Tomahawk, WI 01/22/2014 (BasicsMedia) – Unilever plc (ADR) (NYSE:UL) managed to improve its revenues by 4.1% in the fourth quarter even after facing sluggish demand in North America and Europe. The company also witnessed sluggishness in the emerging markets. However the results were far better than expected.

Unilever’s Results:

The weaknesses in emerging markets and macroeconomic conditions of the developed areas like the U.S. and Europe put a damper on Unilever plc (ADR) (NYSE:UL)’s revenue growth. The company reported underlying sales (devoid of new businesses and impact of currency fluctuations) rose by 4.1% in the fourth quarter of 2013. The actual sales showed a decrease of 6.4% to 11.8 billion Euros due to the impact of a strong euro. Emerging markets saw underlying sales grow by 8.4% with increase in volumes contributing to an increase of 5%. Price increase lead to the balance increment.  However, underlying sales fell by 1.7%, due to less volumes and a decrease in selling prices.

The full year saw sales revenues decrease by 3% to 49.8 billion Euros ($67.5 billion) with net profits of 5.3 billion Euros; a rise of almost 9%. The improvement in the economic conditions in the U.S. has not had any positive effect of either the bottom line or the top line. Sales in emerging markets have been hit by weaker currencies. There was a slight improvement in operating margins to 15.1% from 13.6%.

Uniliver’s Strategy:

Faced with weak demand from the developed countries and weak currencies in emerging markets, Unilever plc (ADR) (NYSE:UL) will be seeking to protect its operating margins and controlling costs. It has outlined several measures aimed at cost rationalization. The company has targeted savings of $683 million next year through improving supply chain efficiencies, improving overall process efficiencies as well as through job cuts. It plans to cut its marketing head count by 12% across the world. This would mean a decrease in head count by almost 800, a major of this would come from the U.S. Even supply chain expenses are being rationalized, Unilever plans to reduce its stock keeping units (SKUs) by almost 30% by the end of 2014.

The company is also targeting marketing overheads and is trying to improve returns on marketing investments. One major focus will be on agency and production expenses. One cost factor often overlooked are the non-working media expenses comprising of promotions, cost of production as well as fees paid to advertising agencies.  Unilever plc (ADR) (NYSE:UL) has been focusing on these since the last three years and has managed to reduce them from 32% of the total marketing expenses to 24% in 2013. The company is targeting these at 20% of the total advertising and promotion spending.

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