Unilever today (3 February) booked a jump in annual profits on the back of higher proceeds from disposals, lower restructuring costs and accelerating underlying sales in the fourth quarter. Michael Polk, president of Unilever’s foods, home and personal care businesses, also noted that the company had enjoyed its strongest growth in sales volumes for over 30 years. However, this afternoon, Unilever’s shares were down on the London Stock Exchange. Here is a selection of comments on Unilever’s results from key analysts.
Andrew Wood, Sanford Bernstein
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“Overall performance was mixed. The fourth quarter saw strong top-line growth of 5.1%, with volumes well above expectations, and pricing slightly below; slightly negative margin growth of -20bps (below expectations); and good EPS growth of 19% (also slightly below). Top-line growth was good and Unilever gained share in all regions – suggesting a healthy, competitive business. Although pricing was flat (i.e. not negative for the first time in six quarters) it was not quite the positive we had hoped for. And, although margins were slightly down, Unilever still met the CEO’s commitment to grow margins in line with FY consensus (+20bps).
“We believe that Unilever’s stock has been weak year-to-date, driven by poor results from Procter & Gamble and Colgate, the recent surge in commodities and weak margins at Hindustan Unilever [its Indian business] In this context, Unilever’s fourth-quarter results or even the full-year results can be considered to be quite strong, and investors should be pleased. We consider that 2010 has indicated further structural and sustainable progress at Unilever.
Richard Withagen, SNS Securities
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“Unilever performed well in terms of volume growth [during the fourth quarter], one of its key objectives. Pricing did not come through as strong as expected, as markets remain very competitive. The group’s underlying margin declined in the fourth quarter as a result. We expect higher input costs to continue affecting margins in the remainder of the year.”
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By GlobalDataMartin Deboo, Investec
Unilever has delivered a fourth quarter that is strong on volume and weak on margin relative to market expectation. The margin miss was after disinvestment in A&P ahead of our expectations. So despite the volume beat, we think the quality of the profit result will preoccupy the market this morning. With Unilever struggling for margin in the face of what we think are only the foothills of input cost inflation, we expect even bigger challenges when it faces the peaks to come in FY11.
Graham Jones, Panmure Gordon
“Paul Polman’s objectives for Unilever are to restore the competitiveness of the group, sustainably increase margins and improve cash generation. We believe he continues to deliver on all these points, and most importantly today he has reiterated these objectives in his outlook statement, despite the pressures of rampant commodity cost inflation and difficult consumer markets.
“Despite the good trading performance from Unilever in 2010, the shares were one of the worst performers in the sector last year, and have started this year weakly. In our view Unilever is now a more aggressive and agile company, with a more competitive organisation structure and cost structure. Its category mix is steadily improving and we expect HPC to be larger than food this year (and believe personal care is now Unilever’s biggest category).”
