Unilever shares boosted by strong results

Shares in Unilever rose just under 1% to 4,136p as the company unveiled a strong set of full-year results. Turnover at the food producer increased by 14.5% to €60.1 billion, while underlying sales growth came in at 9% for the full-year. The beauty and wellbeing division grew sales by 21% to €12.3 billion, while the personal care side saw revenues increase by 15.9% to €13.6 billion.

Meanwhile, at the home care division sales grew by 17.3% to €12.4 billion. Unilever’s so-called ‘billion+ Euro brands’, which include OMO, Hellmann’s, Sunsilk and Magnum and bring in 53% of the company’s turnover, grew underlying sales by 10.9%.

Pre-tax profits came in at €10.3 billion for the full-year, an increase of 17.9% at constant currency rates compared to last year. Unilever also introduced a €1.5 billion share buyback scheme during the period.

Unilever pushes through price hikes

The company made up for pressure on margins and volume declines in Europe by successfully pushing through price increases as inflation hit the cost of production, particularly in its home care products. It is also on track to achieve €600 million of cost savings over the next two years.

“We have made further progress in the transformation of Unilever and continued to deliver against our strategic priorities,” outgoing chief executive Alan Jope told investors. “Our new operating model is already unlocking a culture of bolder and more rapid decision-making with improved accountability.

“We continue to improve our growth profile, with the sale of the global Tea business and the acquisition of Nutrafol. We are increasingly realising the benefits from the reshaped portfolio, accelerated savings delivery and improved execution.”

New CEO Hein Schumacher, formerly of Dutch firm Royal FrieslandCampina, is due to take over the reins from Jope in July. It has been an eventful 12 months for the company, during which it was thwarted in its attempt to buy GlaxoSmithKline’s healthcare division Haleon and attracted the attentions of activist investor Nelson Peltz.

Unilever: further price hikes expected

However, while the food producer forecasts that cost input inflation will ease off later this year; further price increases will be necessary. Management anticipates that cost input inflation will fall in the second half of the year, from €1.5 billion in the first-half. Nevertheless, underlying price growth will remain high and volume growth will decline. As such, Unilever expects underlying sales growth to come in in the upper half of a range of 3% to 5% and underlying operating margins to improve only modestly to around 16% in the first-half.

Analysts at Berenberg Bank recently set a price target of 5,120p on the shares, while those at broker Jefferies think they could reach 4,500p.

The shares are up 9% this year to 4,118p but are still off their three-year highs of 4876p. They are worth buying, given the company’s strong brands and ability to push through price increases in the current economic climate.

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