8th Feb 2024 14:20
(Alliance News) - Unilever PLC won over shareholders on Thursday, despite a drop off in profit, after it announced a further EUR1.5 billion share buyback during 2024.
"Unilever's boss may have flagged areas of disappointment but a healthy increase in volume growth during its fourth quarter and a new EUR1.5 billion share buyback was enough to win over investors and give a boost to its share price," said Russ Mould, investment director at AJ Bell.
Shares in Unilever were up 3.1% to 4,022.00 pence each in London on Thursday afternoon.
The London-based maker of food & drink, cleaning, toiletry, and personal care products said pretax profit fell 9.7% to EUR9.34 billion in 2023 from EUR10.34 billion in 2022, as turnover slipped 0.8% to EUR59.60 billion from EUR60.07 billion.
Unilever declared a fourth-quarter dividend of EUR0.4268, unchanged from a year earlier.
The company also announced a new share buyback programme worth up to EUR1.5 billion, set to begin in the second quarter and be completed within 2024. Last year, Unilever completed the second half of a two-year EUR3.0 billion buyback it had announced at the start of 2022.
"Today's results show an improving financial performance, with the return to volume growth and margins rebuilding. However, our competitiveness remains disappointing and overall performance needs to improve. We are working to address this by improving our execution to unlock Unilever's full potential," said Chief Executive Officer Hein Schumacher.
Looking ahead, Unilever expects underlying sales growth for 2024 to be within its multi-year range of 3% to 5%, with more balance between volume increases and price hikes.
It said it anticipates a "modest" improvement in underlying operating margin for the full year. It intends to deliver this via gross margin expansion, "driven by a step-up in productivity and net material inflation back to more normal levels."
Matt Britzman at Hargreaves Lansdown commented: "Volumes are growing again, led by Unilever's biggest brands like Dove and Hellmans. Price hikes have come tumbling back down to earth, from the mammoth double-digit levels seen in the first quarter. Cost inflation is easing, meaning less needs to be passed on to consumers who were starting to trade away from Unilever's higher priced products. The net impact was a more equal balance of price and volume growth in the latest quarter and a better outlook on margins moving forward."
Unilever also looked at how it is transforming the company.
"In October, we set out a growth action plan focused on three priorities: delivering higher-quality growth, stepping up productivity and simplicity, and adopting a strong performance focus. The new leadership team has embedded the action plan at pace," said Schumacher.
"We have increased investment behind our 30 power brands, accelerated portfolio transformation, and are driving a sharper performance focus with clear and stretching targets across the whole organisation.
"We are at the early stages of this work and there is much to do but we are moving with speed and urgency to transform Unilever into a consistently higher performing business."
However, Britzman said "there's still a long way to go before Unilever's refreshed leadership team can call mission complete on the turnaround."
By Sophie Rose, Alliance News senior reporter
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