But confirmation of plans to sell off its tea business by the end of next year offers an opportunity to reappraise the consumer goods behemoth’s sprawling business amid the new normal that coronavirus is bringing about.
Moreover, during the first half of 2020 the FTSE 100 group has shown its quality, as football managers like to say, with results beating expectations at both the top and bottom line and free cash flow growing 85%.
Shares in the group surged 9% to 4,725p on the day.
“In a world where investors have been obsessed with growth, one might have thought Unilever’s pedestrian performance would have gone down like a cup of cold gravy,” said Russ Mould, investment director at AJ Bell.
“However, resilience is a highly-desired characteristic and the latest trading update is likely to attract a lot of interest from people who had previously dismissed the company as being too boring.
“Business resilience is a much sought-after attribute in the current economic climate and Unilever has certainly got the right ingredients.”
While parts of the portfolio were hit by out-of-home segments like ice cream, food service and ‘prestige beauty’, there was considerable resilience from household care, cleansing and in-home consumption of ice creams and other foods.
While financial guidance for the full-year is still not being given by the company, analysts at broker Liberum said they believe Unilever’s valuation “reflects an iconic, powerful brand-led business on sale due to temporary factors” and hiked their share price target to 5,290p.
The analysts highlighted how strongly the Anglo-Dutch group’s brands performed, enabling the group to grow underlying operating profit margins by 1.3%, helped by cost savings and lower commodity costs.
What does Unilever sell?
In the past half-year, home care products such as Cif and Domestos were the undoubted stars, with sales rising in high-teens percentage and strong double-digits, with ‘clean and green’ brand Seventh Generation also generating strong double digit growth.
But these are not even Unilever’s biggest brands.
In the past year, industry research shows Unilever was the best-performing manufacturer in global brand rankings.
The London and Rotterdam-based group had three brands, Lifebuoy, Dove and Sunsilk, in the top ten and seventeen in Kantar’s top 50 brands list.
Six of its brands were bought by consumers more than a billion times over a year: Lifebuoy soap, Sunsilk shampoo and conditioners, Knorr soups and condiments, Dove soaps and deodorants, Lux soaps and hair care and Sunlight dishwashing detergent.
In the past half year, soap brand Lifebuoy increased to more than 50 markets.
In fact, as part of the increased global demand for hand sanitiser, Unilever cranked up its capacity for hand wash by around 600 times across Lifebuoy, Dove and other brands.
And while coronavirus lockdowns reduced occasions for use of other personal care brands, the Dove super-brand remained resilient, with growth in the mid-single digits.
However, another perspective was offered by UBS, where analysts have a ‘sell’ recommendation on the shares and said the strong performed in the past period was attributable to an acceleration in North America and China which respectively accelerated from the first to the second quarter and swung from a decline to mid-single-digit growth.
Unilever’s e-commerce business grew more than 60% on an underlying basis in the second quarter, with positive future implications.
However, the main beauty of the results statement for many investors may just have been the dollar signs flashing before their eyes from the sale of the tea business, where industry analysts speculate a disposal could net at least €6bn.
Published at Thu, 23 Jul 2020 13:47:00 +0000-Unilever shows beauty of boring (and cleanliness) during pandemic