Unilever 2005 Earnings Jump, to Sell Frozen Foods

Unilever Plc/NV posted a 37% jump in 2005 earnings. The company also put most of its west European frozen foods businesses up for sale, due to slow growth. Anglo-Dutch Unilever said it expects a continual recovery into 2006 and higher operating profit margins. Annual earnings per Unilever NV share rose to 3.88 euros ($4.65), at the high end of forecasts of 3.17 to 3.89 euros. After stripping out a one-off profit from the sale of UCI Calvin Klein prestige perfumes, the rise was 22%. The consumer goods giant has been cutting prices and boosting marketing to drive a sales-led recovery from a shock profit warning in 2004. Executives expect the recovery to continue this year, with improved productivity and a move to higher-price products, offsetting higher input costs. They plan to sustain underlying sales growth, running at 3.1% in 2005, and expect a rise in 2006 operating margins from 13.4% in 2005, funded in part by more cost savings. Unilever Plc shares rose by 1.85 to 610 pence and Unilever NV by 1.5 percent to 59.45 euros by 1110 GMT. The company said it had put most of its west European frozen foods business up for sale under the Birds Eye and Iglo brands but would retain its Findus branded business in Italy. The frozen food businesses had found growth elusive, with underlying sales down 4.5% in 2005, although the Italian unit with 500 million euros of sales was its biggest operation in Italy and had better growth prospects. The businesses to be sold include four processing plants in the UK and Germany and employ around 3,500 people with annual sales of 1.4 billion euros. Analysts said the business is likely to fetch a price of one times sales, or up to 1.4 billion euros, and attract attention from private equity buyers. Unilever’s 3.1% underlying 2005 sales rise was in line with its medium term goal of 2 to 4% and up from virtually flat growth of 0.4% in 2004, but still half the growth of rivals Nestle and Danone. The company saw an underlying sales rise of 5% in the fourth quarter, accelerating from increases in the first three quarters of 2, 3.3 and 3.5 percent. Even Unilever’s slow-growing European business saw growth in the last quarter with a 2% rise. Analysts said one disappointment was that the group announced a share buyback program of only 500 million euros for 2006, versus hopes for a buyback about three times as much. At the same time, the Unilever One program, which aims to eradicate duplication, was on track to save 700 million euros by end-2006 and extended the target to 1 billion euros by end-2007. It proposed an annual dividend of 1.98 euros per Unilever NV share, up 5%, and 20.31p each Plc share, up 6%.