Preview: Unilever 2Q earnings to fall

posted: 116 DAYS 21 HOURS AGO

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AMSTERDAM -Unilever NV PLC, the maker of Dove soaps, Lipton teas and Ben & Jerry's ice creams, reports earnings for the second quarter of 2009 on Thursday. The following is a summary of key developments and analyst opinion related to the period.

OVERVIEW: Nobody is expecting blowout earnings from consumer products maker Unilever amid the global economic downturn. That gives it a chance to beat low expectations — or just meet them.

The company is suffering from tepid consumer demand and rising commodity costs. That means it must walk a difficult path, trying to keep sales afloat by raising prices even as volumes fall.

In the first quarter, the company said Europe — its largest market — was suffering worse than other parts of the world from the economic downturn.

Chief Executive Officer Paul Polman, who took the top job at the company in January, said Unilever planned to restore growth in sales volumes by increasing advertising spending. At the same time, he said the company wouldn't sacrifice margins. That may be possible, analysts say, given that advertising costs are falling, but it's not a surefire solution.

The company said some shoppers had begun switching to cheaper brands or in-store brands in the first quarter and analysts will be watching closely to see if that trend continues.

BY THE NUMBERS: Analysts expect the company to earn 29 cents per share, excluding one-time items, on revenue of euro10.5 billion for the quarter that ended in June. That would mean a 9.5 percent fall in earnings and a 1 percent rise in sales.

ANALYST TAKE: Richard Withagen, who follows Unilever for SNS Securities, said in a note Monday that the pressure from rising commodity costs will ease later in the year, but that may come too late to help the numbers this quarter.

"Shares trade in line with the peer group, which we believe is unwarranted: we rate Unilever Reduce," he wrote.

WHAT'S AHEAD: In recent years, Unilever has followed the trail blazed earlier by its biggest rivals, U.S. consumer products giant Procter & Gamble Co. and Swiss foods company Nestle SA, selling off its less known brands to focus on its biggest winners.

Polman, who was came from competitor Nestle, may continue to prune Unilever's portfolio or announce job cuts.

The company could surprise analysts by providing guidance for its full year earnings, which it has so far declined to give.

On the bright side, Nielsen data show improving sales figures for European stores in recent weeks, so Unilever may comment on whether it too is benefiting from that pickup.

STOCK PERFORMANCE: Unilever's share price at euro18.86 has increased 41 percent from its March low, outperforming both P&G and Nestle. It is 9.5 percent off its high of euro20.85 in September.

2009-08-04 10:52:04