Unilever 3rd qtr results

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 updated the market on their 3rd quarter sales and since this follows closely on from their trading statement of 30 September, this was much as expected.

Underlying sales growth for the quarter was 3.2% with emerging markets up 5.95%.  Reported turnover decreased by -6.5% to €12.5bn due to a negative currency impact of -8.5% and the disposal of non-core businesses reducing turnover by -1.0%.

Underlying sales growth for the nine months was 4.4%, with emerging markets up 8.8%.  Reported turnover decreased -2.0% to €38.0bn including a negative currency impact of -5.0%.

The announcement on 30 September alerted the market to a decline in the emerging market growth.  Although Unilever's definition of emerging markets does not totally align with their geographical reporting, one can see the decline in growth from the Asia/AMET/RUB numbers:

	Sales Growth
Asia/AMET/RUB*	USG	UVG	UPG
3rd qtr 2013	6.2%	4.5%	1.6%
2nd qtr 2013	9.2%	5.8%	3.1%
1st qtr 2013	9.2%	5.4%	3.7%
Total 2012	10.6%	5.7%	4.6%

* AMET includes Africa, Middle East & Turkey.  RUB includes Russia, Ukraine & Belarus.

The most marked decline is the reduction in sales growth due to pricing, where 4.6% growth in 2012 was attributed to price increases, declining to 1.6% in the 3rd quarter of this year.  This is substantially below the rate of inflation in these countries, although there are some low inflation countries such as Ukraine, Japan & Australia included here, some of the big markets such as Russia, India and Indonesia have inflation well above 5%.

Procter & Gamble will be announcing their first quarter numbers tomorrow, so it will be worth seeing how they have performed and whether any of the lower price growth is due to discounting by P&G.

The company announced a third quarter dividend of 22.8p, a 15.3% increase from last year, although almost a third of this increase is due to a 4% strengthening of the Euro against sterling, as the Euro dividend at €0.269 was up 10.7%.  Unilever have an excellent record of rewarding shareholders with increasing dividends above the rate of inflation and with the added benefit of a quarterly pay-out.

The management expect to report underlying sales growth in the fourth quarter with profitable volume growth ahead of their markets.  They also state that they expect an improvement in core operating margins and strong cash flow.