Management gamble pays off

The Anglo-Dutch company, which produces products like Dove soap, Magnum ice cream and Liptons tea, stated in December that underlying sales growth for the year would be between 4.5% and 5%. But at a later business seminar, Bergman made comments regarding improved sales growth that left investors unclear as to whether he was referring to the full year on just the fourth quarter.

The confusion forced Unilever to rush out a statement announcing that underlying sales growth for the group’s top 400 brands would be 5.4%. Analysts then estimated this would mean top brand sales growth of about 9% for the fourth quarter.

The muddle has taken the gloss off what is otherwise a quite impressive performance that has been triggered by a range of product innovations and heavy promotional activity.

The results will comes as vindication for financial director Rudy Markham and co-chairman Niall FitzGerald’s huge restructuring project launched in 2000 to deliver significant cost savings.

Unilever is shedding 1,200 under-performing products to focus on a core 400 key brands, such as Hellmann’s mayonnaise, Knorr stock cubes and Domestos bleach. This group is believed to have contributed to around 90% of the group’s sales last year. The initiative is expected to last until 2005.

Despite the company’s restructuring and the expectation of strong results, recently Unilever has not managed to impress investors in recent times.

The group’s share price has been falling steadily since the middle of January – from a high of around 630p in November to a current trading figure of around the 500p-mark.

In a statement made late last year, the group said: ‘We have a good momentum which is broad based across our business. We see good growth in our leading brands without having to introduce savings programmes to provide the fuel for increased levels of advertising and promotion and for the expansion of our operating margin.’

This operating margin expansion is expected to be around 15% – an increase of 100 basis points.

Meanwhile, Unilever’s earnings per share were expected to increase impressively by some 20%, at constant exchange rates due to cost savings.

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