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Unilever beats forecasts, sees gains in emerging markets

File photo shows Unilever headquarters in Rotterdam.


Anglo-Dutch consumer goods company Unilever PLC/NV beat growth expectations in 2012, propelled by an increasing presence in emerging markets.

The company is beating its rivals and a dull economic backdrop by focusing its marketing on the personal and home care sectors, which are skewed more to high-growth regions like Latin America and Asia and grew around 10 per cent in 2012.

"We're making much clearer choices – allocating resources, and concentrating where we see the most potential," Chief Financial Officer Jean-Marc Huet told reporters after on a call with reporter journalists on Wednesday.

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"It could be the launch of Tresemme (hair care products) in Brazil, Indonesia, India. It could be the launch of this product in the U.S., Magnum (ice cream) in the Philippines, Bertolli Gold (olive oil spread) in the Nordics, the U.K. – the list continues."

Dove Damage Therapy haircare and Rexona Maximum Protection deodorant had been stand-out successes in 2012, the company said, while it is promoting its new Axe/Lynx Apollo deodorant with a global competition offering a trip into space.

Unilever was born 83 years ago out of the merger of Sunlight Soap and foods maker Lever Brothers and Dutch group Margarine Unie.

Now it is the spreads business – Flora margarine, and others – which is more exposed to sluggish developed markets and the biggest drag on the company's growth, with the foods business growing a comparatively weak 1.8 per cent last year.

"In spreads we're focused on recovering the volumes. We've taken some pretty serious price actions," said Mr. Huet.

Mr. Huet cautioned that overall markets still remained tough, with no room for complacency.

"In 2013 the markets in which we operate will continue to be difficult. Competition will remain intense and consumers are still feeling very much the effects of austerity measures," he said.

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The maker of Omo detergent and Ben & Jerry's ice-cream said overall 2012 underlying sales grew 6.9 per cent, beating forecasts of 6.5 per cent.

Emerging markets, which make up around 55 per cent of the company's turnover, grew 11.4 per cent.

That performance contrasts with rivals that have been slower to move into fast-growth regions. Unilever's main household products rival Procter & Gamble is shedding jobs, and French yogurt maker Danone may do the same as the European economic downturn weighs on its business.

Unilever did not give a specific outlook for 2013, but repeated its mantra of focusing on growing ahead of its markets, on steady core operating margin improvement and on strong cash flow.

"As expected, 2013 guidance was the standard and somewhat vague," said analyst Andrew Wood at Bernstein.

"Management remains cautious on the markets and competition, but that was no different to its position 12 months ago. Still, it will be tough for Unilever to repeat 2012's success, especially on the top line."

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Analysts at Shore Capital retained their 'buy' rating on the stock, saying that despite the high valuation, Unilever's investment potential remained "in its infancy", pointing to the company's emerging markets exposure and sustained margin expansion.

Core operating margin grew to 13.8 per cent in 2012, bettering many analyst predictions, as Unilever said it stayed "rigorous" on driving down costs. Raw material cost rises were expected to be between low and single digits in 2013, Huet said.

Sales for the full year were up 10.5 per cent at €51.3-billion ($68.4-billion U.S.), while core earnings per share rose 11 per cent to €1.57, both in line with forecasts.

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