Consumer goods giant Unilever scrapped all its targets due to global economic uncertainty, despite beating forecasts with a 7.3 per cent rise in fourth-quarter underlying sales.
Anglo-Dutch Unilever Plc./NV, the world's third-biggest food and consumer goods group and maker of Knorr soups, Lipton tea and Dove soap, said it could not give a specific outlook for this year in current conditions, sending its shares spinning lower.
"No-one can be clear about the exact extent of the current recession or the speed of recovery... 2010 targets were set at very different times in very different circumstances," new chief executive officer Paul Polman told an investor briefing after results.
He added the group was planning on the basis that it would not see any significant improvement in economies around the world in the next 18 to 24 months, and would not be pushed into changing its guidance "every five minutes" like its competitors.
Unilever's long-term targets had been for underlying annual sales growth of three to five per cent and an improvement in operating margin. Mr Polman added the group was also abandoning its target for a 15 per cent operating margin by 2010.
"While fourth-quarter sales growth was better than we had expected, margins were weaker ... and the failure to give any guidance for this year or to reconfirm next year's targets suggest to us margin forecasts will be coming down," said analyst Graham Jones at broker Panmure Gordon.
Analysts say Unilever will come under pressure this year from slowing global growth and competition from retailers' cheaper own brands produced by companies such as McBride, which expects a strong first half, helped by falling costs and shoppers switching out of branded goods to save money.
Unilever's worldwide rivals such as Procter & Gamble (P&G), Kraft and Danone have all cut their targets due to the consumer slowdown and retailer destocking, but Mr Polman said giving specific guidance was not helpful.
This wrong-footed analysts who, despite the slowdown, had expected something from Polman, who joined Unilever last month after working for its two bigger rivals P&G and Nestle.
"Given the lower raw material backdrop and the restructuring savings coming through, it is a surprise that Unilever has withdrawn this (2010) target," said analyst Charlie Mills at Credit Suisse.
For the October - December quarter, Unilever's 7.3 per cent underlying sales rise compared with analysts' forecasts of 4.5 per cent to seven per cent and a consensus of six per cent, while its underlying last year's annual sales rose 7.4 per cent, beating forecasts that ranged from 6.7 to 7.3 per cent and averaged seven per cent.
In the fourth-quarter, sales volumes fell 1.6 per cent as price increases peaked at over nine per cent, with volumes in Western Europe and the US down sharply as economies slowed, while growth is slowing in developing markets, which make up around half of Unilever's group sales.
"In developing markets, we still see growth, but demand is slowing down as a result of the rapidly changing economic environment and the impact of cost inflation," said Mr Polman.
The group, whose 400 brands include Sunsilk shampoo, Omo detergents and Ben & Jerry's ice cream, posted annual earnings per share of €1.79, compared with forecasts of €1.15 to €1.70 and a consensus of €1.38.
Full-year dividends on the company's Dutch-listed shares rose three per cent to €0.77, while the London listing's dividend rose 19 per cent to 60.74p.