How Is The Needle Moving On Unilever Plc (ULVR) Stock?

Unilever Plc (ULVR), headquartered in London, is a producer and marketer of fast-moving consumer goods (FMCGs) such as food, beverages, home care, health and wellbeing products. The company operates through more than 400 brands across the Americas, Europe, Asia-Pacific, Africa and the Middle East regions. Core business segments are Home care, Personal care, Foods, Refreshment and Others. The major brands comprise Knorr, Hellmann’s, Lipton, Wall’s, Lux, Dove, Rexona, Surf Excel, Comfort, Sunsilk, Pureit, Suave and Axe, to name a few. Its distribution channels include supermarkets, hypermarkets, wholesalers, cash and carry, small convenience stores, e-commerce, out-of-home and direct consumer channels. The company has pledged to reduce its carbon footprint extensively by 2030 and was ranked number one in its sector as per Dow Jones Sustainability Index 2017.

First Half year 2019 highlights

The company’s revenue stood at €26,126 million in H1 FY19 as against €26,352 million in H1 FY18. The company’s underlying revenue grew by 3.3 per cent in beauty and personal care segment. Deodorants, skin care items, haircare and toothcare items continued to drive growth for the FMCG giant. Some of the popular brands like Dermalogica, Hourglass, and REN continued to foster growth in double digits. The company also announced buying of Tatcha and Garancia.

The company’s underlying turnover grew by 7.4 per cent and price grew by 4.5 per cent in the homecare segment. The company’s cleansing solutions for fabrics performed well as the company believes in making the customers to opt for solutions with added benefits such as Omo wash in China and Brazil. The popular Surf Excel achieved double digit growth in India. Home cleaning related products did well, bolstered by Sunlight which achieved growth in double digits. New innovative solutions with natural cleaning agents were launched by the company such as the Cif Cleaner. In certain markets, such as Indonesia, homecare solutions are used to clean popular religious places like mosques especially during festive season Ramadan, a perfect example for event-driven growth.

The company launched a Comfort core range (redesigned) which is focused on fabric and cloth care along with a natural variants range.

The company optimised its brands, marketing investments and overheads and efficiencies to improve gross margin which resulted in a surge in underlying operating margin by 1.2 per cent in homecare.

The company’s underlying sales grew by 1.3 per cent and price grew by 1.4 per cent in the foods and refreshment category. In developed markets, the revenue stream from tea declined due to a plunge in demand. This was partially offset due to some extent by black tea, fruit tea, herbal tea and green tea ranges in emerging economies. Pukka’s, the premium herbal tea product did well. Dressings segment stood flat due to stiff competition and volumes were a bit down. On the contrary, even in the challenging weather in Q2 as against the previous two years, the ice cream did well as a segment. It also did well in the emerging countries, due to innovative products such as Magnum. New convenient snack pots were trending and helped the company. Hellmann’s burger and spicy dipping sauces were introduced by the company which penetrated the market well. Sir Kensington’s was also good.

The company’s operating margin (adjusted) plunged by 0.4 per cent in foods & refreshment segment due to the negative impact on overheads with reference to the disposal of the company’s spreads in business.

The underlying revenue from the emerging markets grew by 6.2 per cent and price by 3.2 per cent in the emerging nations. In the emerging countries, adjusted operating margin was up by 0.7 per cent. This can be attributed to improvement in gross margins and optimisation in brand and marketing investment strategies.

In Europe, the revenue (underlying) plunged by 0.6 per cent and the price plunged by 0.4 per cent. The company’s business faced stiff challenges due to challenging weather conditions and deflation in price levels in the second quarter of the financial year 2019. The sales channels of e-commerce and discounters did well and helped the company in executing strategies. The retail market looks rough in the broader sense, for instance, in Germany, the business was tough. However, the company did well in Southern Europe by virtue of homecare and food related products. The company exhibited a good performance overall in the Central and Eastern Europe region especially in fabric solutions. The company’s underlying operating margin plunged by 0.4 per cent, due to price deflation.

 The company’s turnover plunged by 0.9 per cent which was partially offset by 1.1 per cent (currency benefit). The company’s operating margin surged by 0.4 per cent. The company’s underlying EPS surged by 5 per cent.

The company’s net finance costs as incurred surged by €63 million to €351 million in H1 FY19. This increase in costs was due to loss making on cash balances by virtue of exchange rates to the tune of €40 million in Zimbabwe followed by currency devaluation in Zimbabwe along with higher cost of capital. The effective tax rate applicable on adjusted operating profit was 26.2 per cent in H1 FY19 as against 26.5 per cent in the previous year.

The company’s net income from associates and joint ventures stood at €85 million in H1 FY19 as against €83 million in the previous year. The company’s income from non-current investments stood at €2 million, down by €3 million from 2018.

The company’s EPS (earnings per share) rose by 5 per cent to €1.27. The company’s adjusted EPS at constant rates surged by 3 per cent. These adjustments might not include the post-taxation effect of disposals, acquisition and other relevant costs incurred in the regular course of business activities such as restructuring costs, impairments and any other unexpected event which can impact net profit. The company’s diluted EPS (earnings per share) surged by 3.4 per cent at existing rates and 2.3 per cent at constant rates.

The company’s FCF (Free cash flow) stood at €1.5 billion in H1 FY19, down by €0.5 billion from the H1 FY18. This was due to a loss made from the disposal of spreads as well as detrimental effects from tax paid relating to profit on the disposal. The FCF stood at €2.0 billion in H1 FY18.

The company’s net debt stood at €24.2 billion in H1 FY19 as against €22.6 billion (as on December 31st, 2018). The rise in debt can be attributed to share based payments made by the company, acquisitions made by the company, followed by negative impacts of currency.

The company’s pension liabilities (adjusted for net assets) reduced to €0.5 billion by the end of the first half of FY19 as against €0.9 billion as at December 31st, 2018. The liabilities went down due to fair returns from the investments done earlier.

On June 4th, 2019, the company issued 1.5 per cent fixed rate notes with a maturity of June 2039 amounting to €650 million. The company issued another 1.5% fixed rated notes with a maturity of July 2026 amounting to £500 million.

In the month of February 2019, 4.8 per cent bonds got matured and repaid by the company amounting to $750 million. In the month of March 2019, 2.2 per cent fixed rate notes got matured and repaid by the company amounting to $750 million. The company’s cash balances (as per cash flow statement) stood at €3,789 million as on June 30th, 2019.

Unilever Plc has reported strong performance during the period. Going forward, the company has good potential to increase market share in Asia.

ULVR Share price performance

Chart as on 26-July-19, before the market close (Source: Thomson Reuters)

While writing (as on 26 July 2019, at 02:39 PM GMT), ULVR shares were trading at GBX 4,881 per share; plunged by 0.30 per cent as compared to the previous day closing price level. The company’s market capitalisation was around £125.76 billion.

In the last 52-wks, ULVR shares have registered a high of GBX 5,122.00 (as on 17 Jul 2019) and a low of GBX 3,904.94 (as on 31 Jan 2019). At the current trading level, as quoted in the price chart, its shares were trading 4.70 per cent below the 52-week high price level and 24.99 per cent above the 52-week low price level.

At the time of writing, the stock’s volume before the market close, stood at 1,021,732. Stock’s average traded volume for 5 days was 1,855,214.40; 30 days- 1,799,763.23 and 90 days – 1,813,951.58. The company’s stock beta was 0.86, which makes it slightly less volatile as against the benchmark index.

In the past 1 year, ULVR shares have delivered a positive return of 14.21 per cent. Also, on a YTD (Year-to-Date) time interval, the stock surged by approximately 19.17 per cent and was up by 7.53 per cent in the last three months.

Share’s RSI (Relative Strength Index) for the 30-days, 14-days and 9-days was recorded at 51.40, 40.15 and 31.65 respectively. Also, the stock’s 3-days RSI was recorded at 9.96.

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