Unilever PLC’s Q2CY12 revenue at ~EUR13.3bn was 1% above consensus estimates due to higher contribution from emerging markets (India being a key pillar) which also helped them maintain their guidance (both P&G and Danone have cut their full-year profit forecasts). Underlying sales rose (USG) 5.8% YoY (vs 8.4% in Q1CY12), beating the forecast of 4.8%. Personal care and Home care continued the robust performance, USG growing 10.4% and 9.6% YoY respectively. However, foods failed to deliver growth (up 0.6% YoY). European markets disappointed with a decline of 2.2% YoY in revenues even as a strong growth in developing markets, especially China and India (gained market share in laundry business in both geographies) led to a 10.7% YoY rise in revenues in the Asia/Africa region. Launch of Expert Protection range simultaneously in France (under Signal brand) and India (under Pepsodent brand) further signals their priority on India and the oral care category. P&G’s softening aggression in emerging countries like India is a positive for Hindustan Unilever. However, worsening economic conditions in developed economies and high input costs remain a key concern.
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Price hikes lift sales, foods disappoint
Unilever delivered a sales growth of 11.1% YoY to ~EUR13.3bn, helped by a 5.8% growth in USG (underlying volume growth 2.2% YoY). Personal care portfolio was up 10.4% YoY (USG) on the back of a robust 7.2% volume growth, home care was up 9.6% YoY (USG) led by 5.9% volume growth and refreshments gained 3.2% YoY (USG). Net profits declined 2.4% YoY for H1CY12.
Emerging markets robust, strong growth in India, China
Emerging markets (54.5% of the business) delivered a strong growth of 11.4% YoY in H1CY12 while developed markets disappointed with a 1.9% growth YoY (North America grew 3.3%; Europe declined 2.2% YoY). Unilever aims to increase focus on China and India (India reported volume growth of 9% YoY in Q1FY12 vs 5.8% achieved in the Asia/Africa/CEE region) as P&G’s softer stand in emerging markets (accounting for more to Unilever’s top line compared to P&G) and a likely dip in A&P spends in the laundry segment provide Unilever with a good chance to further tighten its grip in these markets.
Outlook: Input prices, European markets remain concerns
Amidst a scenario of skyrocketing raw material prices and worsening global macros, Unilever remains cautious over the growth in developed markets. However, we believe that due to the diversified nature of its products and a strong global distribution network, the company will be able to navigate rather efficiently through these difficult times.
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