Sector News

Unilever Edges Closer To Record Peaks Following Strong Half-Year Numbers

July 24, 2017
Food & Drink

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

comments closed

Related News

February 4, 2023

Unilever names FrieslandCampina’s Hein Schumacher as next CEO

Food & Drink

Schumacher will replace Alan Jope, who announced his decision to retire last September, less than a year after a failed attempt by Unilever to buy GlaxoSmithKline’s consumer healthcare business and just months after activist investor Nelson Peltz joined the company’s board.

February 4, 2023

Tetra Pak execs flag plant-based ice cream development hurdles as indulgent offerings expand

Food & Drink

Globally, plant-based ice creams have doubled their share of the market over the last five years, according to Tetra Pack. Pea protein and coconut milk are leading the way, but Tetra Pak cites data showing that oat-based ice cream launches have doubled in the previous year.

February 4, 2023

Examining the meaning of eco-labels: Is it time for mandated methodology?

Food & Drink

A myriad of so-called eco-labels are being rolled out across various F&B products, but with no gold standard or strict rules governing precisely what the logos mean and what methodology is behind them, concerns are growing that they will confuse consumers and ultimately be counterproductive.

How can we help you?

We're easy to reach