Unilever takes a battering after fresh sales warning

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The Independent Online

Almost £1.8bn was wiped off the value of Unilever yesterday, after the food and household products giant warned it would miss its sales targets for the second time this year.

Shares in the Anglo-Dutch group plunged 11 per cent to 496p, after it slashed its full-year target for growth from its top brands such as Magnum ice cream and Hellmann's mayonnaise to 4 per cent from 5 to 6 per cent. The news, which coincided with a profit warning from the Dutch brewer Heineken, shocked the market, dragging the FTSE 100 index of leading shares down to close at a three-week low. It came less than two months after Unilever insisted it would meet its sales targets for its top brands. "The market suspended belief after its first quarter and yesterday it suspended it a bit more," David Lang, an analyst at Investec Securities, said.

Unilever blamed a tougher-than-expected business environment for its disappointing second-quarter sales projections. It said growth for its leading 400 brands would be just 3 per cent, in line with the first quarter, dashing analysts' hopes the group would achieve growth of at least 6 per cent. The company, which is in the closing phases of a huge restructuring programme that has seen it overhaul its business, said a poor performance from its SlimFast diet food brand and lower sales of its home and personal care products such as Dove shampoo were behind its sales revision.

A slump in the global travel market had hit demand for its Calvin Klein fragrances, it added. In the US, the company said sharper-than-expected destocking, particularly from retailers facing financial difficulties, had exacerbated weak market conditions.

"Based on our expectations for the second quarter along with our experience in the first quarter, we have clearly given up more of the headroom in our plan than we are comfortable with at this stage of the year and are adjusting the growth outlook for the leading brands to some 4 per cent for the year," the company said.

Unilever's comments, which were made in a trading update for its second quarter, echoed those from other consumer-focused companies such as Proctor & Gamble and Cadbury Schweppes. "Life getting tougher is a common theme through the industry," Mr Lang said.

Sales of SlimFast were down by about 17 per cent in April and May, in line with the fall in the first quarter. Unilever said it was on track to meet its outlook of low double-digit earnings per share growth, but the market chose to focus on the group's sales guidance. "The top line is really the number one financial objective. That's why the [restructuring] plan is called 'Path to Growth',"Mr Lang said. "There will be question marks hanging over the results for the rest of the year until the company delivers."

Unilever said that while earnings per share growth for the first half was expected to remain flat, restructuring savings of about ¤100m (£69m) per quarter would help it to achieve its full-year target. It also expects to net ¤600m of savings from its global buying programme.