Household goods manufacturer Unilever moved closer to June’s record highs above £43.70 per share following the release of half-year trading numbers. The stock was last dealing 1% higher in Thursday’s session.
The maker of blockbuster labels like Dove soap and Magnum ice cream announced that turnover rose 5.5% during January-June, to €27.7bn, a result that powered net profit 22.4% higher to €3.3bn.
Underlying sales rose 3% in the period, with growth in the second quarter remaining stable from the prior three months. Excluding its underperforming spreads business — the sale or de-merger of which Unilever described as being “well underway” — underlying revenues rose 3.4%.
While group volumes remained flat between January and June, the formidable brand power of Unilever’s goods helped revenues to continue expanding. The company managed to lift prices by 3% in the six months to June.
Mighty Margin Growth
Lauding today’s news, chief executive Paul Polman commented that “our first half results show continued growth well ahead of our markets and a substantial step-up in profitability despite the persisting volatile global trading environment.”
And Polman expects Unilever to pick up the pace as 2017 progresses, commenting that “the actions we are taking keep us on track for another year of underlying sales growth ahead of our markets, in the 3-5% range.
“We anticipate accelerating growth in the second half of the year driven by the phasing of our innovation plans and a step-up in brand and marketing investment,” he continued.
The company expects to deliver a 100-basis-point improvement in underlying operating margins, the Unilever head honcho added. Margins jumped 180 basis points in the half-year, to 17.8%, although growth is anticipated to moderate in the second half as brand investment and marketing is set to rise.
Excellent Estimates
I have long argued that Unilever’s bulging stable of market-leading brands, broad product diversification and extensive geographic footprint makes it one of the most dependable growth shares out there. The FTSE 100 giant saw sales rise in all of its categories and sub-categories during January-June (cutting out the drag over at its spreads division), even though market conditions remain challenging.
And current City projections underline my faith in Unilever’s earnings-creating capabilities. The Marmite maker is predicted to report a 16% earnings rise in 2017, and to follow this up with an extra 12% rise next year.
Although expensive on paper, I reckon the Anglo-Dutch giant’s forward P/E ratio of 23.2 times is a fair reflection of its formidable defensive capabilities.
And Unilever’s also provides plenty for growth dividend investors to get excited about. Last year’s dividend of 109p per share is predicted to rise to 122.6p in the present period, and again to 135.5p in 2018.
Consequently investors can enjoy handy yields of 2.8% and 3.1% for this year and next. With revenues tearing higher and Unilever doubling-down on cost-cutting initiatives, I expect the firm to remain a firm favourite with growth and income chasers for years to come.
By Royston Wild
Source: Forbes
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