Unilever and Vodafone get profit boost from emerging markets

Unilever posts a 26% hike in full-year profits - but with commodity prices inching ever higher, times may be tougher in 2011.

by James Taylor
Last Updated: 19 Aug 2013
There's a good reason why Unilever was recently voted by its peers as Britain's Most Admired Company (in MT's annual survey). The consumer goods giant managed to boost turnover by 11% to €44.3bn in 2010, while increasing net profit by 26% to €4.6bn - despite weak consumer confidence in its traditional markets, and despite higher commodity prices eating into its margins. It managed this partly by hiking prices, but also by focusing more on emerging markets, some of which are growing like topsy. On a day when Vodafone also reported a boost from sales in India, it's a reminder that most of the UK's biggest companies are now seeing much of their growth outside these shores...

Unilever enjoyed underlying sales growth of 4.1% across the board last year. But although volumes were up in Western Europe - albeit by a measly 1.1% - the big story was its Africa/ Asia/ CEE group, which saw a jump of more than 10%. This division accounted for about 40% of group turnover last year, while its Americas division contributed another 33%. So Western Europe is much less important to Unilever now than it was a decade ago; as chief exec Paul Polman said today, emerging markets are now Unilever's 'engine of growth'.

One big headache for Unilever - which is only going to get worse in the coming months - has been the rise in commodity prices; things like tea, milk and oils have all got more expensive in the last year. But Unilever has managed to prevent too much damage to margins by cutting costs and - in news that will please shareholders, if not shoppers - hiking prices, particularly at the back end of last year. So chances are we'll be paying more for our PG Tips in the coming months.

Vodafone has also been a big winner in emerging markets lately: revealing today that revenues climbed 3.5% to £11.9bn in the three months to December 31, chief exec Vittorio Colao suggested that customer growth in India had been a big factor (although it's also benefited closer to home, as more and more Brits have been buying smartphones - and then spending more money on data and services).

So although it certainly helps the overall mood when our big corporates post strong results, it doesn't necessarily tell us much about the state of the UK economy. These huge multinationals are profiting from the strong recovery in emerging markets; smaller businesses, who have to rely on the fragile confidence of consumers here in the UK, are clearly having a much harder time.

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