Unilever launches $1.6 billion buyback as CEO demands improvements
Reuters
Published Feb 08, 2024 07:12
Updated Feb 08, 2024 15:10
By Richa Naidu
LONDON (Reuters) - Unilever (LON:ULVR) launched a 1.5 billion euro ($1.6 billion) share buyback on Thursday after volumes increased for the first time in 10 quarters, although the consumer goods giant's CEO said its performance needs to improve.
"Our competitiveness remains disappointing and overall performance needs to improve," Hein Schumacher said in a statement. "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."
While the maker of Dove soap and Hellmann's condiments said its full-year underlying operating profit rose 2.6% to 9.9 billion euros and its underlying operating margin was up 60 basis points to 16.7%, it missed analyst expectations for operating profit of 10.4 billion euros and a margin of 16.9%.
Unilever's shares rose as much as 4% on Thursday, hitting their highest point since it last reported earnings in October. The stock has fallen about 2% over the past year.
"Main takeaway is the launch of the buyback which has buoyed the price this morning," Jack Martin, a portfolio manager at Oberon Investments, said.
"Beauty and wellbeing and personal care divisions: solid. Ice Cream division results, especially weak volumes, might lead to speculation around potentially selling this business off again."
REGAINING MARKET SHARE
The consumer goods industry has struggled to protect margins as everything from sunflower oil and shipping to packaging and raw commodities became more costly as a result of the pandemic.
These increases worsened after Russia invaded Ukraine in 2022, sending energy costs to record highs.
"We will continue to see inflation in 2024. I would say it will return to normal levels -- when I say normal, I mean somewhere between 2.5-3%," Schumacher said on a call with journalists.
Some companies are starting to ease price hikes, in step with slowing inflation, hoping to lure back shoppers who traded down to cheaper products and retailers' private labels.
The percentage of Unilever's business winning market share on a rolling 12 month-basis was "disappointing" at 37%, the company said, hurt by it cutting back its portfolio, raising prices and changing shopper habits. In October, it was 38%.
"There is still plenty of work to be done in terms of competitiveness and regaining market share," Aviva (LON:AV) portfolio manager, Richard Saldanha, said. "Given the valuation discount, especially when compared to U.S. peers, we think investor patience may be ultimately rewarded."
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Analysts and investors have been warning Unilever and other big consumer firms that this lost market share would be tough to recover once consumers had been put off by high prices.
Unilever said it expects "modest improvement" in underlying operating margin for the full year and underlying sales growth within its multi-year 3% to 5% range.
($1 = 0.9271 euros)
Written By: Reuters
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