Tough times for Unilever
for its personal care products in the first half, operating mainly
in weak markets with declining prices. Cutting costs helped improve
operating profits at the division, but price cuts failed to
stimulate growth in sales, writes Iordan Mateev.
Unilever reported total turnover of €19.9 billion for the first half, down 6.8 per cent, with personal care sales (including brands such as Dove and Lux) accounting for around a quarter of this at €5.4 billion, up just 1 per cent as the company was forced to cut its prices by around 3 per cent to maintain its market position.
"In competitive markets we are taking the actions necessary to protect our market position," the company said in a statement. "Market conditions weakened further in the quarter with price declines in both home and personal care. Conditions in Germany, France and the Netherlands have been particularly difficult. Lower sales in home and personal care reflect an increased level of consumer related price promotions, with price down by 2.3 per cent."
But while sales fell, there was some good news on the profit front. "We continue to generate savings from our procurement and restructuring programmes and there was another healthy improvement in mix," the company said.
These efforts helped the group rally somewhat in the second quarter after a poor first three months, with personal care operating profits increasing 22 per cent in the second quarter compared to just 3 per cent for the first, leaving operating profit for the half dome 2.9 per cent higher.
But the personal care division proved to be the exception to the rule, with total group operating profits sliding 7.8 per cent to €2.4 billion during the half, despite a recovery in the second quarter.
But despite its ongoing difficulties - compounded by the broad range of products which Unilever makes, many of which have their own specific problems to deal with - the company remained upbeat.
"It has been a tough quarter both in terms of the trading environment in some of our key markets and because of the specific portfolio issues we are dealing with. We have responded flexibly based on the specific needs of individual markets.
"Importantly our business continues to demonstrate its resilience and ability to finance the necessary investment in our brands through cost savings in every area," said financial director Rudy Markham.
