Unilever reported its lowest quarterly sales growth in nearly five years last week, but Shore Capital has increased its earnings per share forecast for the company, albeit very slightly, from €1.58 to €1.59.
“Whilst sales growth remains subdued, and lower than both we and management expected at the start of the year, we have never heard management so definitive about its margin expectations, with CFO Jean-Marc Huet stating on numerous occasions throughout the analyst call that Unilever would deliver core EBIT margin growth in FY2014 on an actual currency basis,” Shirley said in an investors’ note.
The Anglo-Dutch food and consumer goods giant blamed a slowdown in emerging markets and the ongoing weak economic situation in Europe as it posted underlying sales growth of 2.1% in the third quarter – its lowest since Q4 2009.
“Such confidence is driven by an even more rigorous focus on costs,” he said.
Unilever management said it was on the way to delivering half of a promised €500m of savings, including reducing the number SKUs by 25-30%, cutting its marketing costs, and an ongoing restructuring programme.
“We continue see Unilever as a medium-term winner,” the analyst added, although he underlined that Shore Capital’s forecasts were “tweaks…no more than that”.
The firm expects Unilever to consider acquisitions in the short to medium term, after a period of divestment in its North American food sector.
The company recently sold its Ragu and Bertolli sauces to condiment manufacturer Mizkan Group for $2.15bn. Unilever said at the time that it planned to use some of the proceeds to fund bolt-on acquisitions. It also sold SlimFast to Kainos Capital in July, but retained a minority stake in the business.