Unilever (ULVR) has had an up-and-down start to 2018. A well-flagged truckers’ strike in Brazil constricted sales growth, particularly through the second quarter, though overall volumes improved in fast expanding segments such as natural beauty products and wholefoods. The group anticipates a partial reversal of the strike-linked sales drag over the second half of the year, but perhaps the most pressing issue for investors is the October vote on the proposed abandonment of the dual listing and Anglo-Dutch legal structure. The dual-listing issue, in particular, has potential ramifications for Unilever's share price.
Regardless of the Brazilian situation, the group’s key structural driver – rising discretionary incomes in emerging markets – remains firmly intact. Emerging market sales grew 4.1 per cent in the period, largely on the back of increased volumes, as overall price increases were subdued by a lower inflationary environment.
You get some idea of the way spending patterns are changing through the steady take-up of beauty and personal care products (BPC) – familiar brands such as Ponds and Vaseline - in growth markets such as India, wholly symptomatic of an expanding middle class. Underlying volume growth in the BPC segment increased by 2.9 per cent. In part, the improvement was driven by increased commitments on the marketing front, yet there was an 80-basis point increase in the underlying operating margin.
The foods and refreshment division also delivered a noteworthy increase in profitability, as reduced overheads and a favourable sales mix fed through to a 100-basis point increase in the underlying margin. Volumes were supported by growing demand from health-conscious consumers, which is also reflected in an evolving product portfolio, as Unilever complements its traditional brands with growth areas in the food market, such as organic and vegan.
Liberum gives underlying EPS of 229¢ for the December year-end, rising to 249¢ in 2019.
| UNILEVER (ULVR) | ||||
| ORD PRICE: | 4,237p | MARKET VALUE: | £124bn | |
| TOUCH: | 4,237-4,238p | 12-MONTH HIGH: | 4,558p | LOW: 3,679p |
| DIVIDEND YIELD: | 3.5% | PE RATIO: | 22 | |
| NET ASSET VALUE: | 397¢* | NET DEBT: | 202% | |
| Half-year to 30 Jun | Turnover (€bn) | Pre-tax profit (€bn) | Earnings per share (¢) | Dividend per share (p)† |
| 2017 | 27.7 | 4.63 | 1.10 | 62.04 |
| 2018 | 26.4 | 4.34 | 1.11 | 67.76 |
| % change | -5 | -6 | +1 | +9 |
| Ex-div: | 02 Aug | |||
| Payment: | 05 Sep | |||
| £1 = €1.12. *Includes intangible assets of €28.7bn, or 984¢ a share. EPS and NAV figures based on combined UK and Dutch shares in issue. †Dividend dates relate to Q2 payment of 38.72¢ (34.35p). | ||||
