The unsolicited Kraft Heinz bid sent shockwaves through the Unilever boardroom, but the fmcg giant has impressively steadied the ship with its well-received strategic review and now better than expected first-quarter growth.
Unilever comfortably beat City expectations for its first-quarter organic sales growth, posting a revenue rise of 2.9% against consensus closer to 2%. A 3% jump in prices drove the sales growth, while volumes slipped a better-than-expected 0.1%. Without Unilever’s soon to be disposed of spreads business, organic sales growth would have been 3.4% as sales in that division fell 5.1%.
Perhaps most encouraging were the signs of recovery for Unilever in emerging markets, with sales there rising 6.9% on an organic basis. “Unilever effectively seems to be calling the bottom for emerging markets,” said analysts at Société Générale. “This is significant despite it not yet translating into market growth.”
Barclays welcomed the sales outperformance, noting: “We expect the shares to respond favourably to the improved EM top line dynamic, with the volume trend at the group in particular having stabilised following a weak second half of 2016.” Liberum cautioned that the outlook for developed markets would take longer to improve.
Unilever shares were up 1.2% on Thursday morning to 3,985.5p on the consensus sales beat and are now up by more than 20% since news of Kraft Heinz’s approach leaked in February.
Elsewhere, the weak pound and higher sugar prices have given a considerable boost to sales and profits at Associated British Foods in the first half. Revenues leapt 19% to £7.3bn in the 24 weeks to 4 March of £7.3bn, with a 36% rise in adjusted operating profit to £652m - up £171m on a year ago, including a £51m currency benefit.
Shares were up 1.3% to 2,753p and are now up more than 10% over the past 10 days. Barclays said: “The tide looks to be turning at ABF with the recovery in sugar profits (and the less mentioned ingredients division) well underpinned.”