- Unilever shares at highest level since 2020 after big improvement on margins
- Volume growth exceeds pricing growth in emerging markets, with the opposite being the case for developed markets
- Ice cream division the weakest part of the group
“A big improvement on margins has put a rocket underneath Unilever’s shares, taking the stock to its highest level since November 2020. Key to its success has been shifting greater volumes of products, suggesting that consumer demand for big brands is bouncing back,” says Dan Coatsworth, investment analyst at AJ Bell.
“It’s a healthy sign when volume growth exceeds pricing growth, as it implies solid underlying demand for the products, rather than simply slapping an extra amount on the unit price to boost revenue.
“Dig deeper and Unilever’s success is not universal. Emerging markets account for just under three fifths of sales and volume growth exceeded price growth. However, higher prices played a bigger role than volume growth in developed markets.
“Ice cream was the weakest part of the group, which perhaps explains why the unit doesn’t have a future inside Unilever. Efforts are ongoing to sell or float the division, allowing Unilever to streamline and focus on other divisions which have stronger growth prospects. The ice cream arm was hit by a poor performance from China where competition is tough and from Europe where unfavourable weather conditions dampened sales.
“For a company that has faced considerable criticism in recent years for taking its eye off the ball and losing focus, Unilever now seems to be getting its act together. There is a clear plan for how to make the business leaner and keener, and a sharper focus on the best bits of the business make perfect sense.
“The tricky part is execution and a big cost-cutting drive including the removal of thousands of jobs won’t be good for morale inside the business. Therefore, while the latest results offer some hope that its new plan is off to a good start, it won’t always be plain sailing from here.”
