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Unilever plc Posts Solid Growth; Warns of a Tough Year Ahead

By Demitri Kalogeropoulos - Jan 23, 2016 at 2:24PM

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The consumer goods titan wrapped up a year in which sales and profits rose despite a weak global sales environment.

Unilever (UL -1.18%) posted fourth-quarter earnings results on Tuesday, Jan. 19. The consumer goods giant managed market-beating sales growth despite weak selling conditions in many countries. Meanwhile, management sees additional global economic challenges, but also opportunities for profit gains, ahead for 2016.

Here's a look at how the results stacked up against the prior-year period.

Unilever's results: The raw numbers


Q4 2015 Actuals

Q4 2014 Actuals

Growth (YOY)


12,884 million euros

12,094 million euros


Net Income

4.9 million euros

5.2 million euros



1.72 euros

1.79 euros


Data source: Unilever's financial filings.

What happened with Unilever this quarter?
Organic sales, profitability, and adjusted earnings per share all rose in the fourth quarter. But the company felt the strain of weak consumer demand in both developed and emerging markets. Here are the main highlights from the quarter:

  • Organic sales rose 4.9% overall, with contributions from both volume (+1.9%) and pricing gains (+2.9%).
  • On a geographic basis, organic sales were flat in developed markets, including down slightly in North America, and up a hefty 8% in emerging markets.
  • Cost cuts helped operating margin tick higher to 14.8% for the full fiscal year. Gross margin improved by a full percentage point to hit 42.2% of sales.
  • The home care segment led the company in both volume growth and profitability gains thanks to innovation in brands like Omo and Comfort.
  • Unilever's food business was its weakest segment, as improvements in cooking products, margarine, and dressings were overwhelmed by losses in spreads.

What management had to say
"All categories delivered progress against their strategic priorities" in the fourth quarter, Unilever management explained in a press release. The company highlighted the faster growth and sustained profitability in the personal care and foods divisions, along with improving margins and cash flow from its home care and refreshment categories. "We have again grown ahead of our markets, driven by our innovations and increased support behind our brands," CEO Paul Polman said. The company in its press release highlighted moves including the launch of dry spray deodorants in North America, food products focused on "naturalness and health," and margin-accretive ice cream innovations including Ben & Jerry's Cores and new flavors of Breyer's Gelato.

Unilever booked improvements in revenue, profitability, EPS, cash flow, and financial efficiency for 2015. Image source: Unilever investor presentation.

Unilever likely beat rival Procter & Gamble (PG -0.23%) on the key growth metric of organic sales. P&G struggled to find any sales growth last year, and is expected to post flat quarterly growth and a slight volume decline when it announces its fourth-quarter results next week.

Yet competitive wins were offset by general softness in global demand. "Consumer demand remained fragile and volume growth was barely positive in the markets in which we operate," Unilever executives explained. "Many emerging markets continued to be weak, particularly those dependent on oil and other commodity exports and those where currency devaluation is pushing up the cost of living for our consumers."

Looking forward
Executives are bracing for another year of an unstable appetite for consumer staples. "We are preparing ourselves for tougher market conditions and high volatility in 2016, as world events in recent weeks have highlighted," they said.

Thus, Unilever's major strategic goals include continuing to lower costs across its operations while working to improve its execution around product innovation. If it can manage those feats, then the company should be in position to continue booking steady -- but low -- growth in the key areas of sales volume, profitability, and cash flow.

Demitrios Kalogeropoulos has no position in any stocks mentioned. The Motley Fool recommends Procter & Gamble and Unilever. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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