Unilever (ULVR) reported underlying sales growth of 3.1 per cent during the first quarter, beating market expectations thanks to a mix of price increases and volume growth. However, reported sales fell 1.6 per cent to €12.4bn (£10.7bn) due to the sale of the spreads business in July last year.
Performance in emerging markets was impressive, with sales growth of 5 per cent, compared with a more sluggish 0.3 per cent in developed markets, with “sustained momentum” in Southeast Asia and North Asia. Argentina was excluded from the growth calculations due to the hyper-inflationary environment distorting statutory numbers.
Another standout performer was the home care division, where sales increased 6 per cent thanks to fabric, home and hygiene products. Analysts at Liberum noted that prices were increased for these products in an attempt to offset higher input costs.
Investors may find these numbers reassuring, given comments made by new chief executive Alan Jope in January that market conditions were expected to “remain challenging” in 2019. That followed lower-than-expected sales growth in the final quarter of 2018. Indeed, underlying sales growth is still expected to be in the lower half of the 3-5 per cent range for the year. However, the underlying profit margin is expected to improve over the course of the year, with a target of 20 per cent and 100 per cent cash conversion by 2020.
