Fast-moving consumer products giant, Unilever N.V. (UN) announced that it will shut down its Atlanta factory where the company manufactures spreads brands like Country Crock, Imperial and I Can't Believe It's Not Butter. Unilever will close this site by the end of Jun, thus eliminating 125 jobs. The move has been made to deal with the spare capacity at its other U.S. plants that make spreads.
Unilever, with dual headquarters in London and Rotterdam, Netherlands, is the world's third-largest maker of consumer products behind Procter & Gamble Co. (PG) and Nestle. It is also one of the world’s leading suppliers of fast moving consumer goods with strong operations in more than 100 countries and sales in 190.
Most recently, Unilever also posted decent fourth quarter and full year 2012 results, with underlying (excluding the impact of currency, acquisitions and disposals) sales growth of 7.8% in the fourth quarter. The increase was driven by volume and pricing gains of 4.8% and 2.9%, respectively. All the categories performed well in the quarter, driven by increased investment in innovation and brand building. This company also performed well in the emerging markets despite global macroeconomic headwinds and unfavorable foreign currency translations.
Overall, we are optimistic about Unilever’s wide portfolio of brands, which helps it to maintain a dominant share in the market. Unilever has been strengthening its portfolio by expanding through a number of acquisitions. Further, Unilever has been divesting its businesses to shed off its non-core operations, thereby optimizing resources and allocating them to more promising markets.
Unilever sold its North America frozen meals business (brands of Bertolli and P.F. Chang) in Aug 2012. More recently in early-Jan 2013, Unilever agreed to sell its Skippy peanut butter business to Minnesota-based meat producer Hormel Foods Corporation (HRL).
However, the company faces high commodity and raw material cost that is impacting its margins since last many quarters. Moreover, we continue to expect an uncertain macro-economic environment, going forward. Though the company forecasts volume gains and strong free cash flow in the near term, commodity cost inflation will continue to be a headwind. Unilever currently holds a Zacks Rank #4 (Sell). However, its peer The J. M. Smucker Company (SJM) carries a Zacks Rank #1 (Strong Buy) and is worth considering.
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