Unilever Dr (EU:UNA)
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6 Meses : De Sep 2018 a Mar 2019
By Saabira Chaudhuri
Two of the world's largest consumer goods companies, Unilever PLC and Nestlé SA, reported stronger sales as a wave of inflation in many markets emboldened them to raise prices.
The new pricing power gives a boost of confidence to the entire industry, which has struggled in recent years with fierce competition and rapidly changing consumer tastes.
Unilever, the maker Hellmann's mayonnaise and Dove soap, on Thursday said third-quarter sales climbed 3.8% on an underlying basis, with prices up 1.4%. Nestlé, which makes Kit Kat chocolate and Nescafe coffee, reported organic sales up 2.9% for the quarter, saying prices grew by 0.9%.
Both companies' figures exclude the impact of currency changes and acquisitions and disposals. Neither reported profits figures. Shares in Unilever fell 1.2%, while Nestlé rose 0.4%.
Many consumer goods makers have in recent quarters struggled to raise prices amid weak inflation, Amazon.com Inc.'s growing prowess in selling more household staples, and a decline in brand loyalty as consumers use the internet to shop around. A shift to discount retailers, from dollar stores across the U.S. to European discounters like Germany's Aldi, has further pushed down prices.
But inflation, especially in emerging markets, is changing the picture.
"The combination of underlying commodity increases but also the stronger U.S. dollar is really putting a lot of inflation into our market," said Unilever Chief Financial Officer Graeme Pitkethly. "I see pricing being a key feature of the entire sector through the balance of the year and in 2019."
Unilever said commodity costs and hence price growth was particularly strong in emerging markets while both companies said prices rose in the U.S. However, in Western Europe both cut prices.
Kimberly-Clark Corp., which makes Huggies diapers and Kleenex tissues, in August said it was raising prices in North America to offset higher commodity costs. It reports third quarter results next week.
Procter & Gamble Co. reports fiscal first-quarter results Friday. The maker of Tide and Bounty has grappled with fierce competition in categories like hair care and laundry detergent, forcing it to keep a lid on prices. In July it reported prices in the fourth quarter dropped 2%.
In developed markets, Unilever said underlying third-quarter sales climbed by 1.3%, driven mostly by volume gains. Emerging market sales jumped 5.6% as Unilever was able to raise prices by 2.1%. The results exclude pricing in Argentina, which is going through a period of hyperinflation. The company raised prices there by 34% in the third quarter while volumes dropped 10%.
Overall Unilever's third-quarter sales came in at EUR12.5 billion ($14.4 billion).
Finance chief Mr. Pitkethly said investing in brands was key in an inflationary environment to ensure that volumes continue to grow even as the company raises prices.
"We got to get the price moving but keep volume first," he said. "The true test of the strength of a brand is the ability to price and give a degree of inflation protection."
Switzerland-based Nestlé said third-quarter sales came in at 22.5 billion Swiss francs.
Revenues were held back in part by the strength of the Swiss franc against emerging-market currencies, which weakened foreign sales when they were translated into francs.
Jefferies analyst Martin Deboo noted that Nestlé's third-quarter pricing was ahead of forecasts and a sharp improvement from the 0.2% growth it reported in the first half, which he said bodes well for profit margins.
Nestlé said higher pricing in the third quarter reflected inflation in commodity and freight costs in North America.
--Brian Blackstone contributed to this article.
Write to Saabira Chaudhuri at email@example.com
(END) Dow Jones Newswires
October 18, 2018 05:44 ET (09:44 GMT)
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