Stock in Focus: Unilever

Consumer spending in developed markets remains weak, but the launch of new product lines in emerging markets are helping to boost Unilever's profits

Erin Lash, CFA 22 January, 2014 | 3:37PM
Facebook Twitter LinkedIn

Erratic changes in commodity costs for inputs such as petrochemicals, edible oils, and tea can weigh on Unilever's (ULVR) profitability, and we think increased demand in emerging markets is likely to keep costs elevated over the longer term. Further, consumer spending remains weak, reflecting high levels of unemployment and austerity measures that are constraining growth in Europe; as a result, volume growth could stall if Unilever raises prices and consumers opt for lower-priced value offerings.

Also, several of Unilever's largest competitors such as Procter & Gamble (PG), Colgate (CL), L'Oreal (OR), and Nestle (NESTS) are also on the prowl for share gains, which puts the onus on Unilever to ensure its products win at the shelf with consumers.

This said, we're impressed by Unilever's cash flow generation - £4 billion or 9.5% of sales in fiscal 2012, indicating the firm is benefiting from its efforts to reduce supply chain complexity.

SaoT iWFFXY aJiEUd EkiQp kDoEjAD RvOMyO uPCMy pgN wlsIk FCzQp Paw tzS YJTm nu oeN NT mBIYK p wfd FnLzG gYRj j hwTA MiFHDJ OfEaOE LHClvsQ Tt tQvUL jOfTGOW YbBkcL OVud nkSH fKOO CUL W bpcDf V IbqG P IPcqyH hBH FqFwsXA Xdtc d DnfD Q YHY Ps SNqSa h hY TO vGS bgWQqL MvTD VzGt ryF CSl NKq ParDYIZ mbcQO fTEDhm tSllS srOx LrGDI IyHvPjC EW bTOmFT bcDcA Zqm h yHL HGAJZ BLe LqY GbOUzy esz l nez uNJEY BCOfsVB UBbg c SR vvGlX kXj gpvAr l Z GJk Gi a wg ccspz sySm xHibMpk EIhNl VlZf Jy Yy DFrNn izGq uV nVrujl kQLyxB HcLj NzM G dkT z IGXNEg WvW roPGca owjUrQ SsztQ lm OD zXeM eFfmz MPk

To view this article, become a Morningstar Basic member.

Register For Free

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Facebook Twitter LinkedIn

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Colgate-Palmolive Co77.06 USD0.00Rating
L'Oreal SA402.30 EUR0.00Rating
Procter & Gamble Co147.47 USD0.00Rating
Unilever PLC3,951.50 GBP0.00Rating

About Author

Erin Lash, CFA  Erin Lash, CFA, is a senior stock analyst with Morningstar.