Unilever (ULVR) has posted underlying annual sales growth of 3.1% despite “challenging” market conditions and “pressure on consumer demand”.
Underlying sales excluding its now sold spreads division grew 3.1% in 2018, with 2.1% from volume growth and 1% from price increases.
On a reported basis sales decreased 5.1% to €51bn which included an adverse currency impact of 6.7% and the disposal of its spreads division which was completed on 2 July 2018.
Underlying operating margin also improved by 90bps to 18.4% in the year, driven by “margin-accretive innovation” and strong results from its cost saving programmes. Brand and marketing investment was 10bps lower, whilst absolute spend in local currencies increased by €60 million, even after productivity gains from zero based budgeting.
Constant underlying earnings per share increased 13% and underlying earnings per share increased 5.2% after an adverse impact of 7.6% from currencies.
New Unilever CEO Alan Jope commented: “2018 was a solid year for Unilever, with good volume growth and high-quality margin progression.
“Looking forward, accelerating growth will be our number one priority. With so many of our brands enjoying leadership positions, we have significant opportunities to develop our markets, as well as to benefit from our deep global reach and purpose-led brands.
“We will capitalise on our strengthened organisation and portfolio, and our digital transformation programme, to bring higher levels of speed and agility. Strong delivery from our savings programmes will improve productivity and fund our growth ambitions.
“In 2019 we expect market conditions to remain challenging. We anticipate underlying sales growth will be in the lower half of our multi-year 3-5% range, with continued improvement in underlying operating margin and another year of strong free cash flow. We remain on track for our 2020 goals.”
On a divisional basis, underlying sales were up 3.1% in beauty & Pprsonal care, with volumes up 2.5%. Its biggest brand Dove delivered another year of broad-based growth, while it saw strong growth from its skin care portfolio.
In food and refreshment foods & refreshment underlying sales excluding spreads grew 2.3% with 1.6% from volume. Ice cream had another strong year helped by innovations on its premium brands.
The division’s emerging markets growth was driven by good performance on core brands like Brooke Bond in India whilst in developed markets challenges in black tea offset good growth from Pukka and its organic Lipton range. In savoury, Knorr was helped by good performance of cooking products in emerging markets while sales were held back by promotional intensity particularly in the US.
In home care underlying sales grew 4.2% with 2.3% from volume, with home and hygiene growing strongly led by Sunlight.
Underlying sales in Europe grew 0.7%, all from volume, while North America grew 0.9% and emerging markets were up grew 6.2% (with 4.3% from volume).
The headline underlying sales exclude Argentine from 1 July onwards due to its hyperinflationary status. The country would have contributed 50bps in pricing, but a 30bps negative impact on volumes due to a volume decline of 10% in the country.
Unilever shares have fallen 2.3% in early trading down to 3,972.5p as fourth quarter organic growth undershot City expectations.
Global drinks giant Diageo (DGE) has grown first half sales by 5.8% to £6.9bn in the six months to 31 December.
Reported net sales grew 5.8%, driven by organic growth which was partially offset by unfavourable exchange and acquisitions and disposals.
Organic volume growth in the period was 3.5% and a 4% improvement in price/mix drove 7.5% organic net sales growth. All regions reported organic net sales growth.
Organic operating profit grew 12.3%, ahead of top line growth, as cost inflation and higher marketing investment were more than offset by improved price/mix and efficiencies from our productivity programme
Reported operating profit was up 11.0% to £2.4bn.
Europe and Turkey delivered 5% net sales growth, reflecting another half year of consistent performance in Europe where net sales were up 5% with double digit growth in Turkey. Europe growth was driven by Great Britain, Ireland and Continental Europe.
In GB net sales grew 14%. Gordon’s and Tanqueray both delivered strong double digit growth, while Diageo gained almost 700bps of share in an expanding gin category and Guinness net sales grew 6% to gain 14bps of market share.
North America delivered net sales growth of 6%, with growth across all markets.
Africa net sales grew 6% with growth in East Africa, Africa Regional Markets and South Africa partially offset by a decline in Nigeria.
CEO Ivan Menezes commented: “Diageo delivered broad-based volume and organic net sales growth across regions and categories. We continue to expand organic operating margins while increasing investment in our brands ahead of organic net sales growth.
“These results are further evidence of the changes we have made in Diageo to put the consumer at the heart of our business, to embed productivity and to act with agility to enable us to win sustainably.
“As we deploy our strategy, we remain focused on building the long-term health of our brands and ensuring we grow our business in a consistent and sustainable way.”
Diageo said this half period benefitted from some one-time and phasing gains in both organic net sales and operating profit, and therefore its still expects to deliver mid-single digit organic net sales growth for the year and to expand operating margins of 175 bps for the three years ending 30 June 2019.
AIM-listed Stock Spirits Group (STCK) has announced it has signed an agreement to acquire Distillerie Franciacorta, an Italian producer of grappa, liqueurs and sparkling wine Franciacorta.
Founded in 1901, Distillerie Franciacorta is owned by the Gozio family and is located in Franciacorta, in the Lombardy region of Italy. Stock Spirits is acquiring the entirety of Distillerie Franciacorta’s spirits and liqueurs business, together with land for the construction of a new production facility. It will also acquire the Franciacorta wine brands, although all aspects of the wine manufacturing will be retained by the seller.
Stefano Gozio, one of the selling shareholders of Distillerie Franciacorta and a member of the founding Gozio family, will continue to act as a brand ambassador and consultant to Distillerie Franciacorta.
The grappa category is Italy’s fourth largest spirits category, and the acquisition will mean that Stock Spirits will be the number one branded grappa business by value in the Italian off-trade.
The purchase price is up to €23.5m for the business with a further €3m for the land, payable in cash in three tranches: an initial payment of €3m upon signing, a further €21.5m payable at completion and up to €2m over a four-year period.
Completion of the acquisition is conditional upon consultation with trade unions as well as certain restructuring steps, and is expected to occur in the second quarter of the year.
Sales in the year ended 31 December 2018 for the business to be acquired were €9.7m, with a pro-forma operating profit of €2m.
Mirek Stachowicz, chief executive of Stock Spirits, commented: “”We are delighted to be acquiring Distillerie Franciacorta, which is a business with a fantastic heritage and outstanding brands. This is a truly compelling opportunity that we have been looking at for more than a year now, and we see clear and attractive synergies with our existing Italian operations.
“Distillerie Franciacorta’s deep expertise in local, premium products resonates strongly with Stock Spirits’ wider strategy of investing in well-loved national brands with genuine and high quality provenance.
“This is our first step in pursuing in-market consolidation opportunities in Italy, and Distillerie Franciacorta will strengthen our position in what is a fragmented but highly attractive market for us. It should also be seen as a clear reflection of our willingness to undertake value-creating M&A as part of our four pillar growth strategy.”
Britvic (BVIC) has announced that trading in the first quarter was in line with expectations, with reported revenue up by 4.5% to £352.4m and organic constant currency revenue, excluding the soft drink levies, up by 1.5% to £337.3m.
CEO Simon Litherland commented: “We have delivered a solid start to the new financial year, with performance in line with our expectations. Given the resilience of our business, the strength of our portfolio and exciting marketing and innovation plans, we are confident of making further progress in 2019.”
Dairy Crest (DCG) has posted a trading update for the nine months to 31 December.
It said its key brands of Cathedral City, Clover, Country Life and Frylight all delivered strong volume and revenue growth for the third quarter. On a combined basis, the four brands generated revenue growth of around 10% for the third quarter and 6% for the nine months ended 31 December 2018.
City had a particularly good third quarter, with both volume and revenue growing by around 10%, helped by new product launches, including flavoured snack bars, Lactose Free and a refreshed kids’ snacking range.
Dairy Crest’s spreads brands continue to gain market share, while Frylight returned to double digit volume and revenue growth in the third quarter.
Dairy Crest added that it is taking steps to reduce its exposure to a potentially disorderly Brexit, including accelerating the purchase of ingredients and packaging materials.
CEO Mark Allen commented: “Our key brands have delivered exceptional performance in the third quarter with all four generating both volume and revenue growth. Demand for our functional ingredients is also increasing, with positive implications for price.
“We have launched several major innovations during the past nine months. It is gratifying to have received external validation of one our most technologically advanced achievements, Clover Light with No Artificial Ingredients, by winning ‘Product of the Year 2019’. This is the third consecutive year that one of our products has been awarded this accolade.”
Greencore (GNC) has announced a full take-up of its tender offer to buy back £509m of stock from shareholders.
The maximum number of shares of 261,025,641 - approximately 36.92% of the issued ordinary share capital – will be acquired for £509m.
The tender offer was oversubscribed, with a total of 296,192,127 ordinary shares tendered by shareholders.
On the markets this morning, the FTSE 100 continues to head back towards 7,000pts, rising a further 0.7% this morning to 6,989.9pts.
Diageo shares are up 3.8% on this morning’s update. Dairy Crest is up 1.3% to 482p, Stock Spirits is up 1.6% to 224.5p and Britvic is up 0.2% to 879p.
Fallers so far today include Greencore, down 1.9% to 201.1p, Majestic Wine (WINE), down 1.6% to 270p, C&C Group (CCR), down 1.4% to €3.22.
Yesterday in the City
The FTSE 100 took advantage of the weakening pound as Brexit uncertainty was ratcheted up on Tuesday evening, with the index ending the day up 1.6% to 6,941.6pts.
Global international consumer groups particularly benefited from the pound’s weakness, with British American Tobacco (BATS) up 4.9% to 2,632p, Imperial Brands (IMB) up 3.2% to 2,489p, Compass Group (CPG), up 2% to 1,641p and Diageo (DGE), up 1.7% to 2,772p ahead of this morning’s half year results.
Also on the up were DS Smith (SMDS), up 4.1% to 348.1p, Greencore (GNC), up 2.8% to 205p, Hilton Food Group (HFG), up 2.^5 to 954p, Dairy Crest (DCG), up 2.4% to 476p and Finsbury Food Group (FIF), up 2.3% to 88.5p.