Unilever Sales Soar in 4Q, FY12 - Analyst Blog
24 Januar 2013 - 2:53PM
Zacks
Unilever N.V. (UN) posted solid fourth quarter
and full year 2012 results. The company recorded underlying
(excluding the impact of currency, acquisitions and disposals)
sales growth of 7.8% in the fourth quarter.
The increase was driven by volume and pricing gains of 4.8% and
2.9%, respectively. All the categories performed well in the
quarter. Increased investment in innovation and brand building
contributed to the growth.
This fast-moving consumer products giant also performed well in
the emerging markets despite global macroeconomic headwinds and
unfavorable foreign currency translations. Emerging markets
underlying sales expanded 10.8% while developed markets grew 4% in
the quarter.
Full Year 2012 Results
Unilever’s core earnings (excluding one-time items) increased
11% (in local currency) to Euro 1.57 per share ($2.02 per share*),
driven by the improvement in operating profit, reduced financing
costs, lower tax rates and currency.
Underlying sales grew 6.9% in the 2012, comprising volume growth
of 3.4% and pricing gains of 3.3%. Emerging markets underlying
sales expanded 11.4%, while developed markets grew 1.6% in the
current reporting year.
Despite higher commodity costs, gross margin improved 10 basis
points (bps) to 40.0% on a currency neutral basis. The improved
results were driven by pricing gains, cost saving initiatives and
improved mix. The company also invested in its brands and increased
its advertising spending. Overhead costs declined 20 bps in the
year owing to business restructuring initiatives, leading to 30 bps
increase in core operating margin to 13.8%.
Segment Details
Personal Care: The segment delivered underlying sales growth of
11.5% in the fourth quarter, driven by volume gains of 7.2% and
improved pricing of 4.0%. For full year, underlying sales increased
10.0%, with volume gains of 6.5% and pricing gains of 3.3%.
Home Care: The segment delivered underlying sales growth of
10.4% in the quarter, riding on volume growth of 7.0% and price
increase of 3.1%. For full year, underlying sales increased 10.3%,
with volume gains of 6.2% and pricing gains of 3.9%.
Foods: The segment’s underlying sales increased 1.3% in the
quarter as a 1.4% positive impact from pricing, partially offset by
a 0.1% decline in volumes. For full year, underlying sales
increased 1.8%, driven by pricing gains of 2.7% and offset by
volume declines of 0.9%.
Refreshments: The segment delivered underlying sales
growth of 9.8% in the quarter, owing to volume growth of 6.7% and
pricing increase of 2.9%. For full year, underlying sales increased
6.3%, with volume gains of 2.4% and pricing gains of 3.9%.
Overall, we are optimistic about Unilever’s wide portfolio of
brands, which helps it to maintain a dominant share in the market.
Unilever has been strengthening its portfolio by expanding through
a number of acquisitions. Further, Unilever has been divesting its
businesses to shed off its non-core operations, thereby optimizing
resources and allocating them to more promising markets.
Unilever sold its North America frozen meals business (brands of
Bertolli and P.F. Chang) to ConAgra Foods Inc.
(CAG) in August 2012. More recently in early-January 2013, Unilever
agreed to sell its Skippy peanut butter business to Minnesota-based
meat producer Hormel Foods Corporation (HRL).
However, the company faces high commodity and raw material cost
that is impacting its margins since last many quarters.
We expect an uncertain macro-economic environment, going
forward. Though the company forecasts volume gains and strong free
cash flow in the near-term, commodity cost inflation will continue
to be a headwind.
Unilever holds a Zacks Rank #2 (Buy). Other stocks that are
presently doing well and hold a favorable rank include
B&G Foods, Inc (BGS) and Flower Foods,
Inc (FLO). Both the companies carry a Zacks Rank #1
(Strong Buy)
*Euro 1=$1.28608, i.e. average price for the year
2012.
B&G FOODS CL-A (BGS): Free Stock Analysis Report
FLOWERS FOODS (FLO): Free Stock Analysis Report
HORMEL FOODS CP (HRL): Free Stock Analysis Report
UNILEVER N V (UN): Free Stock Analysis Report
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