Unilever 4Q15 Earnings Call Notes

Unilever’s (UL) CEO Paul Polman on Q4 2015 Results

Currency boost

“Turnover grew by 10% which was helped by currencies. Underlying sales growth returned to a solid 4.1% which was ahead of the markets. It was driven by emerging markets where we grew a strong 7.1%, with 2.7% of this coming from volume despite the challenging environments there as well.”

Tailwinds proved short lived last year

“At the beginning of last year I said that we were starting to see more tailwinds than headwinds, but unfortunately the tailwinds proved short-lived.”

A second consecutive monsoon failure have put pressures on rural demands in India

“Crop failures for a second consecutive monsoon failure have put pressures on rural demands in India.’

Have to work harder on costs in a low growth deflationary environment

“In a low growth and deflationary environment we have to work the cost part of the equation harder. ”

Global ice cream helps improve seasonality

” one of the beauties that we now have in our ice-cream business from what it was six, seven years ago if you want to, that we have made it global James and Latin America has had a reasonable summer and strong ice-cream plants in that part of the world, but the pricing component to recover cost increases is much higher there than in other parts of the world. ”

The middle market is disappearing in the US, but prestige brands well positioned

“Combined, despite what you see at the global economy, we think that these prestige brands, small as they may be, are well positioned. Because you take the U.S. as a great example. You announce a growth rate of the GDP, but what really happens is — Oxfam just reported that the 1% in the wealth now has the same wealth as the bottom 99%. The U.S. is the extreme of that. The GDP growth goes to a very small amount of people and they’re not eating more products. The middle market is disappearing which is the bulk of the business. That’s why you see a lot of retailers struggling. But the prestige segment is continuing to grow amongst that target and we’re very well positioned for that.”

Europe has been strong

“Greece, as you can imagine, is very challenging and will continue to be. The Nordic countries are actually challenging. But if you look at Italy, France, Germany, the UK and — which is the other big one? Spain, we’re performing well and we’re actually growing share there on more of our businesses than not. So the core of it is healthy. You’ve actually seen a strong volume component in Europe, offset by a slight negative on pricing, but still an overall positive. A very strong performance in Europe.”

Currency adjustments should be less enormous this year

“if I may take one step back here, there is undoubtedly the enormous currency adjustments we’ve seen in these emerging markets. I think there will be continued pressure to the downside, but not the enormous adjustments. So it is fair to say that there will less — pricing component will be less moving forward as a result of that.”

Pricing is not going to be higher this year than last year

“The pricing on a macro level on a global basis is not going to be higher than last year, that you have to take. That is separate from commodity cost being the same or not. There are currency effects, there’s mix effects, there’s the net revenue management that we’re doing. So the pricing component is not going to increase.”

See irrational competition in home care in some markets like South Africa/Middle East

“the competitive pressure has not been really significantly eased either. We see very irrational behavior still of our competitor in some of the markets, like South Africa, the Middle East. We’ve just seen the buy one get one frees on all of the Middle East volume which to me is puzzling. But anyway, we deal with that and we get these results. So that’s it.”

India is very affected by weather events

“In India it’s still a very rural environment, with 70% of the people living in the rural environment. And if you really have this climate stress — they’ve had tremendous droughts there again and not the right monsoon seasons. So the rural income that was growing at, let’s say, 150% or 170% versus average, has now moved down again.”

Graeme Pitkethly

Argentina nor Venezuela have triggered hyperinflation accounting quite yet

On the technical question of hyperinflation which I think is, memory serves, IAS 29. Neither Argentina nor Venezuela have triggered the criteria for hyperinflation accounting and I think that’s pretty much consistent with their peers.