Anglo-Dutch consumer goods giant Unilever this morning (25 April) saw its share price fall as weakness in its spreads division held back an otherwise “solid” first-quarter performance. The underlying sales increase came in below analyst forecasts who gave a relatively mixed view of the results.
Panmure Gordon analyst Graham Jones
“Unilever’s Q1 sales numbers were weaker than expected with like-for-like sales growth of 4.9% versus our forecast of 6% and consensus of 5.6%. While developing markets growth was impressive at 10.4%, developed market trading was disappointing with like-for-like sales falling by 1.9%. The two tier growth was evident on a category basis as well, with personal care and home care still growing strongly but food declining, with particular weakness in spreads.
“Unilever was lapping its toughest comparison on the year (with one less trading day as well), and its 10.7% increase in its quarterly dividend in Euros (and 15.6% rise in sterling terms) signals its confidence going forwards. The shares are likely to fall today, but we reiterate our ‘buy’ recommendation and 3000p target price.”
Shore Capital analyst Clive Black
“Unilever has issued a relatively subdued Q12013 trading update, which has reported underlying sales growth of 4.9%, which is below both Shore Capital’s forecast of 6.1% and a consensus expectation of 5.6%. The under-performance was driven by weaker than expected volume growth of 2.6% (Shore forecast 4%, consensus 3.2%), whilst price/mix was more resilient than anticipated at 2.6%.
“On the positive side, we note a very healthy 10.7% increase to the quarterly dividend has been declared to €0.2690, which will equate to 22.91p for plc shareholders. Such an increase is a little ahead of expectations and will provide 3.2% annual dividend income.”
Sanford Bernstein analyst Andrew Wood
“Overall, this was a somewhat disappointing quarter … even if Unilever’s Q1 organic growth (+4.9%) was still healthier than its two major peers Nestlé (+4.3%) and P&G (+3%). Still growth was below consensus (+5.6%) and our estimates (+6.2%), driven by lower than expected volumes, and fell to its lowest level since Q1 2011.
“On the positive side the emerging markets stayed in the double digits (+10.4%) and, despite tough compares, the home and personal care businesses continued to deliver excellent growth (PC: +8.3%, HH +9.4%) albeit with the inevitable slowdown from the +10% delivered in 2012. On the negative side, foods (-0.5%) remains a big problem and, once again, spreads are dragging the business down (it seems like we have been seeing/hearing ‘we have more to do to communicate the improved taste and health benefits of our margarine to consumers’ for most of the last decade). Refreshment was also a disappointment, mainly driven by weak growth in ice cream, and this business showed the biggest miss to expectations.”
Kepler Capital Markets analyst Jon Cox
“The result was weaker than expected driven by a poor Europe performance on the back of ice cream, impacted by weather, and its under-pressure spreads business. However, the comparables were tough and emerging markets remain robust with double-digit growth still. I would expect consensus to come off but barely.”
Investec analyst Martin Deboo
“Unilever have missed expectations in Q1 on weak volumes and [a] weak Europe. We expect this to be negative for the shares this morning, but observe that one, Unilever’s emerging market story remains intact and, two, the Q1 volume consensus was somewhat naïve, to our eyes. Meanwhile, developing market growth remains robust. Buy on any early weakness.”
Hargreaves Lansdown Stockbrokers analyst Keith Bowman
“Hot on the heels of a disappointment from US peer Procter and Gamble, Unilever has followed suit. Non-controllable factors have impacted, with the cold European weather hitting ice cream sales. Margarine sales also disappointed due to a highly promotional environment, whilst the challenging economic backdrop across Europe remains a drag.
“More positively, emerging market sales continue to grow, the group’s North American markets held firm, whilst product quality and factory efficiency improvements remain ongoing.”