ii view: Unilever’s new head makes promising start

First-half results to 30 June

• Revenue up 2.7% to €30.4 billion (£26.1 billion)
• Underlying or adjusted sales up 9.1% - 9.4% in price growth and a 0.2% fall in volumes
• Adjusted operating profit up 3.3% to €5.2 billion (£4.5 billion)
• Dividend maintained at €0.4268 per share

Guidance:

• Now expects full-year underlying sales growth to be above 5%, up from a previous 3-5%

Chief Executive Hein Schumacher said:

"Unilever's performance in the first half highlights the qualities that attracted me to the business: an unmatched global footprint, a portfolio of great brands and a team of talented people.

My early immersion in the business has confirmed my belief in Unilever's strong fundamentals. The task ahead is to leverage these core strengths - supported by our simplified operating model - to drive improved performance and competitiveness. This is our absolute priority and it will mean bringing greater focus and sharper execution, with science-backed innovations and investment behind our brands."

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ii round-up:

Unilever (LSE:ULVR) is major provider of consumer goods, operating across the five areas of Beauty and Wellbeing, Personal Care, Home Care, Nutrition, and Ice Cream. 

Its 400 plus brands include Sunsilk, Dove, Cif, Knorr and Magnum. 

For a round-up of these latest results announced on 25 July, please click here. 

ii view:

Started in 1929, Unilever generated sales of over €60 billion in 2022. Selling its products in more than 190 countries, its goods are used by around 3.4 billion people every day. Sales of Nutrition or food and Personal Care products generate its biggest slug of sales at around 23% each, followed by Home Care and Beauty and Wellbeing at just over 20% each and Ice cream the balance of around 13%. Geographically, close to three-fifths of its revenue is made across emerging markets, with the US accounting for a further fifth and the UK under 5%. 

For investors, a cost-of-living crisis for consumers is resulting in some reduction in the volume of products sold, with consumers likely swapping to other cheaper supermarket own brands. Costs generally remain elevated, competitors such as Procter & Gamble Co (NYSE:PG) are not standing still, while the required cost of ongoing investments in areas such as marketing and product innovation also offer headwinds to operating profit margins. 

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More favourably, product price increases are helping to offset increased costs. Diversity across both products sold and geographical markets is high, a cost saving programme continues to be pursued, and its new chief executive is looking to further reinvigorate group strategy including possible new details come October. A focus on shareholder returns is also ongoing, with a current share buyback programme of up to €3 billion underway and the shares sat on a forecast dividend yield of 3.7%. 

On balance, and while some caution looks sensible, this consumer goods giant appears to remain worthy of its place within investor portfolios focused on the long term.  

Positives: 

• Diversity in both product type and geographical location
• Cost saving programme

Negatives:

• Elevated cost pressures
• Discount retailers often only stock their own branded labels

The average rating of stock market analysts:

Hold