Unilever PLC ADRUL

Morningstar Rating

Stock Research and Analysis

by Erin Swanson, CFA

In the past, an extremely decentralized and complex structure hindered Unilever's ability to realize the growth and profitability that should emanate from one of the largest players in the packaged food and household and personal product industries. Read more

Bulls Say

Unilever is the third-largest packaged food firm in the world, producing more than EUR 22 billion in annual sales from a stable of brands including Knorr, Hellmann's, Lipton, Breyers, and Ben & Jerry's.

As one of the largest global household and personal product firms, Unilever generates nearly EUR 19 billion in annual sales through its portfolio of well-known brands, such as Dove, Ponds, and Suave.

By focusing on opportunities in developing and emerging markets years earlier than its peers, Unilever has realized some of the benefits of being a first-mover and now generates around 50% of its sales from these markets.

Cash-flow generation through the first six months of the year was impressive (at EUR 2.0 billion, or 10% of sales), primarily because of lower inventory levels as Unilever appears to be realizing the benefits of its efforts to reduce the complexity of its supply chain. Read more

Bears Say

Operating margins have suffered during the last several years as Unilever failed to present a clear global strategy, while also inefficiently ramping up its product base and overhead.

Despite spending heavily on marketing and promotions and reducing price points, sales continue to suffer in Western Europe, which makes up about one third of Unilever's total revenue.

Even after culling its product portfolio from 1,600 items to less than 400 during the last five years, Unilever still had trouble generating consistent sales growth. Read more

Strategy

Strategically, Unilever is focused on driving sustainable revenue growth, while at the same time improving margins. During the last two years, Unilever has steered away from less profitable businesses Read more

Management

After 35 years at the firm and four years at the helm, Patrick Cescau has stepped down as CEO. To fill his shoes, the board tapped Paul Polman, who was most recently executive vice president and zone director for the Americas at Nestle NSRGY. In our Read more

Profile

U.K.-based Unilever PLC and Netherlands-based Unilever NV operate Unilever Group, which is a diversified packaged food (about 55% of total sales), and household and personal Read more

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