The Unilever (LSE: ULVR) share price has now lost nearly 10% of its value since the end of August.
Some of that is surely shareholder reaction to the company’s bungled attempt to unify its headquarters in The Netherlands. Ex-CEO Paul Polman claimed that the intended move was not because of Brexit, though that was perhaps seen as not entirely credible in some quarters. A shareholder backlash scuppered the idea, and the farce led to Polman’s departure.
2018 results
What’s curious about Thursday’s 2018 results announcement is that Brexit isn’t mentioned. New CEO Alan Jope said: “In 2019 we expect market conditions to remain challenging. We anticipate underlying sales growth will be in the lower half of our multi-year 3-5% range, with continued improvement in underlying operating margin and another year of strong free cash flow. We remain on track for our 2020 goals.”
So we’re in for a challenging period for the consumer products giant, but of the ‘B’ word there was not a sign. I can’t help feeling the new boss wants to put the headquarters embarrassment behind him as quickly as possible.
The results themselves came in a short way behind some expectations, and were a little mixed.
Sales growth weakness
On GAAP measures, turnover declined by 5.1% to €51bn, though underlying sales growth was put at a positive 2.9%. The firm’s underlying operating margin edged up by 90bps to 18.4%, with underlying earnings per share up 5.2% to €2.36.
Excluding Unilever’s spreads business (Flora, I Can’t Believe It’s Not Butter, etc), which it sold at the end of 2017, the company reported underlying sales growth of 3.1%. But even that falls a bit short of market expectations for around 3.5%.
Global growth
While the company enjoyed 4.6% growth in emerging markets, developed markets were said to have grown “modestly.”
Unilever’s global presence is one of its strengths, and that helps with its resistance to economic upheavals in individual countries and regions — like the Brexit thing of which it did not speak. That can be a bit double-edged, though, as massive inflation in Argentina led to that country’s contribution being excluded from sales growth.
Jope’s “number one priority” is to accelerate growth: “With so many of our brands enjoying leadership positions, we have significant opportunities to develop our markets, as well as to benefit from our deep global reach and purpose-led brands.”
But the markets were not impressed, knocking the share price down 3% in early trading.
Good value
Analysts currently have EPS rises of 8% and 12% marked down for Unilever for the next two years, though with the 2018 figures lagging forecasts a little, I expect those to be downgraded slightly. But even if that happens, I think we’ll still be looking at a P/E multiple of 16 to 17 for 2020.
That might sound a little high, but for a perennially safe stock like Unilever, which commands a premium, I see it as decent value. And forecast dividend yields of 3.6% to 3.9% look attractive to me too.
While 2018 and 2019 might be choppy by Unilever’s standards, there are surely many that will envy what’s likely to be a relatively calm Brexit period for the globally-focussed company.
