) 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
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%.
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%.
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%.
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%.
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.
) 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
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
Flower Foods, Inc
). Both the companies carry a Zacks Rank #1 (Strong Buy)
*Euro 1=$1.28608, i.e. average price for the year
B&G FOODS CL-A (BGS): Free Stock Analysis
FLOWERS FOODS (FLO): Free Stock Analysis
HORMEL FOODS CP (HRL): Free Stock Analysis
UNILEVER N V (UN): Free Stock Analysis Report
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