This fast-moving consumer products giant
) posted solid second quarter 2013 results. The company???s core
earnings per share increased 3.6% to EUR 0.76 (99 cents per
share), driven by organic sales growth and operating margin
improvement. However, these were partly offset by currency
headwinds and slightly higher interest rates. On a constant
currency basis, earnings increased 7% in the second quarter.
The company recorded underlying sales growth of 5.0% (in local
currency) in the second quarter. The increase was driven by
underlying volume and pricing gains of 2.6% and 2.3%,
respectively. Increased investment in innovation, improved
product quality and expansion of brands to new markets
contributed to the top line growth.
The company???s recent launches like Axe Apollo deodorant and
the continued success of TRESemm??, Dove Men+Care as well as
Clear hair products showed the benefits of rolling out strong
global innovations across multiple regions.
The company???s underlying sales increased 10.3% (in local
currency) in the emerging markets. However, it was lower than the
last quarter, as the company is witnessing sluggish growth in the
markets of Brazil, Russia, India and China. Weaker exchange
rates, particularly in Brazil, India, South Africa, Argentina and
Indonesia, hit the company???s sales in the quarter. Sales in the
developed markets also remained sluggish due to global
Unfavorable currencies also led to a rise in commodity costs
as it affects the price paid in local markets. Unilever expects
low- to mid-single digit inflation for the year as a whole.
Unilever witnessed strong market share growth in Home Care and
Personal Care categories. The Foods category improved from the
last quarter but still remains sluggish due to weak performance
of spreads, which offset the impressive performance in savory and
dressings. The company???s low-cost business model in the Home
Care and Refreshments categories resulted in significant
improvement in operating margin during the quarter.
During the second quarter, the company increased its stake in
its Indian unit Hindustan Unilever to 67.3% from 52.5% by
acquiring 15% of the outstanding shares for a total of EUR 2.45
billion in order to strengthen its position in the emerging
markets.In Pakistan too, the company has so far acquired over 20%
of its outstanding shares, taking its shareholding above 97%
through an investment of around EUR 350 million. We believe that
with these investments, the company will be able to gain more
from the attractive markets of India and Pakistan.
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
its non-core operations, thereby optimizing resources and
allocating them to more promising markets. Most recently in Jan
2013, Unilever agreed to sell its Skippy peanut butter business
to Minnesota-based meat producer
Hormel Foods Corporation
). Last year in August too, the company sold its North America
frozen meals business (brands of Bertolli and P.F. Chang) to
ConAgra Foods Inc.
However, we remain concerned about the uncertain
macro-economic environment, particularly in Europe. 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 #4 (Sell).
However, you can consider
), which is currently doing well and holds a Zacks Rank #1
B&G FOODS CL-A (BGS): Free Stock Analysis
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UNILEVER N V (UN): Free Stock Analysis Report
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