Unilever Earnings: Growth in a Challenging Market

More
importantly,
margins
improved
substantially
in
the
first
half,
with
underlying
operating
margin
up
by
250
basis
points
to
19.6%,
similar
to
peak
levels
seen
back
in
2020.
This
impressive
bottom-line
performance
was
driven
by
gross
margin
expansion
of
420
basis
points
partly
offset
by
stepped-up
marketing
investments
(up
180
basis
points).
From
a
volume
perspective,
volume
growth
accelerated
for
a
third
consecutive
quarter
to
positive
2.9%
in
the
second
quarter,
driven
by
beauty
and
wellbeing
and
more
specifically
prestige
beauty
(Hourglass)
and
supplements
(Liquid
IV,
Nutrafol).
The
company
announced
a
capital
markets
day
in
London
on
Nov.
22,
2024.

Management
reiterated
its
fiscal
2024
organic
growth
guidance
of
3%-5%
versus
4.4%
for
consensus
(prerelease)
and
4%
(unchanged)
in
our
model.
Core
categories
performed
well;
beauty
and
wellbeing,
personal
care,
and
home
care
exhibited
solid
volume
growth
in
the
second
quarter,
despite
consumer
downtrading
across
several
categories,
reflecting
robust
elasticities
and
brand
strength.
Home
care
margin
expanded
by
400
basis
points,
driven
by
commodity
deflation
that
benefited
gross
margins.

In
nutrition,
margins
expanded
by
390
basis
points
–
a
function
of
normalising
commodity
costs
and
SKU
optimisation
efforts.
In
contrast,
ice
cream
continues
to
disappoint,
with
weak
volumes
(down
1.1%)
leading
to
margin
declines
due
to
stepped-up
marketing
investments.
Given
the
mostly
in-line
growth
numbers
and
full-year
guidance,
as
well
as
an
expectation
of
a
more
modest
margin
expansion
in
the
second
half,
our
fair
value
estimates
are
unchanged
at
£43.80/€52/$56.
The
shares
appear
fairly
valued.

Key
Morningstar
Metrics
for
Unilever

• Fair
Value
Estimate:
4,380p
• Morningstar
Rating:
★★★ 
•
Morningstar Economic
Moat
Rating:
Wide
•
Morningstar Uncertainty
Rating:
Low

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