Changes muddy waters at Unilever

Accounting changes at Unilever will reduce the transparency of the consumer goods giant’s results, analysts have claimed.

Link: IFRS hits Unilever’s turnover

The group will issue first quarter results tomorrow amid criticism that accounting changes are making its performance harder to judge.

Unilever, which makes Flora margarine and Slim-Fast, among many other familiar brands, is set to reduce the number of global categories it reports under. In line with organisational changes announced in February, it will now report results for three regions (Europe, The Americas, Asia/Africa), rather than five (Europe, North America, Latin America, Asia Pacific and Africa/Middle East).

It will also no longer provide ‘beia’ (before exceptional items and good will amortisation) measures of profit and earnings per share, and is discontinuing a datasheet providing an analysis of underlying sales.

In a research note published last week, analysts at ABN Amro said the changes ‘are likely to make it more difficult for investors to understand the underlying trends in the business going forward’.

There has been an unusually high degree of uncertainty in the market in relation to profit prospects for Unilever recently. The note said: ‘To some extent, this was probably an inevitable consequence of the company’s decision to stop providing any guidance on sales and profits.

‘However, this has been exacerbated by confusion related to the change to international financial reporting standards (IFRS) and alterations to Unilever’s presentation of its profits, particularly the treatment of restructuring and exceptional items.’

Friday’s results will be the first under new IFRS standards. At the end of March the group announced that IFRS would see its annual turnover fall by around l1bn (£679m), and its profits increase by the same amount.

A spokeswoman for Unilever said that the changes were related to the introduction of IFRS and changes to the organisation of the company.