Unilever's EPS Stays Flat Y/Y

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Unilever NV (NYSE:UN - News) delivered earnings of €1.46 ($2.03) per share in the fiscal year 2011, in line with the prior-year period. Core-earnings increased 4% from the 2010 period to €1.41 ($1.96). Profits went up based on acquisitions and disposals along with higher sales.

Consolidated Revenue and Margins

Unilever’s net sales in 2011 increased 5.0% to €46.5 billion ($64.7 billion) compared with the prior-year period. The upswing came on the back of acquisitions and disposals, which delivered a positive contribution of 1.2%. However, currency translation had a negative impact of 2.5%. Unilever delivered €11.6 billion ($16.2 billion) net sales in the fourth quarter. 

Underlying sales grew 6.5% in 2011 based on improved price of 4.8% and volume growth of 1.6%. Emerging markets also delivered an underlying sales growth of 11.5%. Fourth-quarter underlying sales growth was 6.6%, coming from 6.5% price growth and 0.1% volume growth.

In the year 2011, advertising and promotional expenses went up €150 million ($208.9 million) to €6.2 billion ($8.6 billion), including acquisitions.

Operating profits increased 1% year over year to €6.4 billion ($8.9 billion). However, a reduction in overheads offsetting the pressure on gross margins from higher commodity costs, resulted in a decline in underlying operating margin by 10 bps in 2011.

Region-Wise Details

Asia Africa CEE: The region experienced strong volume growth in the fourth quarter despite higher prices and challenging macro-economic conditions in many countries. In addition, Unilever achieved double digit-growth in South Africa, Indonesia and Vietnam along with robust growth from India, Turkey and China. However, Japan’s downward trend continued largely due to the occurrence of earthquake in the first half of 2011, while there seemed little growth in Central & Eastern Europe.

The Americas: North America delivered a 2.1% underlying sales growth in 2011, reflecting both a good performance from Personal Care and the pricing action taken to recover input cost increases, particularly in spreads, in-home ice cream and bar soaps. Latin America also grew 10.8% in 2011 with strong growth from Argentina and Mexico, with a lesser growth in Brazil.

Western Europe: Unilever’s six largest markets in Western Europe delivered positive sales growth in the fourth quarter with strong performances in France and Italy. However, volumes were negatively impacted by the action to increase prices, particularly in spreads.

Personal Care, which has now formed one-third of the business, delivered double-digit growth in the second half of 2011 and 8% in the year 2011. Underlying sales growth in the Home Care segment was also around 8% in 2011. In Refreshment and Foods, the underlying sales were at mid-single digit at approximately 5%. In Refreshment, the growth was driven by innovation and new market launches, particularly with Magnum in Ice Cream, while in Foods, performance was driven by the strong pricing that was taken, especially in spreads.

Other Financial Updates

During the fiscal year of 2011, free cash flow was €3.1 billion ($4.3 billion). Unilever’s Board also announced to pay a quarterly dividend of €0.225 per share ($0.313 per share) in March, 2012. Net debt was €8.8 billion ($12.3 billion) at year-end, up from the €6.7 billion ($9.3 billion) at the end of 2010.

Based on the full-year exchange rate of $1.39284 as on 12/31/11

Currently, Unilever holds a Zacks #3 Rank, which translates into a short-term ‘Hold’ recommendation. Moreover, considering the fundamentals, we have a long-term ‘Neutral’ rating on the stock.

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