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Turnover declined 2% in the first quarter at Unilever (ULVR) as sales were hit by currencies, slowing volume growth and weak consumer demand.
Sales in the first quarter of 2016 was down 2% to €12.5bn, including a negative currency impact of 7.1%.
Underlying sales growth was 4.7%, with emerging markets up 8.3%. Underlying volume growth was 2.6% and pricing was up 2% in the quarter.
Chief exec Paul Polman said: “The first quarter demonstrates a strong volume-driven performance, following on from a good delivery in 2015. We are maintaining momentum despite a tougher external environment, with all four categories gaining market share.
“With markets remaining volatile, we continue to focus on driving agility and resilience in our business through the key programmes which we set out at the end of last year: net revenue management, zero based budgeting and the next stage in our continued organisational transformation. This will position us well to deliver another year of volume-driven growth ahead of our markets, steady improvement in core operating margin and strong cash flow. These underpin sustained long-term value creation for our shareholders.
Unilever said overall consumer demand “remained fragile” amid slowing volume growth, weak market growth in emerging markets, negligible growth in North American and negative growth in Europe.
Developed markets declined by 0.3% with volume growth offset by widespread price deflation in Europe.
However, its foods category sustained its return to growth. A “good” performance in savoury was led by cooking products in emerging markets and by innovations around naturalness such as Knorr Mealmakers with 100% natural ingredients in Europe. Sales in spreads declined as a result of the continued market contraction in developed countries.
Unilever shares are 0.2% down at 3,258p, having fallen as low as 3,203p in early trading.
Morning update
Another busy morning has seen updates from Nestle, Poundland, PZ Cussons and Stock Spirits.
Nestle (NESN) has again posted organic growth below its long-term 5% target, with organic sales growth 3.9% in its first quarter.
First quarter sales were CHF20.9bn, including a foreign exchange impact of -2.8%, with the 3.9% organic growth consisting of 3% internal growth and 0.9% pricing growth.
Organic growth was 2.5% in developed markets, 5.6% in emerging markets
Paul Bulcke, Nestlé CEO said: “As anticipated, the first quarter continued the positive momentum in real internal growth, with softer pricing. We gained market share in the majority of our categories and businesses. The strongest performances were in Europe, in South East Asia and in Africa as well as for Nescafé, Nespresso and petcare. Our US frozen food business is progressing well. The trends seen over the last few quarters show the relevance of our investments and allow us to confirm our outlook for the year.”
Nestle comfirmed its full-year outlook, with organic growth set to be in line with 2015, with improvements in margins and underlying earnings per share in constant currencies, and capital efficiency.
Poundland (PLND) has updated the market on the 99p Stores property estate conversion programme and its fourth quarter trading statement for the 13 week period to 27 March 2016.
For 99p Stores, Poundland said 190 conversions were completed by the end of its fourth quarter and the programme will finish at the end of April. “The conversion programme has been delivered in four months, well ahead of plan,” Poundland said and converted stores had seen strong sales growth.
The acquisition is on track to deliver targeted incremental annual EBITDA of at least £25m, with around two-thirds expected to be generated in the year to March 2017. However, the costs of converting the store portfolio have been incurred in the 2016 financial year and will contrain full-year earnings this year.
The fourth quarter saw Poundland’s total sales, excluding Spain, increase by 29.5% on a constant currency basis, benefiting from the addition of the 99p Stores’ portfolio. Growth in the core Poundland estate slowed to 3.5% during the quarter.
Poundland said: “It has been a tough quarter for the core business, which was impacted by difficult market conditions and disruption from the accelerated pace of delivery of the 99p Stores’ conversion programme.”
Full year sales, excluding Spain, increased by 18.4% on a constant currency basis, representing a 3.9% decline on a like for like basis after growing by 2.4% last year. In the second half of the year like for like sales fell by 4.9%.
PZ Cussons (PZC) has issued a trading update for the period 27 January 2016 to 13 April 2016. It said overall performance for the period has been in line with expectations with performance in Europe and Asia offsetting more difficult trading conditions in Africa.
On its primary market in Nigeria it said, whilst the official naira exchange rate continues to be stable, a lack of availability at that rate is resulting in the majority of dollars being purchased at a premium of 50-70%. “The resultant cost impact is being managed through changes to relative pricing in an environment where trading conditions remain challenging and consumer disposable income is under pressure,” it said.
“The situation in Nigeria remains extremely fluid and is the largest variable to the year-end outturn”, PZ Cussons stated.
Finally, Eastern European spirits group Stock Spirits (STCK) has issued a trading statement for the first three months of 2016. Total revenues were up 29% to €55.3m, with operating profit of €6.3m compared to a €4.2m loss in the corresponding period last year
Adjusted EBITDA stood at €9m with a margin of 16% following a loss of €1.4m last year.
Chris Heath, CEO of Stock Spirits Group, commented: “The positive momentum we saw in the second half of last year has continued and we have seen a strong start to 2016, with volume, sales revenue and EBITDA growth. All markets have recorded EBITDA growth in the first quarter. Especially pleasing is a return to profit in the quarter in Poland following a loss in Q1 2015. There is still much to do but the initiatives we have been implementing since making the management changes in January last year and following the ‘root and branch’ review this year are clearly delivering results.
“It is still early days, but we are pleased with the start the new products we launched in 2015 have made and the recent medal awards for both our core brands, and several new products launched in 2015, continues to confirm the outstanding quality of our brands versus their competitive set.”
Nestle shares are up 1.3% to CHF71.10 this morning, Poundland is up 0.2% to 147.6p, PZ Cussons is 1.9% down to 311.2p and Stock Spirits has jumped 6.2% to 154p.
The FTSE 100 has held most of yesterday’s gains, down just 0.3% to 6,343pts.
Elsewhere, Tesco is up 1.1% to 183p after yesterday’s falls, while Tesco supplier Hilton Food Group (HFG) is down 2% to 568.5p.
Yesterday in the City
Tesco may have returned to the black yesterday, but its underwhelming guidance left the City distinctly unimpressed.
Tesco plunged 7.8% to 181p after Tesco (TSCO) revealed its first quarterly rise in sales in three years, while pre-tax profits rose to £162m from a property-driven loss of £6.4bn last year. However, the shares dropped after Dave Lewis warned that analysts’ expectations of a 35% boost to profits in 2017 could prove too optimistic.
Morrisons (MRW) was also dragged 2% lower to 197.2p after the market perceived Tesco’s outlook as a warning that supermarkets will struggle to improve margins in the face of continued competitive pressures from each other and the discounters.
But the supermarket falls were made to look mere blips by a 26.8% collapse in the share price of Premier Foods (PFD) after US suitor McCormick announced it wouldn’t be making a formal bid for the UK food producer. Despite the share price collapse yesterday, the shares remain around 35% higher than the 31.5p level they were at before McCormick’s interest became public.
Elsewhere, it was a decent day for the markets, with the FTSE 100 up 1.9% to 6,362.9pts after a sharp rebound in Chinese exports helped drive the FTSE to its highest level so far in 2016.
Risers in the grocery market included PZ Cussons, up 5.6% to 318p before today’s trading update, Greggs (GRG), up 2.7% to 1095p, Coca-Cola HBC (CCH), up 2.1% to 1453p, and Marks & Spencer (MKS), up 1.9% to 446p.
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