Consumer goods maker Unilever reported lower-than-expected fourth-quarter sales on Thursday, blaming the Indian government’s withdrawal of high-value notes and a weak economy in Brazil.
The maker of Dove soap, Knorr soup and Marmite spread said those issues would continue to hurt results in the first part of the new year, helping to push the company’s shares down 4.5%, its worst day in nearly a year.
The company said underlying sales rose 2.2% in the quarter. That compared with analysts’ average expectation of 2.8%, according to a consensus compiled by the company, and growth of 3.2% in the third quarter and 4.7% in the first half.
Turnover was 13.1 billion euros ($14 billion) in the fourth quarter, up from 12.9 billion in the year-earlier period.
Results were ahead of expectations on second-half margins, earnings per share growth and free cash flow, but were overshadowed by the sales figure.
For the full year, sales growth was 3.7%, below the 3.9% analysts were expecting.
Looking ahead, Unilever is targeting growth in the range of 3% to 5% for 2017, but said results in the early part of the year would be below that, due to the ongoing issues in Brazil and India, and the timing of Easter.
“We do expect the first half and Q1 in particular to be slightly slower than that rate,” Chief Financial Officer Graeme Pitkethly told Reuters.
The company said growth in India was below historic levels, as consumer demand was limited by the government’s decision in November to remove higher-value currency notes. Pitkethly said the move would help the economy, and Unilever’s business, in the long term, after some difficulties in the short term.
In Europe, Unilever’s fourth-quarter sales fell 2.3%, hurt by weak volumes and continued price deflation in many markets. Yet Pitkethly said European prices were starting to recover, due partly to price rises in Britain the company took in the wake of the Brexit-related fall in the pound.
“You are actually starting to see the impact of things like the devaluation in the UK pull through in terms of market growth,” Pitkethly said.
The price increases Unilever sought to put through last year met resistance from major retailer Tesco, leading to a brief standoff that became known as “Marmitegate”.
Unilever is in the process of revamping its structure and operations in order to streamline them and cut costs. It said those efforts allowed it to increase profitability of its shrinking spreads business, and that for now, it continues to make financial sense for the company to hold on to it.
“As long as we continue to generate more value as owners of this business than we would receive from any other options, we should continue to manage this business and protect our value,” Chief Executive Officer Paul Polman said. He added though the company would continue to assess the business.
(Editing by Susan Thomas and David Evans)