Solid First-Half Results From Unilever

Published in Company Comment on 26 July 2012

Consumer goods giant reports 11.5% increase in turnover.

Good news for long-term buy-and-hold investors -- Unilever (LSE: ULVR), this morning reported that it was making progress in its transformation to a sustainable growth company in its first half-year results with robust sales from emerging markets. Emerging markets underlying sales grew 11.4% in the first half; up 11.0% in the second quarter.

The company, which has a strong portfolio of global brands from food to fabric conditioner, said turnover was up 11.5% at €25.4 billion. First-half underlying sales rose 7.0% comprising volume growth of 2.8% and price growth of 4.1%. Second-quarter underlying sales growth increased 5.8%.

Core earnings per share are up 6% at €0.76; free cash flow at €1.5 billion.

Chief executive officer Paul Polman commented: 

"Despite deteriorating global economic conditions and a competitive environment which remains intense, we again delivered volume growth ahead of our markets and gained value share across the majority of our business. Our performance reflects continued investment in innovation, brand-building and people, whilst keeping discipline on both costs and execution.

"The Unilever Sustainable Living Plan is increasingly bearing fruit by accelerating innovation and helping us build stronger relationships with consumers, customers and communities, energising our people and reducing costs. It lies at the heart of our strategy to double the size of the business whilst reducing our overall environmental footprint.

"We continue to prepare the ground for future growth. The first half saw the completion of the acquisition of Concern Kalina, Russia's leading local personal care business, Tresemmé made excellent progress in Brazil and we launched Magnum in the Philippines, all evidence that we are further strengthening our position as the emerging markets consumer goods company. We are also investing in developed markets: during the first half we successfully launched Clear in the United States and Axe Hair in Europe.

"Looking forward we expect continued volatility, especially in commodity costs and economic conditions. We remain focused on profitable volume growth ahead of our markets, steady and sustainable core operating margin improvement and strong cash flow, driven by increased capital discipline. For 2012 we remain on track to deliver a modest improvement in core operating margin."

At this afternoon’s share price currently trading around 2,255p, the company has a prospective dividend yield of 3.8.

Ace stock-picker Neil Woodford has delivered an impressive 347% total return -- and thrashed the wider market -- during the 15 years to 31 December 2011.

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> Sonia owns shares in Unilever.

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ANuvver 26 Jul 2012 , 1:58pm

I'm a fan of ULVR and Woodford.
But unless I have missed something in the 2012 Edinburgh report, he doesn't hold it...
Possibly misleading, MF?

QuantumDealer 26 Jul 2012 , 2:11pm

Also a big fan of ULVR and their products...although, when are we going to start saying it has become expensive? It had a pretty punchy P/E ration before today's rally.

ANuvver 26 Jul 2012 , 2:35pm

Quite Quantum. I had to mop coffee off the wall this morning - I know we live in a silly, twisted world, but you don't really expect 5% on the day from the likes of ULVR, do you?

QuantumDealer 26 Jul 2012 , 3:35pm

Not at all but it is an impressive market reaction and one which is remarkably bullish given the already relatively bullish sentiment for this consumer staple name. I am out in Spain right now and tucking into an iced strawberry Calippo (nee Walls ice cream) so am attempting single-handedly to grow Iberian revenues for the Group!

Has been a good day so far today...ULVR, R-R, BG.,WEIR, BSY, EZJ etc. etc.

Hope you are having a similarly enjoyable day, ANuvver?

PS - good luck getting the coffee stains off the wall!

richjfool 26 Jul 2012 , 4:09pm

Glad I topped up earlier this year, contrary to some advice I received from an investment advisor.

Yes according to my research Woodford doesn't hold Unilever, though....

Nick Train Manager of Finsbury Income Growth IT (FGT) does. He has a big "conviction" holding of Unilever (9.0%).
Alastair Munday Manager of Temple Bar IT does too. He has a large holding (6.10%), and
Job Curtis Manager of City of London IT Temple Bar has a modest holding (3.00%).

Perhaps TMF will start following quoting them in their daily articles.

Anyway back to my Magnum (ice cream).

QuantumDealer 26 Jul 2012 , 4:14pm

A Magnum?!? You show-off - you must have made vast profits today on your ULVR position!!

richjfool 26 Jul 2012 , 4:50pm

Up 5.51% on the day anyway. Can't be bad.

I've also got Compass too. (Don't think Mr W has that one either). Also Centrica both in the up 4% bracket. Hence the Magnum.

ANuvver 26 Jul 2012 , 4:54pm


What's not to like about today? The Draghinator has spoken.

What a shame you're off in sunny Spain. You'll miss the glorious festival of a load of boring monomaniacs trying to be a millisecond, millimetre or gram better than each other. Citius, Altius, Fortius - me cag... oops. Was going to indulge in a bit of demotic Spanish there, but caught it. I've been told off for that sort of thing before on here.

Have advised the current Lady Uvver that if she wants to wear red lingerie she must ensure it is Coca Cola red, as I can't risk the lawsuit. Have given her Dulux colour matching chart BS-IOC-FU-2012 to work to.

Hur hur - Magnum Private Investor...

QuantumDealer 26 Jul 2012 , 5:06pm

ANuvver - I am coming back from my 3 week holiday on Tuesday as I am at the beach volleyball on Wednesday evening.

A quote from the Draghinator..."I am a cybernetic organism sent back through time by the ECB to save the world from financial armageddon...I'll be back!"

F958B 26 Jul 2012 , 6:17pm


There's no doubt that ULVR are a quality company.

The problem is the price being asked - 19x historic and 18x forward P/E is extremely expensive relative to the market median which is two-thirds that and the market mean which is not much more than half that (influenced by FTSE having a large weighting in lowly-rated financials and commodities)

Note, however, that if ULVR continue raise the dividend at the 6% level comparable to the rise in "core" earnings per share, that the dividend yield would be 5.9% in ten years time.
On the other hand, there are many good companies on the FTSE that will pay you a comparable yield to that *now* and which are likely to raise their payout almost as much as ULVR.

So, unless greater fools (small "f") are prepared to continue paying ever-higher earnings multiples for ULVR, then the shares seem to offer little upside. At current prices, ULVR certainly look frothy, if not somewhat bubbly.

Beware that certain managers having a large weighting might mean they're tempted to take some profits after a strong run. More often than not, it is my larger holdings that are most likely to be sold as they tend to be the ones which have appreciated the most and departed the furthest from the fundamentals.

QuantumDealer 26 Jul 2012 , 8:27pm

F958B - what do you do for a living?

The GARP managers will sell first (but not yet) then the growth managers will justify holding it for a fair while longer before they end up selling. Momentum can be v powerful particularly when it relates to low execution risk. ULVR presents low execution risk.

What companies do you hold that are mega-cap and rose more than 5% on a single day over the past 18 months?

F958B 26 Jul 2012 , 10:47pm


You are correct: mega-caps don't usually move more than about 3.5% in a day, apart from occasional days of extreme moves in the whole FTSE due to some debt-related scare in a major economy.

You asked: < "What do I do for a living?" >
Is that a genuine question, or some kind of trick, double-edged or sarcastic question?

If it matters: I invest in financial markets to earn my living.

QuantumDealer 26 Jul 2012 , 11:14pm

F958B - is that with your own capital or with someone else's?

(why would I ask a sarcastic or disingenuous question?)

QuantumDealer 26 Jul 2012 , 11:17pm

Oh, and it depends on the beta of the stock but a 3.5% move for a mega cap stock, as you say, would not happen that often at all for a stock with a beta of 1 or less. I am not talking about BARC or RIO with betas of around 2.3 and 1.8 respectively. ULVR has a beta of around 0.6 so a 5.5% move on a single day must be around a 3 sigma event.

F958B 26 Jul 2012 , 11:34pm

Hi QuantumDealer

I wasn't sure whether you knew my origins; I think I've discussed it from time-to-time on the Fool.

It's my money that I invest.

I also assist several family and friends.

I used to be a scientist but various things (bureacracy, time constraints, quality of life) persuaded me to make the switch to being an investor.

The switch which was gradual over several years - first moving to part-time working (because it's quite daunting to give up the "security" of a "day job") and then giving it up completely when I felt confident enough and had a large enough portfolio to become a "full time investor".

richjfool 27 Jul 2012 , 1:43am

F958B I like and hold Unilever because I see a long continuing and growing demand for their wide ranging products. Indeed I use many of their products daily. I see the second and third world also wanting to do so.

The dividend (paid qtly) is very fair. Noted the PE is getting a bit high.

ANuvver 27 Jul 2012 , 2:22am

To be fair, I'm happy to already be in ULVR, but it's not exactly value at this level.

It is possible that this kind of SP move indicates that in the current climate, certain "big, blue boringers" might see proportionately more of the immediate price action than overt growth stocks than many would suppose during switches to risk-on.

Megacap income generating equities with relatively robust earnings could be an attractive destination for that wall of "risk-averse" money parked in sovereigns, under the right conditions. And if you think about it, the big blues are sitting on mountains of cash that governments can't prise out of them, and they don't keep it in banknotes in cocoa tins. Certain of them are sitting the cosy side of the bond trade and I'll let them deal with that and pay me income out of it.

Of course, if the world does go phut we'll all be too busy with baseball bats and soup to care. Pascal's wager, really.

QuantumDealer 27 Jul 2012 , 7:49am

I may have something sharper than a baseball to defend my assets if the world goes "phut"...I have Calippo ice lollies in the freezer here after all!!

QuantumDealer 27 Jul 2012 , 7:50am

Oh, and it seems we all like to say up too late too!

QuantumDealer 27 Jul 2012 , 7:50am

say = stay

dubre 27 Jul 2012 , 9:46am

Unilever which I bought at £12.50 was value.Vodafone @£3.59 was not.

It's as simple as that---nearly.

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