth quarter.

For the year, Unilever reported an underlying operating margin of 17.5%, up 110 basis points from the year earlier.

Unilever gave annual guidance of underlying sales growth of 3% to 5% and an improvement in its underlying operating margin, as it works toward hitting its 2020 target.

Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com

(END) Dow Jones Newswires

February 01, 2018 04:57 ET (09:57 GMT)

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