Unilever Hits 52-Week High


Shares of Unilever, Plc (UL) hit a 52-week high of $44.24 and eventually closed at $43.65 on Apr 10 following  the company’s announcement of the acquisition of a majority stake in the Qinyuan Group, a leading Chinese water purification business on Mar 9. In fact, the stock’s share price has increased around 9% since the acquisition announcement. Average volume of shares traded over the last three months came in at approximately 1,410K.

Acquisition of Qinyuan Group

On Mar 9, this consumer products giant agreed to acquire a majority stake in the Chinese water purifier maker Qinyuan Group for an undisclosed amount - making its biggest deal in China in more than 10 years. Unilever owns a global water purification business – Pureit (launched in 2005), which is available in several countries in South Asia, South East Asia, Latin America and Africa.

This deal is a strategic fit for both Pureit and Qinyuan, as their combination will offer a complete range of water purification products. The deal will allow Unilever to more than double the size of its current water purification business and also expand its business in China, where the water purification market has been growing rapidly. Unilever will also benefit from Qinyuan’s strong foothold in the local market, its marketing platform, and its manufacturing and distribution facilities.

Unilever has been focusing on shaping its portfolio to deliver sustainable growth. With the announcement of the acquisition of a majority stake in the Qinyuan Group, the company has taken a step further in making safe drinking water available and affordable to people across the world.

Unilever is also involved in divesting its businesses to concentrate on its core portfolio. Unilever's core businesses comprise detergents, foods, toiletries, and specialty chemicals. Recently in Feb, it agreed to sell its meat snacks business to Berlin-based Jack Link’s Meat Snacks for an undisclosed amount. Some other divestitures include its Royal pasta brand; Soft & Beautiful, TCB and Pro-Line Comb-Thru brands in the hair care category; Wish-Bone salad dressing business; the Skippy peanut butter business and Bertolli and P.F. Chang's frozen meals brands.

Unilever is scheduled to report its first quarter 2014 results on Apr 24 and is quite optimistic about delivering solid operating margin growth in 2014, driven by its cost savings programs. However, the company anticipates the volatility in the external environment to persist and expects low to mid single-digit commodity cost inflation, largely due to the effect of weaker currencies. Unilever holds a Zacks Rank #2 (Buy).

Other players in the consumer staple companies worth considering include Diamond Foods, Inc. (DMND), J&J Snack Foods Corp. (JJSF) and McCormick & Co. Inc. (MKC), all of them holding a Zacks Rank #2.

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