Unilever interims

A manufacturer and supplier of fast moving consumer goods, with more than 400 brands focused on health and wellbeing, 14 of which generate sales in excess of €1 billion a year. I have a holding in my income portfolio (epic code: ULVR).

Unilever announced their interim results today, for the period to 30 June 2013.  Turnover was up 0.5% to €25.5bn; adjusting for foreign currency and disposals, underlying growth was 5%, with emerging markets growing by 10.3%.  Of the 5% underlying sales growth 2.6% was due to volume. Operating profits were €3.9bn up 14% (18% at constant currencies), reflecting stronger gross margins up 120bps, that they attribute to profitable innovations, an improving mix and continuing to apply a rigorous approach to supply chain costs and savings.

Core EPS was up 4% to €0.76 and reported EPS up 14% to €0.83.  Dividend for the second quarter will be 23.12p per share a 22% increase on last year, partly due to Euro strength, as the Euro dividend was increased by 10.7%.  Free cash flow was €1.3bn, compared to last year's €1.5bn, this does not yet reflect the €2.1bn that will be paid to shareholders of Hindustan Unilever (HUL) that accepted ULVR's open offer. 

Net debt was €11.6bn up from €7.4bn at the year end, due in the main to accounting for the maximum liability of the HUL offer of €3.8bn. Since fewer HUL shareholders accepted the open offer, the net debt if adjusted for this would be €9.9bn (maximum value of the offer was €3.8bn, $2.1bn accepted).  So the adjusted gearing would be 76.7% still a substantial change from the 48.5% at the December year end.

They caution what is a good performance in their markets by stating that growth is slowing in emerging countries, as macro-economic headwinds influence consumer behaviour.  For developed markets they mention that they remain sluggish with little sign of any recovery in North America or Europe.

Unilever's overall underlying sales growth of 5% is still ahead of their main competitor P&G, who are in a 3-4% growth range and expect to remain there for their fourth quarter to June 2013, due to be announced in early August.