Unilever sales suffer from hurricanes, European rains

[LONDON] Unilever reported third-quarter sales growth that fell well short of estimates as poor weather in Europe and hurricanes in the Americas cut demand for ice cream.

Underlying revenue rose 2.6 per cent, the Anglo-Dutch maker of Magnum and Ben & Jerry's said, compared with the 4 per cent median estimate of analysts surveyed by Bloomberg. The shares fell as much as 3.4 per cent early Thursday in Amsterdam.

"The developed markets were extremely challenging," with retailers cancelling orders after hurricanes hit Florida and Texas, Unilever's second and third-largest states for revenue in the US, chief financial officer Graeme Pitkethly said on a call.

In Europe, ice cream was the main source of volume decline, London and Rotterdam-based Unilever said.

In addition to bad weather, new competition hit Unilever in ice cream. The company lost market share to a new entrant, Halo Top, though US ice cream sales should be back in growth next year, Mr Pitkethly said.

Unilever's refreshment business, which includes ice cream and tea, accounts for about one-fifth of overall sales. The company has maintained its commitment to spend one billion euros (S$1.6 billion) to three billion euros annually on fast-growing businesses such as teamaker Pukka Herbs and Sir Kensington's condiments, even after Kraft Heinz Co's unsuccessful US$143 billion takeover bid in February.

A review of the dual-headed legal structure is "progressing well", Unilever said. The Anglo-Dutch company has been taking steps to simplify its corporate structure with predators circling the food industry, and it has put its underperforming spreads business up for sale.

In addition to the hurricanes, increased competition hurt the ice cream business, Unilever said. Underlying sales in North America were down 2.9 per cent, while the company said China and India showed signs of improvement.

To pursue growth in the emerging world, which accounts for almost two-thirds of sales, Unilever last month agreed to acquire cosmetics maker Carver Korea for US$2.7 billion.

Underlying revenue growth slowed from the second quarter's 3 per cent increase as volume decelerated for the fourth straight period. The company maintained its forecast for full-year underlying sales growth of 3 per cent to 5 per cent.

BLOOMBERG