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Unilever Net Profit Falls 13.7% in Fiscal 2023 as Currency, Competition Bite

LONDON Turnover at Unilever was broadly flat in fiscal 2023 while net profit declined nearly 14 percent as the company faced currency headwinds and lost ground to competitors in a difficult market.

Revenue at the parent of brands including Dove and Kate Somerville was down 0.8 percent to 59.6 billion euros in the 12 months to Dec. 31.

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The company said the decline was due to currency headwinds, disposals, and shrinking market share in certain regions and product divisions. On an underlying basis, sales grew 7 percent in the year, with most of those gains accrued in the first half.

Net profit was down 13.7 percent to 7.1 billion euros, while operating profit fell 9.3 percent to 9.8 billion euros. Underlying operating profit rose 2.6 percent to 9.9 billion euros.

In the fourth quarter, turnover showed a slight improvement compared with the previous period on a reported basis. It fell 3 percent to 14.2 billion euros. On an underlying basis, it rose 4.7 percent.

In the third quarter of 2023, turnover was down 3.8 percent to 15.2 billion euros. On an underlying basis it rose 5.2 percent.

CEO Hein Schumacher said the results show “an improving financial performance,” with the return to volume growth and margins rebuilding.

“However, our competitiveness remains disappointing, and overall performance needs to improve. We are working to address this by improving our execution to unlock Unilever’s full potential,” he said.

Schumacher added that Unilever has increased investment behind its 30 “power brands,” group which includes Dove, Vaseline and Pond’s. It is also transforming its portfolios, “and driving a sharper performance focus, with clear and stretching targets across the whole organization.”

He added: “There is much to do, but we are moving with speed and urgency to transform Unilever into a consistently higher performing business.”

The new chief financial officer, Fernando Fernandez, also delivered some difficult messages on the analyst call.

He said Unilever wasn’t responding well to different trends around the world. He said the consumer giant had been “too slow to respond” to consumers’ shift to higher-end segments in the U.S. At the same time he said Unilever has been losing ground to cheaper, private label products in Europe amid a cost of living crisis.

“It’s been a difficult year, but we’ve seen sales volumes come back in the fourth quarter,” he said.

Beauty and Wellbeing outperformed in the year.

In fiscal 2023, the Beauty and Wellbeing division reported underlying sales growth of 8.3 percent, with strong volume growth of 4.4 percent, Unilever said.

Prestige Beauty and Health and Wellbeing continued to grow in the double-digits and accounted for a quarter of Beauty and Wellbeing’s turnover, the company added.

Looking ahead, the company said it expects underlying sales growth for 2024 to be within its multiyear range of 3-5 percent, “with more balance between volume and price,” and a modest improvement in underlying operating margin for the full year.

Analysts were underwhelmed. They said that while the numbers were broadly in line with estimates, the company needs to win back market share.

Bernstein described the numbers as “only half-reassuring, as competitiveness keeps going down and the action plan seems ‘more of the same.'”

RBC Capital Markets said that “competitiveness has yet to improve. We find the significant increase in marketing/sales in the second half encouraging, but competitiveness has yet to respond, and we see little reason to get unduly excited.”

Shares closed up 2.9 percent to 40.15 pounds on Thursday.

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