Report
Philip Gorham
EUR 850.00 For Business Accounts Only

Morningstar | Home Care and Asia to the Rescue for Unilever in Otherwise In-Line 1Q

In the first quarter of 2019, Unilever grew its top line at a whisker below our forecast for the full-year rate, but at this early stage, we are maintaining our estimates and our EUR 52 fair value estimate. The market reaction to the update has been positive, and after a strong performance in the stock during the last 12 months, the market price is now close to our fair value estimate. We are reiterating our wide moat rating, which was evident this quarter through Unilever's ability to generate growth in developed markets, albeit modest growth.

First-quarter consolidated organic sales growth of 3.1% is roughly where Unilever ended the year in 2018, and modestly below other large cap competitors that have reported first-quarter results so far, such as Nestle. While Europe performed totally in line with our expectations, with little underlying growth, the Asia/AMET/RUB segment posted a positive surprise with 6% organic growth, offset by a slowdown in the Americas segment (organic growth up just 0.4%). The net impact is negligible to our full-year forecast of 3.4% consolidated organic growth. By category, home-care stood out, growing by 6% on an underlying basis, while food and refreshments continues to be sluggish, up 1.5%. We doubt the home-care segment can sustain mid-single-digit growth because we expect its price/mix, which contributed 4.8 percentage points to growth, to be structurally lower than that in the medium- to long term.

The value of Unilever's emerging markets exposure was evident in the first quarter, with 5% underlying sales growth in emerging markets, versus essentially flat sales in developed markets. Both pricing and volumes contributed to the differential, with 3.2% pricing in emerging markets, driven by Latin America. Unilever generated over 60% of its revenue from emerging markets in the first quarter, and we expect this to be a key growth driver, particularly through volume, in the long term.
Underlying
Unilever PLC

Unilever is a consumer goods manufacturing group based in the United Kingdom. Co. is engaged in supplying consumer goods in the refreshments, foods, home and personal product categories. Co. supplies its consumers product for nutrition, hygiene and personal care and is active in emerging markets in Asia, Africa, Central & Eastern Europe and Latin America. Co.'s portfolio includes such well-known brands as Knorr, Lipton, Hellmann's, Magnum, Omo, Dove, Lux and Axe/Lynx. Co. manages its brands under the following four category headings: savoury, dressings and spreads; ice cream and beverages; personal care; and home care. Co.'s products are sold in over 190 countries around the world.

Provider
Morningstar
Morningstar

Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.

Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.

We have operations in 27 countries.

Analysts
Philip Gorham

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