What: Unilever announced that its profit grew by nearly 500 million euros (US $676 million dollars) during the fourth quarter of 2013, an 11% increase versus the same quarter of the year before.
Why it matters: The company reported that the growth achieved last year was largely due to emerging markets, including Latin America.
Unilever’s good performance in emerging markets has helped the Anglo-Dutch consumer goods multinational to grow profits by 11% in 2013.
Despite slower markets and depreciating currencies, sales in emerging markets rose by 8.4%, during the fourth quarter of 2013, an increase over the third-quarter’s 5.9% gain. Fourth-quarter sales rose more than 10% in China and by 12% in Latin America.
The 4.1% in underlying sales exceeded the 3.9% median estimate of 14 analysts surveyed by Bloomberg. Underlying revenue in developed markets fell 1.7%.
Unilever is enduring a slowdown in emerging markets such as India and China, where it gets about 57% of revenue. At the same time, it is struggling with declining sales in North America and Europe. Slowing growth in emerging markets and motionless demand in developed countries will continue after quarterly sales provided some reprieve for investors.
[ Unilever generates more than half of its sales in emerging and developing markets.Indonesia, Brazil and India combined account for 18 percent of Unilever’s sales. Each of them have seen their currencies fall more than 10 percent versus the euro over the past year, according to data compiled by Bloomberg.
Emerging markets, most of them in Latin America, amount to 57% of the multinational overall sales.[/comillas ]
“Emerging markets bounced back in the fourth quarter — few expected that,” Warren Ackerman, an analyst at Societe Generale in London, said in a note. “This is a decent performance given that emerging markets continue to slow and developed markets are weak. We always felt that one bad quarter didn’t make a bad company.”
Unilever said it would stick to its emerging markets growth strategy as a fourth-quarter recovery in sales in the region increase the consumer goods maker’s 2013 results and relieved investors who had been worried about consumer demand there.
Chief Financial Officer Jean-Marc Huet trusted Latin America and Southeast Asia strength, as well as the increased contribution from Hindustan Unilever, a venture in which Unilever recently increased its stake.
“From where we were in September, we’re pleased with the performance of emerging markets. The good news is that a big proportion is just good volume growth – we’re selling more products,”Huet said in an interview with Reuters.
Weaker start to 2014
Promising economic indicators in developed markets had not yet been translated into greater demand for its products. Nevertheless, Unilever sustains its goals for 2014, which focus on volume growth ahead of its broader markets and improvements in operating margin and cash flow.
Unilever sales will grow at about 3% to 5% for the year. In 2013, underlying sales rose 4.3%. Including the impact of currency exchange rates and divestments, turnover fell 3 percent.
Foreign exchange rates may reduce sales growth by about 5% in 2014.It has a large presence in Brazil, India, South Africa, Indonesia, Argentina and Turkey — which have all seen depreciation in their currency.