The poor outlook for corporate earnings was underscored when Unilever on Thursday took the unusual decision to scrap its financial targets amid declining sales volumes, raising concerns that other consumer goods companies may follow suit.

The Anglo-Dutch maker of well-known products like Dove soap and Sunsilk shampoo refused to give financial guidance for this year or reaffirm its 2010 target of increasing profit margins by 15 per cent. Investors have been buying Unilever shares in recent months as a defensive investment, but their faith has been shaken by this decision.

Paul Polman, who became the chief executive officer on 1 January, defended the decision to scrap financial targets, saying he did not think it was "a good moment" to give long-term targets. "We have to be in tune with the environment," he said, and predicted other companies would follow Unilever's lead.

He said companies that set targets and then revised them were not credible, and that running a business to meet financial targets would result in management doing "the wrong thing" for the business. "This is an exceptional time...we live in a time of ambiguity."

A senior corporate banker told a London newspaper that Unilever's decision was a tactic that other blue-chips might deploy in coming months. GlaxoSmithKline too said on Thursday that it was dropping the guidance it gives on short-term earnings.

But while two of Unilever's competitors, Kraft Foods and Procter & Gamble, have cut guidance for 2009, neither has dropped it altogether. P&G is working with Goldman Sachs on selling its pharmaceuticals brands in a sign of the effort it is making to focus on core areas.

Although Unilever's fourth quarter pre-tax profits rose 33 per cent to €1.5bn, and reported sales growth of 7.3 per cent, all of the growth was achieved by raising prices. Sales volumes dropped by 1.6 per cent and profit margins fell 70 basis points. Unilever warned that declines in consumer confidence were causing retailers to reduce trade inventories, particularly in the US.

After Unilever Plc/NV, the results for Nestle, Danone and Reckitt Benckiser are due over the next two weeks, with Danone already pointing to lower guidance back in November.

Unilever had targeted annual underlying sales growth of 3-5 per cent with an underlying rise in margins each year towards a 15 per cent target in 2010, but all that was swept away as Polman said he did not want to be changing financial guidance every "five minutes".

Polman has also imposed a management pay freeze and a deep cut in travel budgets in a whirlwind of change aimed at getting the multinational ready for an anticipated two years of hard times. He promised to reverse an alarming shrinkage in the underlying volumes sold by the company while accelerating a programme of factory closures and job cuts.

Unilever used the power of its main brands, including Omo detergent, Lipton tea and Magnum ice cream, to push through price increases last year. However, the nine per cent retail price increases took its toll on volumes. While sales rose 7.3 per cent in the fourth quarter, well ahead of its target of five per cent, the number of units shipped fell by 1.6 per cent, suggesting shrinking market share.

The Anglo-Dutch group began to detect a fall in the number of items sold in the fourth quarter of the year as consumers cut spending on brand-name goods and sought own-label products from discount retailers. The evidence that Unilever is selling less soap and soup but charging more for it has caused its shares to dip sharply.

Polman derided rival companies, including Procter & Gamble (where he was formerly a senior executive) that have provided targets. "The question is what visibility do they have left if they keep revising targets," he said. He set out two objectives for Unilever: to reignite volume growth and at the same time protect the group's cash flow and margin.

The resources to achieve this would come from cost savings, he said. Management salaries across the group will be frozen and travel budgets will be cut by 30 per cent - a potential saving of about €50 million. A global procurement officer has been appointed to use the company's vast scale to get better prices.

A big restructuring effort begun in 2007, to close up to 70 factories and shed 20,000 jobs by next year, will be speeded up. "We will accelerate savings and get the benefits in 2009," Polman said. The raw materials used by Unilever to make its products cost the company an extra €2.7 billion last year, but it quickly passed on the burden to retailers and consumers.

Barely a month into his job, amid a historic recession, Polman nonetheless claims to be pleased. "The economic crisis is not mine, I inherit that, but I'm very pleased that it's here." His reasoning is that the the crisis will give him the platform to make change more aggressively.

"If I would have come in as a new CEO and everything was handy dandy and I would say: 'I will set the bar higher,' people would say: Okay, that's a new rallying cry, but what is it based on?"

PG Tips, Domestos, Flora and Comfort are just a few of the 400 brands owned by Unilever.