Unilever's sales fell 5% for the first half, due to unfavorable exchange rates. The company said that underlying sales growth, excluding spreads, was 2.7% with volume contributing 2.5% and price adding 0.2%. The company noted that a truckers' strike in Brazil adversely affected underlying sales growth by around 60 basis points.
"Our first half results show solid volume-driven growth across all three divisions, which was achieved despite the effects of an extended truckers' strike in Brazil, one of our biggest markets," said CEO Paul Polman. "Growth was driven by strong innovation and continued expansion in future growth markets. The margin improvement was of high quality and in line with our strategy, driven by further gross margin progression, increased investment behind our brands and strong savings delivery."
Unilever said emerging markets underlying sales growth was 4.1% with volume contributing 3.3% and price adding 0.8%. Underlying operating margin rose 80bps driven by increased gross margin and further reduced overheads. Underlying earnings per share up 7.8% after a currency impact of (10.8)%, constant underlying EPS up 18.6%.
"The Connected 4 Growth change program—which makes our organization more agile and resilient—is driving the step-up in our innovation and savings programs." said Polman. "As part of the continued portfolio evolution, we completed the exit from spreads on July 2, 2018. In anticipation of the disposal proceeds, we have already returned E3 billion as part of our E6 billion share buyback program that will complete before the end of the year. We have also signed an agreement to acquire a 75% stake in the Italian personal care business Equilibra.
"Our expectation for the full year is unchanged. We expect underlying sales growth in the 3-5% range, an improvement in underlying operating margin and strong cash flow. We remain on track for our 2020 goals," Polman concluded.
Beauty & Personal Care continued to grow the core with innovations behind global and local brands, while expanding the portfolio in attractive segments and channels. This led to an improvement in volumes in the first half. Growth in the second quarter however was negatively affected by the truckers' strike in Brazil as well as challenging competitive conditions in Europe and South East Asia. Against this backdrop, skin care performed well, driven by Vaseline's successful market development campaign, Pond's and Lakme in India. The prestige business demonstrated broad-based first half growth of more than 6%. The 2017 acquisitions of Carver, Sundial Brands and Schmidt's all grew strongly and will contribute to underlying sales growth from twelve months after completion.
Skin cleansing delivered good growth helped by new premium formats. These included aerosol mousse which delivers an improved sensorial experience and was launched across five brands in Europe, and the launch of Dove body polish in North America which exfoliates and nourishes at the same time.
In hair care, volume-led growth was driven by Sunsilk and Dove, helped by their successful expansion into natural propositions with on-trend ingredients.
Deodorants returned to good volume growth, helped by innovations such as Rexona antibacterial and invisible, which offers both odor and stain protection, while price growth was negative due to increased promotional activity.
Sales in oral care were slightly down, primarily due to competitive challenges in some developed markets.
Home Care increased its strong emerging market footprint with its proven market development model and benefit-led innovations. Growth was broad-based with the exception of Latin America. Fabric solutions continued to successfully expand its core brands in fast-growing segments, such as natural products with the premium Omo Naturals range in China. Unilever is also uptrading consumers into the liquids segment in emerging markets, for example with Surf Excel Matics in India, and into premium formats in developed markets, such as the launch of Persil triple chamber liquid capsules in the UK.
Comfort delivered double-digit growth, helped by the roll-out of the ultra-concentrated Comfort Perfume Deluxe from South East Asia to the UK and the extension of the sensitive Comfort Pure range into India. Home and hygiene remained a strong growth contributor to home care. This was helped by continued double-digit growth of Domestos toilet blocks and bleaches, the launch of Sunlight dishwash in Indonesia with improved formulation that allows 5x faster degreasing, and the launch of Cif premium sprays, with specialist care and cleaning, in 23 European markets.