Unilever’s Share Price Declines on Q2 Revenue Missing Forecasts
iNVEZZ.com Thursday July 25th: Unilever (LON:ULVR) today reported revenue below analysts’ expectations and warned that economic conditions would remain difficult throughout its markets. Shares in the Anglo-Dutch consumer goods company fell by 34.00p or 1.25 percent to 2,684.00p at the London opening bell.
Underlying revenue rose by five percent in the three months ended June 30, below the 5.3 percent increase forecast by a Bloomberg survey of 14 analysts. Net profit attributable to shareholders’ equity increased by 14 percent to €2.43 billion (₤2.09 billion) from €2.13 billion (₤1.83 billion) in the same period last year. Core operating margin, a measure of profitability, edged up by 40 basis points to 14 percent in the first half of the company’s fiscal year.
Unilever, the world’s No. 2 maker of branded household products by revenue after Procter & Gamble, said new products including compressed deodorants and a spray version of its Vaseline brand of petroleum jelly helped it continue to grow despite “tougher economic environment and reinvigorated competition.”
Emerging markets grew by 10.3 percent in the second quarter, slightly below the 10.4 percent expansion in the previous quarter, while developed markets declined by 1.3 percent. “Growth is slowing in emerging markets, as macro-economic headwinds influence consumer behaviour,” the company said on Thursday.
“Developed markets remain sluggish with little sign of any recovery in North America or Europe.”
Unilever is among consumer-goods companies struggling with declining consumer demand in recession-struck Europe. Along with peers such as Coca-Cola and Nestle, Unilever also faces weaker economic growth in developing markets such as India and Brazil.
**Unilever Boosts Stake in Indian Subsidiary**
Earlier in July Unilever paid €2.45 billion (₤2.11 billion) to increase its majority holding in Hindustan Unilever to 67 percent from 52 percent. The offer valued the Indian subsidiary at 37 times earnings before interest, taxes, depreciation and amortisation (EBITDA). The median multiple for similar deals was 10.8 times EBITDA, according to data compiled by Bloomberg.
Unilever’s Indian business accounts for eight percent of sales and its products in the country command a 40 percent market share, higher than in any other country where it operates. “The potential of India’s consumerville is rightly regarded as huge, and Hindustan Unilever is the de facto play in the space,” said Jon Cox, an analyst at Kepler Capital Markets. “Foreign investors would rather stay invested.”
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**Analysts on Unilever**
Liberum Capital reaffirmed its “buy” rating on Unilever’s shares in a research note sent to investors on Tuesday. A total of two investment analysts have rated the stock with a “sell” rating, five have issued a “hold” rating and twelve have given it a “buy” rating. Unilever currently has an average rating of “buy” and a consensus price target of 2,849.58p.
**Unilever’s share price was 2,675.00p as of 25.07.2013, 10.20 BST.**
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