Unilever's lackluster 2005 buoyed by personal care

By Simon Pitman

- Last updated on GMT

Related tags Personal care Investment Marketing

Unilever sales grew by just 2 per cent in 2005, putting them in the
shadows as arch rival P&G takes the number one consumer goods
spot following last year's purchase of Gillette.

Although the company's performance was let down by its food divisions, its global personal care division helped to prop up the results with a considerably improved performance over 2004's figures.

In 2005 total sales came in at €39.67 billion, compared to €38.56 billion in 2004. This represented a 2 per cent increase at constant rates and a 3 per cent increase at current rates.

In comparison, its biggest rival is estimating that on the back of its strong performance in the fourth quarter, Procter & Gamble's 2005 full year sales of $56.74 billion (€47.45bn) to grow by 20 per cent during 2006.

A continued slide in the fortunes of the company's mainstay frozen foods division means that it is now offloading its Bird's Eye and Igloo divisions, to concentrate on other more profitable aspects of the business, namely household and personal care.

Speaking about the restructuring that has been taking place throughout the course of the year, Unilever CEO Patrick Cescaus said: "We have focused and simplified our organization, and increased investment behind our growth priorities. We have sold our fragrance business and announced today the planned sale of most of the frozen foods business,"

He went on to state that the personal care division, alongside its operations in the developing and emerging markets, had returned to strong growth through the course of the year, also earmarking a stronger performance in the European market.

Proof that the restructuring is working came as the company also revealed that, despite the flat sales growth, profits had risen 28 per cent to reach €4.75 billion, compared to €3.7 billion in 2004.

"The manner in which we ended 2005 gives me confidence as we enter 2006,"​ Cescaus added. "Unilever is a simpler and more agile business, more responsive to customer and consumer needs, with a clear value creation agenda."

On a geographical basis, sales in the mainstay western European market remain challenging for the business as a whole and the company reported that home and personal care sales were disappointing, with the company losing market share, particularly in the key UK market.

In the Americas, there was a better picture, with underlying sales growing by 4 per cent, from volume gains. Sales in the US grew by 3.2 per cent, while big gains in the first half of the year in Mexico and Brazil were said to have slowed down by the second half.

The company said that growth in personal care ranges throughout the Americas has been boosted by good consumer responses to new initiatives, particularly in the personal wash category, with brands such as Axe, Dove and Rexona leading the way.

Meanwhile in Asia and Africa underlying sales grew by 9 per cent, driven by strong gains in all divisions and categories. The company highlighted the Lux skincare range in India and Pond's new 'mud' range in China as being particularly successful.

Looking ahead, the company believes that the restructuring will help to drive profitability as it reaps the affects of a host of cost saving projects, which in turn should see operating margins rise. This leads it to believe that cost savings could top €1 billion during 2006.

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