- Plan to hype up brands like Marmite and Hellmann's
- New CFO announced
Unilever’s (ULVR) volumes fell by 0.6 per cent in its third quarter as consumers continue to plump for cheaper own-brand alternatives in Europe.
Markets on the continent are most exposed to the nutrition and ice cream categories, which as management pointed out “remain inflationary and are more impacted by consumer downtrading”. This led to a 10.7 per cent volume drop in Europe. The Americas and Asia Pacific divisions both saw volumes rise around 2 per cent.
Revenue came in at €15.2bn (£13.3bn) at the Magnum and Marmite seller, with underlying sales growth of 5.2 per cent against last year. The personal care and beauty and wellbeing divisions posted the quickest revenue growth on a divisional level, while the Americas led the way on a geographic basis. Encouragingly, total volumes rose at the beauty and wellbeing, personal care, and home care divisions.
Although the rate of price increases has fallen at the company – underlying price growth was 5.8 per cent in the quarter compared with 8.1 per cent over nine months – the percentage of its business winning market share fell to 38 per cent from 41 per cent in the previous quarter. This, again, highlights downtrading.
New chief executive Hein Schumacher laid out an “action plan” intended to drive growth, which includes a greater focus on Unilever’s 30 brands which contribute around 70 per cent of total revenue. The company is targeting underlying sales growth in a range of 3-5 per cent, an expansion of margins, and a return on invested capital in the mid-teens.
Schumacher wants to "selectively optimise the portfolio" and has ruled out "major or transformational acquisitions". Good news for shareholders tired of acquisition errors. The company said it has made a deal to sell Dollar Shave Club, which it bought for $1bn in 2016, for an undisclosed amount.
Elsewhere, the company confirmed that retiring chief financial officer Graeme Pitkethly will be replaced by Fernando Fernandez, the current president of the beauty and wellbeing division.
The shares are rated at 17 times forward consensus earnings, a discount to the five-year average of 19 times. We remain bullish on the company for its defensive brands, dividend growth, and free cash flow prospects. Buy.
Last IC View: Buy, 4,224p, 3 Aug 2023
