Unilever - Sales growth accelerates
08/24/2012
For the first half of 2012, sales growth at British-Dutch consumer good company Unilever (ULVR) came in at seven percent - faster than each of the last three years. This was driven by double-digit growth in emerging markets and an improvement in developed markets. At the same time the company has maintained margins despite cost pressures with a strong position in fast growing economies.
For all the talk of a global slowdown, the headline numbers at Unilever show acceleration rather than weakening growth. This has highlighted the company’s significant exposure to emerging markets (from where 54% of sales are generated) and has seen its stock rally on recent interim results.
2012 numbers compare favourable than that of previous years. In 2009 the underlying sales growth at the group was 3.5%, 4.1% in 2010 and 6.5% in 2011.
Drilling into Unilever’s sales growth and emerging markets saw an uptick of 7.9% in 2010, 11.5% in 2011 and 11.4% so far this year. This year’s acceleration in overall sales came as emerging markets maintained their rapid clip from 2011 and developed market growth increased.
The core earnings per share last year – excluding disposals and one-offs – rose by 4% to €1.41 with operational gains of €0.11 mitigated by negative currency effects of €0.04. In the first half of 2012, the group saw EPS up 6.2% to €0.76 on operational growth as the currency effect was almost flat.
Unilever’s priorities are volume growth, steady core operating margins and strong cashflow. Clearly in 2011 and in the first half of the current year it has achieved these. Challenges remain with food prices recently taking off and energy prices on the march once more.
However, so far the momentum in bottom line profits has continued and revenue growth has accelerated. Not only was 2012 first half underlying sales growth double that seen in 2009 but the volume increase of 2.8% compares to 1.6% year on year.
Currently the stock trades on 18x this year’s forecast earnings and 16.6x next year, while the yield is 3.4% and 3.7% in both years. Whilst this may seems fully priced at first glance, the P/E for 2016 falls to 12x and the group is all about long-term growth in fast growing markets.
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