ii view: Unilever's plan is coming together

First-half (H1) and second quarter (Q2) results to 30 June

• Q2 underlying sales growth (USG) up 5.8% (inc volume up 5.5% plus price up 0.2%)
• Adjusted profit margin up 0.1% to 20.3%
• H1 adjusted earnings per share down 2.5% to €1.38 (118p) per share
• Q2 dividend up 3% from a year ago to €0.4664 per share
• Net debt of €26 billion, up from €23.1 billion in late December

Guidance:

• Now expects full-year USG of between 4% and 6%, up from a previous estimate at the bottom end of that medium-term range forecast
• Continues to expect a modest improvement in annual adjusted profit margin

Chief executive Fernando Fernandez said:

"We have delivered a strong volume-led performance in the first half, with a significant step-up in the second quarter - the best volume quarter at Unilever in over a decade.

"Our Power Brands continued to outperform, with all Business Groups delivering volume-led growth. Emerging markets showed momentum - India, Indonesia and Latin America all delivered strong growth - while North America again outperformed its market.

"These results show our ability to continue performing while transforming our portfolio. Our combination of Foods with McCormick is progressing well and will unlock significant value, making Unilever a focused pureplay HPC (Home and Personal Care), while giving Foods the platform to thrive as part of a global powerhouse in flavour."

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ii round-up:

Unilever (LSE:ULVR) is major provider of consumer goods across the four areas of Beauty and Wellbeing, Personal Care, Home Care and Foods.

The FTSE 100 company’s many brands currently include Dove, Sunsilk, Vaseline, Domestos, Cif, Comfort, Hellmann’s, Horlicks and Knorr.

For a round-up of these latest results announced on 28 July, please click here.

ii view:

Started in 1929, Unilever products are today sold in more than 190 countries. Its products are estimated to be used by around 3.4 billion people every day. Geographically, the combined Asia Pacific Africa region generated most sales during Q2 at 44%. The Americas came next at 39%, with Europe the balance of 17%. Competitors include Procter & Gamble Co (NYSE:PG) and L'Oreal SA (EURONEXT:OR).

Unilever’s former ice cream business now trades on the stock market as The Magnum Ice Cream Co NV (LSE:MICC). The sale of its food business to US company McCormick for nearly $45 billion (£33 billion) was announced in March and is expected to complete by mid-2027. Food accounted for 25% of sales in Q2, with Personal Care the most at 27%, Beauty and Wellbeing next at 25% and Home Care 23%.

For investors, USG of 1.2% for foods was hindered by increased competition in US condiments. Gains in commodity prices used in products pushed a 0.7% fall in the gross profit margin to 46.8%. Pressured consumer incomes likely see many of its customers across developed markets such as Europe seeking lower-cost non-branded supermarket alternatives, while a forecast price/earnings (PE) ratio broadly matching the 10-year average may suggest the shares are not obviously cheap.

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On the upside, and driven by activist investor Nelson Peltz, Unilever has been pursuing a growth action plan, simplifying activities and the number of products sold, as well as pushing improvements in productivity. A further refocusing on consumer goods is being made via the sale of the food business. Sale proceeds from the food disposal are expected to underwrite a total of €6 billion of share buybacks between 2026 and 2029, while the shares currently offer a prospective dividend yield of around 3.4%.

On balance, and despite ongoing risks, strong brands and a self-help programme continue to leave this consumer goods giant worthy of its place in many investor portfolios.  

Positives:

• Diversity of products and geographical regions
• Cost saving programme

Negatives:

• Pressured consumer incomes
• Discount retailers often only stock their own branded labels

The average rating of stock market analysts:

Strong hold