Unilever Shares Higher as Profit Rises

Pretax profit at the consumer goods firm jumped 21% to £5.27 billion in the first half of the year

Alliance News 25 July, 2023 | 9:20AM
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Unilever (ULVR) today predicted stronger annual sales as it reported double-digit half-year profit growth, while volumes stayed steady from the prior year.

Pretax profit at the consumer goods firm, which makes Magnum ice cream and Dove soap, jumped 21% to £5.27 billion in the first half, from £4.36 billion a year before.

Shares in Unilever were up 5.0% at £42.18 each in London on Tuesday. This leaves them below the Morningstar fair value of £43.80 per share.

Turnover rose 2.7% year-on-year to £30.43 billion, compared to £29.62 billion in 2022. 

A strong performance in Beauty & Wellbeing and Personal Care sales, which rose 8.6% and 7.3%, helped to offset a 7.1% decline in Nutrition sales.

On an underlying basis, sales grew 9.1%.

Unilever maintained its quarterly interim dividend for the second quarter at €0.43.

What's the Unilever Outlook?

Looking ahead, Unilever expects another year of underlying sales growth of above 5% in 2023, which is ahead of its multi-year range. It's also ahead of its April guidance for the upper end of a 3% to 5% range. Underlying price growth is expected to continue moderating over the year.

It expects around €2 billion in net material inflation in 2023, with €400 million to come in the second half. Underlying operating margin for the year is expected to see a modest improvement, thanks to a higher gross margin and increased brand investment.

"Unilever's performance in the first half highlights the qualities that attracted me to the business: an unmatched global footprint, a portfolio of great brands and a team of talented people," said chief executive officer Hein Schumacher.

Schumacher, the former Royal FrieslandCampina boss, joined as its new chief executive at the beginning of July. He replaced Alan Jope, who announced his retirement back in September.

After the result and the daily gains, Morningstar analyst Ioannis Pontikis said the company remains undervalued.

“Considering weak market share trends we remain cautiously optimistic on the name, and we will be looking for evidence of market share trends reversals once cost inflation subsides and pricing normalizes in the second half of 2023 and the first half of 2024," he said.

The market for consumer goods remains tough, he notes, especially in home care and nutrition. "Management commented that consumers were trading down to lower-priced products and private label was gaining share in these categories," he said. Ice cream is another example of consumers voting with their wallets - prices rose in the period and sales were down. Still, Unilever said there are signs that price rises may have peaked.

Among fund managers, Nick Train remains a fan of Unilever. The stock is held in the Silver-rated Finsbury Growth and Income Trust (FGT), where it is the fifth biggest holding, according to Morningstar Direct data.

Which Other Companies Are Reporting This Week?

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Unilever PLC3,863.00 GBX0.05Rating

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