Unilever identifies personal care as priority

By Guy Montague-Jones

- Last updated on GMT

Related tags: Cost, Economics, Material

Unilever has identified personal care as a priority area in the
creation of future sales growth and the protection of profits from
increasing raw material costs.

The Anglo-Dutch company said in its annual report published yesterday that personal care was its fastest-growing business and a key to achieving sustainable profitable growth. Nevertheless adverse exchange rates meant that personal care sales increased by only 1.4 per cent last year to €11.30bn while overall turnover rose 1.4 per cent to €40.2bn. Improving profitability ​ Looking to its overall performance in 2008, Unilever expects to grow profitably despite external pressures such as high material costs, adverse exchange rates and macroeconomic worries. The company plans to achieve this through efficiency improving measures such as the axing of 20,000 jobs across its divisions, 11 per cent of its workforce, and the fusion of Home & Personal Care and Foods into a single category structure. Despite seeing costs rise and margins fall 0.5 percentage points to 13.1 per cent last year Unilever hopes these changes will help it cut costs by €1.5bn and lift its operating margin to above 15 per cent by 2010. Cost pressures ​ Working against its efforts will be the high cost of raw materials affecting all its businesses as the company expects the trend for increasing commodity prices to continue this year. It has already faced significant cost increases that it claims to have been able to substantially mitigate through a combination of price increases, supply chain savings and mix improvements. To fight against future price increases Unilever also purchases forward contracts for raw materials and commodities but only where appropriate as such a strategy can hamper flexibility. Economic environment ​ As for the impact of economic uncertainty on sales growth the company is confident that it will be able to ride out any storms thanks to its slimmer and more flexible structure and the inelasticity of its product mix. "We operate in sectors less susceptible than others to the effects of an economic downturn: people will always need to eat, wash and clean their homes,"​ said Unilever CEO Patrick Cescau.

Related topics: Market Trends

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