Consumer goods colossus Unilever (ULVR) has delivered underlying sales growth of 3.1% in the quarter to 31 March, beating analysts’ expectations of 2.8%.

Strong volume growth of 1.2% alongside price hikes over the same period helped sales in the emerging markets division jump 5%, prompting the shares to rise 3.4% to £45.28.

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Unilever, which owns popular brands Hellmann’s, Magnum and Dove, also reveals that underlying sales growth will be in the lower half of the 3% to 5% range in the year to 31 December 2019.

‘Emerging markets continue to be the key driver of Unilever’s sales with like-for-like growth of 5% in the first quarter of 2019 versus a mere 0.3% from developed markets,’ says AJ Bell investment director Russ Mould.

He warns investors cannot expect Unilever’s sales to remain strong all the time despite its size and market positioning, although the first quarter results were satisfactory under new chief executive Alan Jope.

‘Jope needs to decide the shape of Unilever for the next phase of its life – whether that means slimming down the business to concentrate on the strongest parts or making acquisitions to further increase scale in certain product lines,’ comments Mould.

Over the last year, shares in Unilever have gained 14.5% after the firm bounced back from its ill-fated attempt to shift its headquarters to the Netherlands.

The proposal was ditched in October last year following fierce shareholder opposition.

Despite today's positive share price reaction, Liberum’s Robert Waldschmidt regards the risk/reward outlook for the shares as ‘balanced’. He explains:

‘Management is reinvesting two thirds of a €6bn cost savings program in growth initiatives and is committed to delivering an ambitious 20% underlying EBIT margin target by 2020. Unilever also remains focused on shareholder returns - the dividend is growing 8% in 2018 and the group returned €6bn via a share buyback in 2018.

‘While more aggressive earnings per share (EPS) growth certainly underpins the shares, failure to deliver on lifted expectations could lead to a pull-back. In addition, the company’s bold margin targets could be unsustainable in the long run.'


Issue Date: 18 Apr 2019