25th Jul 2024 10:39
(Alliance News) - Unilever PLC shares got a boost from its strong margin guidance, though sales did miss the market's loftier expectations.
The firm maintained its sales growth outlook, but upped its margin target.
Shares rose 5.4% to 4,635.00 pence each in London on Thursday morning.
The consumer goods firm reported a rise in revenue and profit in the first-half. Revenue in the first six months of 2024 climbed 2.3% to EUR31.12 billion from EUR30.43 billion. Pretax profit increased 5.7% to EUR5.57 billion from EUR5.27 billion.
Underlying sales growth for the half-year was 4.1%, helped by a 2.6% rise in margins and a 1.6% pricing increase.
The USG outcome fell short of consensus, however, with a rise of 4.4% predicted.
"We continue to expect underlying sales growth for 2024 to be within our multi-year range of 3% to 5%, with the majority of the growth being driven by volume," the firm, behind brands such as Dove and Cif, said.
It now expects its full-year underlying operating margin "to be at least 18%". It had previously predicted a "modest improvement" from the 16.7% achieved in 2023.
IG analyst Chris Beauchamp commented: "The shares have not been immune to the recent equity market volatility but today's early bounce has recouped all recent losses and then gone further."
"While quarterly sales missed forecasts, the improvement in margins points the way to improved profitability later in the year."
By division, the strongest underlying sales growth came from the Beauty & Wellbeing arm in the first half. The unit, which includes its Vaseline offering, saw USG rise 7.1%. The weakest growth came from Ice Cream, where it improved 0.6%.
Unilever in March said it plans to spin off its ice cream arm, which has brands such as Magnum and Ben & Jerry's.
Unilever said Thursday: "Separation activity is underway and on track to complete by the end of 2025. We are working at pace on the legal entity set up, the standalone operating model and carve-out financials. In July, we communicated internally on the planned changes to simplify our business and further evolve our category-focused operating model. We have started consultations with the respective works councils."
The restructure is one of the first major projects at the company undertaken by CEO Hein Schumacher. He picked as CEO in January 2023 and joined at the start of July of that year. He replaced Alan Jope, who announced in September 2022 his intention to retire from the London-based consumer goods company. Jope's stint was marred by Unilever's failed tilt at GSK PLC's consumer health arm. The unit was then spun-out of GSK and named Haleon PLC. Unilever had attempted to acquire the unit for GBP50 billion.
AJ Bell analyst Dan Coatsworth commented: "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."
By Eric Cunha, Alliance News news editor
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