Unilever, the maker of Marmite, Magnums and Ben & Jerry’s ice cream, has announced its third quarter results:
- Underlying sales growth accelerated to 10.6% in the quarter, with prices growing 12.5% and volumes declining by 1.6%.
- Unilever now expects underlying sales growth for the full year 2022 to be above 8%. Operating margins for the year are still guided at 16%.
- The group said the global macroeconomic outlook remains “mixed”, with high inflation expected to persist in 2023.
Charlie Huggins, Head of Equities at Wealth Club, commented:
“A solid third quarter comes too little, too late for Unilever’s CEO, Alan Jope. The recent news that he is being relieved of his duties comes on the back of several years of disappointing performance.
The next leader of Unilever faces a monumental task. Unilever’s basic problem is that it’s too big, with over 400 brands sold into more than 190 countries. This makes Unilever much less agile and entrepreneurial than smaller competitors.
One solution is brand disposals. Unilever has, until now, been rather reluctant to meaningfully slim down its portfolio. Don’t be surprised to see Unilever’s next leader take a more heavy-handed approach to culling weaker brands.
Then there is the issue of Unilever’s culture. Too often, Unilever seems to be one step behind. It needed a bid approach from Kraft-Heinz before it cut costs and boosted margins. Then there was the ill-considered attempt to acquire GlaxoSmithKline’s consumer business. A cultural transformation – to quicken decision making and reduce inefficiency – is arguably critical. A new CEO could be just the ticket.
Underneath it all, Unilever remains a good business. It owns some strong brands which tend to hold up well in tough times, generating healthy margins. And it has excellent positions in emerging markets.
But Unilever needs cultural change, and probably more disposals, for that value to be unlocked. Shareholders will be hoping the new CEO can be the catalyst to make that happen.”
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