Refocusing consumer goods giant Unilever PLC (LON:ULVR) saw its shares rise today as the firm raised its quarterly dividend by 12%, while its first-quarter underlying sales growth beat consensus forecasts although it was a touch below the bottom of its 2017 guidance range of 3%-5% growth.
The FTSE 100-listed firm, which unveiled the results of a wide-ranging strategy review earlier this month, said its underlying sales growth in the first three months of the year was 2.9%, with price growth of 3.0% clipped back by a 0.1% fall in volume.
Excluding its spreads business, which Unilever has announced it intends to exit, underlying sales growth was 3.4% with volumes up 0.3%.
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Overall turnover grew by 6.1% to €13.3bn, which included a positive currency impact of 2.4% and 0.7% from acquisitions net of disposals.
In a note to clients on Unilever, analysts at Liberum Capital pointed out that: “1Q’17 organic sales of 2.9% beat consensus by 90bps with strong 6.1% emerging markets growth offset partly by a -1.5% decline in developed markets. Growth was entirely driven by 3% pricing (4Q'16 2.6%).”
They repeated a ‘hold’ rating and 3,870p price target on Unilever.
In early afternoon trading, Unilever shares were up 1.3%, or 49.5p at 3,987p.
Emerging markets underlying sales increased by 6.1% with price up 5.3% and volume up 0.8%, as growth recovered in India from the uncertainty experienced due to the removal of the Rs.500 and Rs.1,000 notes in November, although Brazil continued to be adversely impacted by economic crisis.
Within its product segments, Refreshment, Home Care and Personal Care grew ahead of its markets, while sales in Foods were flat, impacted by the later Easter this year.
Unilever said conditions remained challenging in the markets in which it operates, with growth of around 2% with negative volumes.
Unilever boss says actions “keep us on track”
Unilever chief executive officer, Paul Poman said: “The actions we are taking keep us on track for another year of underlying sales growth ahead of our markets, in the 3-5% range.
“We also expect an improvement in underlying operating margin this year of at least 80 basis points and strong cash flow."
The firm raised its quarterly dividend by 12% to €0.3585 per share, in line with the level pledged in its strategy review, which Polman said reflected confidence in the outlook.
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The strategy review to improve shareholder value was launched at the end of February after the shock of a failed bid move for the Anglo-Dutch group by US food giant Kraft Heinz Co (NASDAQ:KHC).
The review saw Unilever confirm plans to sell or demerge its Spreads business, which includes Flora and Stork margarines, and it also said it would look at changing its dual-listed corporate structure.
Aside from those “active portfolio management” moves, Unilever also said it plans to combine its Foods and Refreshment into one organisation, to unlock “growth and faster margin progression.”
The firm added that it was targeting a 20% underlying operating margin before restructuring by 2020, was establishing a net debt/ EBITDA target of 2x, launching a share buy-back of €5bn this year, and would raise dividends by 12% in the coming year.
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