tag:blogger.com,1999:blog-1013774913766701691.post1226660531455724583..comments2023-10-29T03:33:36.182-04:00Comments on The Johns Hopkins Carey Business School Equity Analyst Team: Unilever partners with Facebook alliance Internet.org to reach millions in India- 02/28/2014Johns Hopkins Carey Business School Equity Analyst Teamhttp://www.blogger.com/profile/00939492264227225505noreply@blogger.comBlogger3125tag:blogger.com,1999:blog-1013774913766701691.post-17145692904784652952014-02-28T22:39:11.548-05:002014-02-28T22:39:11.548-05:00Unilever Q4 and Full Year Results 2013
Seeking Alp...Unilever Q4 and Full Year Results 2013<br />Seeking Alpha<br />S&P Capital <br />Morning Star<br /><br />CORPORATE OVERVIEW<br /><br />2 Business Segments (Revenue % Operating Income %) Fiscal year 2013<br />Home & Personal Care Segment 54.%, 48%<br />Personal Care 36%, 41%<br />Home Care 18%, 7%<br />Foods & Refreshment Segment 46%, 52%<br />Foods 27%, 41%<br />Refreshment 19%, 11%<br /><br />CORE BUSINESS - Personal Care<br />- The business in emerging markets grew 8.4% driven by underlying volume growth of 5.3%. In developed markets we declined (1.7)%. <br />- Personal Care segment underlying sales growth 7.3%, price growth 1.2% and Volume growth 6.1%<br /><br />CUSTOMERS<br /><br />- Multinational retailers, wholesalers and distributors to small independent shops <br />- International retailers such as Walmart, Tesco, Carrefour and Metro <br />- Wholesalers and millions of small independent outlets and kiosks,<br /><br />FINANCIAL DATA <br />Free Cash Flow: <br />- FCF in FY 2013 €3.9 billion decrease 11% from 2012 <br />- FCF/OCF 48% in 2013 there are 3% decrease from 2012<br />- FCF/Revenue 8% in 2013 there are 1% increase from 2012 Use- of FCF: <br />- Use of FCF: <br />1. Pay dividend: FY 2013, €2.9 billion dividend paid. <br />2. M&A: The company spent €2.9 billion on acquisitions <br /><br />Profitability<br /><br />Profit Margin: <br />- Operating Margin: 15%, <br />- Net profit Margin: 9.7%, <br />ROE: 33%; increased 3% from 2012<br />ROA: 10%. Increased 1% from 2012<br /><br />USG/UVG & Pricing Power<br />- Unilever's underlying sales growth was 4.4%, with emerging markets up 8.8%. <br />- Underlying volume growth was 2.4% and pricing was up by 1.9%.<br /><br />PRO (What is going right)<br />- Strong Brand Recognition: <br />- Divesting Businesses; Increasing Exposure in Emerging Markets:<br />- Expansion through Acquisitions:<br />- Innovation product<br /><br />CON (What may go wrong)<br />Revenue (Revenue growth is slowing down)<br />- Sluggish Spreads Business: <br />- Revenue slowdown in European<br />- Increasing competition in emerging markets<br />Expense (Margins are higher than its major competitors) <br />- The operating expenses are higher its major peers (P&G, Nestle)<br />- The high volatility in commodity prices affect its COGS<br />- <br />Free Cash Flow<br />- Currency risk remains an issue as Unilever pays out its dividends in Euros.Anonymoushttps://www.blogger.com/profile/14118028728761664429noreply@blogger.comtag:blogger.com,1999:blog-1013774913766701691.post-16565279038433310702014-02-28T21:26:12.431-05:002014-02-28T21:26:12.431-05:00Sources:
- 2012 10K
- 2013 full year earnings pres...Sources:<br />- 2012 10K<br />- 2013 full year earnings press release<br />- Unilever official website<br />- Seeking alpha<br />- morningstar.com<br /><br />Business Overview:<br />Unilever is a leading manufacturer and marketer of consumer products in the world with significant presence across developed, developing and emerging markets. It is among the world's largest consumer goods companies after Procter & Gamble and Nestle.<br />It has four business segments: (% of total revenue in FY 2013; % of operating income in FY 2013)<br />- Personal care segment: 36%;41%<br />- Foods Segment:27%;41%<br />- Refreshment segment: 19%; 11%<br />- Home care segment: 18%; 7%<br /><br />Revenue by geography: 55% from emerging market and 45% from developed.<br /><br />Core Businesses:<br />- Largest segment and profit driver Personal care: <br />• Strong performance in hair care, skin cleansing and deodorants<br />• Major brands in this segment are Dove, Lux, Rexona, Sunsilk, Axe and Pond’s<br />- Second largest segment Foods:<br />• Categories include savory, dressings & spreads<br />• Major brands: Knorr, Hellmann’s, Flora, Rama, Calvé, Amora, Ragú and Bertolli<br /><br />Customers:<br />- Multinational retailers, wholesalers, distributors and small independent shops<br />- Walmart is Unilever’s largest retail customer<br /><br />Financial Overview:<br />- FCF: 3.9 b in 2013, slightly lower than 2012 due to a lower inflow of working capital<br />• FCF as % of Rev: 7.5% in 2013; 9% in 2012;7.2% in 2011; 8.2% in 2010<br />• FCF as % of OCF: 65% in 2013; 70% in 2012; 64% in 2011; 69% in 2010<br />• Use of FCF:<br />o Dividends paid was 80% of FCF in 2013<br />o Net capital expenditure was 54% of FCF in 2013<br />o Debt repayment: 32% of FCF in 2013<br />o No shares repurchase in 2013<br />o No use in acquisition, instead cash inflow: sale of its Wish-Bone and Western dressings brands to Pinnacle Foods Inc. and completed the sale of its Skippy business in China to Hormel Foods<br />- Margins: EBITDA Margin 17% VS. P&G 21% Nestle 19%; Operating Margin 15% VS. P&G 18%, Nestle 16%.; Profit Margin 10% VS. P&G 13%, Nestle 11%. All of these around industry avg.<br />- ROE: 33% VS. P&G 16% ,improving & leading in the industry; ROA: 11%, flat in the past 5 yrs<br />- D/E: 0.51, remain stable around 50% from 2010 till now<br /><br />Competitive strength:<br />- Strong brand recognition and new product innovation which will bring up its gross margin<br />- Divesting non-core businesses and focusing more on core businesses in emerging markets<br /><br />What can go wrong?<br />- Revenue: <br />• Pricing power low: Although have increases in both volume and price last year. Lots of alternatives in the mkt, if price continues rising, customers may switch to competitors<br />• Negative returns in spread business, may continue hurt sales in the near future<br />• Customer spending slowdown in developed markets<br />• Slowdown in emerging markets due to weak currencies and macroeconomics<br />- Expenses:<br />• Fluctuations on the cost of the underlying commodities and materials which cannot be passed through price increasing<br />• Currency related expenses<br />- FCF: <br />• Continuous acquisition for expansion may put pressure on FCF<br />Anonymoushttps://www.blogger.com/profile/14674214430018401104noreply@blogger.comtag:blogger.com,1999:blog-1013774913766701691.post-3721874326810052372014-02-28T21:00:32.481-05:002014-02-28T21:00:32.481-05:00Sources: Bloomberg, Company 10K and Earnings Call,...Sources: Bloomberg, Company 10K and Earnings Call, Trefis.com, JP Morgan<br /><br />5 operating segments:<br />Reference items all in Euro $ ( Rev 2013 59 B, OCF 5.8 B, FCF 3.7 B)<br />% of total rev and % of total OI<br />Personal care 36%/41%, principal brands in personal care include Dove, Lux, Vaseline, Ax, and Pond's.<br />Food, savory products, dressing and spreads, 27%/41%, and key brands include Knorr, Hellmann's, Amora<br />Home care 18%/7%, includes laundry products, its brands include Omo, Surf, Comfort etc,.<br />Refreshment 19%/11%, popular brands include Magnum, Breyer's, Klondike, Ben&Jerry's and Popsicle.<br />Operating margins: Foods 22.8%, Personal care 17%, Refreshment 9.1%, Home care 5.9%.<br /><br />Unilever's rev grew at a CAGR of 4.2%, and its NI declined at a CAGR of -.7% for the past 5 years. <br /><br />UN's gross margin is 15.1%, slightly higher than the industry average 14.9%, Profit margin is 9.7%, .1% higher than industry average.<br />UN is trading at a P/E multiple of 16.5x, comparing with industry average 18.9x, P/FCF and P/Sales also suggested that UN is trading at a discount relative to its industry.<br /><br />Compare with Procter& Gamble, Unilever is more reliant on emerging markets. P&G generates 37% of its total revenues from emerging markets, Unilever gets 56%, and it expects to generate 70% in those markets.<br /> <br />FCF conversion: 6% of Rev and 64% of OCF<br />Uses of FCF<br />- Maintenance CapEx, 35% use of FCF, <br />- Dividend paymanet, 52% use of FCF,<br />- Acquisition and disposals, 25% source of FCF<br /><br />Guidance<br />- Competition is intense especially in the US, Nigeria and India, short term growth rate will decline to 5%-6%.<br />- Innovation drove the volume and net income, 75% of all innovated products are margin accretive.<br />- Negative commentary in retails in the UK and the US, further price decline is possible.<br /><br />Upside<br />- Higher GDP and population growth in emerging markets will boost aggregate household product demands. Unilever can increase the volume and improve its margins as a result.<br />-<br /><br />Downside<br />- Foreign exchange risks: Emerging markets experienced lower consumer demand and years of high inflation, potential FX-driven price increases will likely hurt sales.<br />- Unilever's increase prices above CPI from 2011-2013, therefore, the gross margins were higher than before. However, price increases may come at the expense of volume growth.<br />- Increasing cost to compete: UN needs to raise its promotional efforts to match up with other competitors such as P&G and private label products. <br />- Market share trends in WE and the US remain challenging: a potential macro recovery might not necessarily boost volumes in developed countries, given the "late-cycle: nature of staples industry. <br />Anonymoushttps://www.blogger.com/profile/08434592686235984125noreply@blogger.com