Event in Progress:
View the latest research on other companies in the sector.
New brands are now 5.8% of sales, we estimate, and growing organically around 15%. These brands are adding c. 40bps to Unilever’s top-line, and more than this to the Beauty & Personal Care division’s growth, as most of the acquisitions have been in this segment. Backing out these high growth brands, Unilever’s base business is growing below the end markets. We calculate the base grew 2.5% in FY18 and is on track for 2.7% in FY19E vs end markets +3%. The reasons for Unilever’s deterioration in recent years are weak emerging market volumes (which are now recovering) and poor performance in developed markets at some of its key brands (e.g. Hellmann’s, Suave, Lipton) where competition has been unusually intense. Greater brand support should help. Comps are slightly tougher in H2 (H118 +2.5%/H218 +3.1%), with Q3 the toughest comp of the year. Management expects no particular pickup in H2, hence FY19 guidance for organic sales “at the lower end of the 3-5% range”. End markets are slowing in N. America & W. Europe, presenting new difficulties. Investment view. While Unilever has near-term challenges to revive growth in its base business, we are pleased that management is approaching this with greater urgency. Acquisitions made since 2015 are beneficial to the group and will continue to flatter the growth profile over time. Longer-term, we think management has ambitions to expand in Beauty & Personal Care, and we would back them to do a good deal based on their track record. The valuation is full after the recent run and we therefore move to Add (previously Buy).
Nestle Unilever PLC
Share: