Billion-dollar ice-cream Magnum propels Unilever to record turnover

Deirdre Hipwell and Katherine Griffiths
January 24, 2013
The Times

A MAGNUM may be a delicious little treat for most people, but for Unilever, which makes the ice-cream, it is “one of the greatest-ever success stories in the consumer goods market”.

The Anglo-Dutch group made the claim as it revealed that sales of Magnum broke the €1 billion ($1.26bn) barrier last year, taking the number of its blockbuster brands to 14 and pushing its total sales over the €50bn mark for the first time.

Unilever said that the success of Magnum, which it dubs an “impulse ice-cream”, and its Sunsilk haircare range, which has also become a billion-euro brand, helped to push pre-tax profits up by 7 per cent to €6.7bn last year.

The group reported growth in its food, personal care, refreshments and homecare categories, with sales rising 10.5 per cent to €51.3bn, moving it further towards its target of €80bn of sales a year.

Paul Polman, the chief executive, said that the group was 30 per cent bigger than it had been in 2009, despite high energy and commodity costs and a “challenging and intense” market.

“We have achieved consistent growth that is ahead of the market, our operating margins are increasing and our cashflow is good. In a single year we have added €5bn of turnover and have made [market] share gains in 60 per cent of our turnover.

“We have achieved growth in every single category and we continue to invest in our brands. This gives us confidence that Unilever is becoming fit to win.” The shares surged 3.1 per cent yesterday to a record pounds 25.26.

In a fresh sign of the growing importance of emerging markets, more than 55 per cent of Unilever’s turnover last year came from developing countries, where underlying sales growth rose 11.4 per cent. This compares with a stagnant European market, which reported a flat 0.8 per cent underlying sales growth last year.

Unilever, which also sells Lipton tea, Ragu pasta sauces and Flora margarine, said that it was expanding some of its best-known brands in Indonesia, Brazil and China and other fast-growing countries to offset slowing growth in other regions.

Mr Polman said that TRESemme, the shampoo brand it acquired after the acquisition of Alberto Culver, was achieving particularly strong growth abroad, adding €150 million of turnover in Brazil alone in a year.

The personal care division, which sells products such as Dove as well as TRESemme, was the best-performing sector, generating €18bn of sales and accounting for 44 per cent of the group’s core profit. The weakest division was food, where sales rose by only 1.3 per cent in the fourth quarter and 1.8 per cent to €14bn for the year.

Mr Polman said that a combination of pricing pressures and consumers putting “less in their baskets” meant that the core operating margin in food was flat and the group was focused on disposing of non-strategic brands.

It sold Skippy peanut butter to the maker of Spam last month and plans a further €500m to €750m of disposals. Unilever wants to concentrate on higher-margin food sales, such as its Knorr Beef Bouillon jelly stock.

Unilever increased its core earnings per share by 11 per cent to €1.57 and has a free cashflow of €4.3bn, with €7.4bn of net debt, in contrast with its household products rival Procter & Gamble, which is shedding jobs.
The Times