ii view: Unilever shares tumble – here’s why

Fourth quarter (Q4) and Full Year (FY) results 31 December 

• Q4 adjusted sales up 4% - Volumes up 2.7% - Prices up 1.3%
• Adjusted FY operating profit up 12.6% to €11.2 billion
• Quarterly dividend up 6.1%
• New €1.5 billion (£1.25 billion) share buyback

Guidance:

• Continues to expect full-year underlying sales growth of between 3% and 5%

Chief executive Hein Schumacher said: 

“Today’s results reflect a year of significant activity as we focused on transforming Unilever into a consistently higher performing business. Under the Growth Action Plan, we committed to doing fewer things, better and with greater impact.”

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ii round-up:

Owner of brands including Dove, Hellmann’s and Magnum, Unilever (LSE:ULVR) today announced sales and profits broadly matching City expectations but offered a cautious near-term outlook.

Fourth-quarter adjusted sales to 31 December climbed 4%, with a 1.7% improvement in the adjusted margin and fuelled by productivity enhancements, helping take 2024 underlying operating profit up 12.6% to €11.2 billion (£9.3 billion). However, management pointed to a slow start to 2025, with growth likely to be biased to the second-half. 

Shares in the FTSE 100’s fourth-biggest company by market value fell 6% in UK trading having come into these latest results up by close to fifth over the last year. That’s similar to the FTSE 100 and ahead of a near one-tenth increase for arch-rival Procter & Gamble Co (NYSE:PG) over that time. 

Unilever sells across the five areas of Beauty and Wellbeing, Personal Care, Home Care, Food, and Ice Cream. The consumer goods giant has been in the process of separating out the ice cream division and has now decided to float shares in the business on the Amsterdam, London and New York stock exchanges. 

Adjusted sales for the 2025 year ahead are still expected to be within management’s multi-year range of between 3% and 5%, with a modest improvement in the adjusted underlying operating margin forecast. 

Likely driven by activist investor Nelson Peltz, Unilever has been pursuing a growth action plan, simplifying activities and the number of products sold, as well as driving improvements in productivity.  

Having returned €5.8 billion to shareholders in 2024, a 6.1% hike in the Q4 dividend to €0.4528 adds to a new €1.5 billion share buyback scheme now underway. 

A first-quarter trading update is scheduled for 24 April.

ii view:

Selling brands including Comfort, Domestos and Knorr, Unilever products are used by around 3.4 billion people every day. Selling in over 190 countries, products are made in more than 280 factories. Personal Care items were its biggest seller in 2024 at 23% of revenues, followed by Food at 22%, Beauty and Wellbeing at 21% and Home Care 20% and Ice Cream at 14%. Geographically, Emerging Markets account for 58% of sales and Developed markets including the UK the balance. 

For investors, the tough economic backdrop for many of its customers globally persists. Ongoing investments in areas such as marketing, product innovation and technology are generating additional costs that put pressure on profit margins. Competitors such as Proctor and Gamble are not standing still, while elevated commodity prices are expected to impact production costs.

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More favourably, this latest performance represents a fourth consecutive quarter of underlying volume growth above 2%. The eventual exit from ice cream will increase management’s focus on remaining businesses. Cost savings of €850 million are being pursued, while there is a forecast dividend yield of 3.3%. 

On balance, and despite ongoing risks, strong brands and a self-help programme continue to leave this consumer goods giant worthy of its place in many diversified investor portfolios.  

Positives: 

• Diversity of products and geographical regions
• Cost saving programme

Negatives:

• Pressured consumer incomes
• Discount retailers often only stock their own branded labels

The average rating of stock market analysts:

Cautious buy