Unilever shares rose on Tuesday after it upgraded its full-year guidance after a strong, volume-led first half that included its best quarter for volume growth in more than a decade.
Shares in the consumer goods company were 5% higher at the time of writing. For most companies, a 5% move is commonplace, but it’s not often you see Unilever shares move more than 5% in a day, underlining the significance of the numbers released on Tuesday.
The consumer goods giant reported underlying sales growth of 4.8% for the six months to 30 June, made up of 4.2% volume and 0.6% price.
Momentum built through the period, with second-quarter underlying sales up 5.8% on 5.5% volume – this was one of the key driving factors being the share price reaction following the results.
“Unilever’s underlying sales growth accelerated sharply to 5.8% in the second quarter, far outpacing market expectations of 4.3%. This was driven by impressive volume growth across all its business segments, marking Unilever’s best volume quarter in over a decade,” explained Aarin Chiekrie, equity analyst, Hargreaves Lansdown.
Turnover edged up 0.5% to €25.6bn, as operational gains and acquisitions were all but wiped out by a heavy currency headwind.
Growth was led by the company’s Power Brands – its biggest names, including Dove, which account for 78% of turnover – which grew 6.0%.
All four business groups delivered volume-led growth, with Home Care the strongest at 7.6%, followed by Beauty & Wellbeing at 5.9% and Personal Care at 4.8%. Foods lagged at 1.2%, held back by soft developed markets and stiffer competition in US condiments, where the group is trying to claw back share in premium and avocado mayonnaise.
Emerging markets, which make up 60% of the group, did much of the heavy lifting with 7.0% growth, led by India, Indonesia and Latin America, where corrective action in Brazil has restored momentum. North America again grew ahead of its market, helped by the shift of the portfolio towards beauty and personal care, while Europe remained subdued and slipped 0.9%.
Underlying operating margin nudged up 10 basis points to 20.3%, helped by an €800m productivity programme completed ahead of schedule and tighter overheads. Underlying earnings per share rose 2.4% to €1.61, though on a reported basis diluted EPS fell 2.5%, dragged down by currency.
Unilever now expects full-year underlying sales growth within its 4% to 6% range, with around 3% volume growth, and a modest improvement in operating margin on last year’s 20.0%. This was another reason to buy shares.
Second-half growth is pencilled in at 4% to 5%, this time led more by pricing as commodity-driven increases feed through.
Garry White, Chief Investment Commentator at Raymond James, said: “There was another solid performance from Unilever in the second quarter, driven primarily by volume growth rather than price increases. As a result, management upgraded its guidance for the full year. This reflects the group’s focus on expanding market share while maintaining pricing discipline.”