- Amsterdam the primary Ice Cream listing destination
- Organic growth decelerates
- Market growth to remain ‘soft’
Packaged consumer goods powerhouse Unilever (ULVR) delivered encouraging full-year 2024 results with volume growth across every division and margins on the rise.
The cash-generative Hellmann’s mayonnaise-to-Dove soap maker also announced a new €1.5 billion share buyback.
Which begs the question, why were the shares down 7.5% at £44 in mid-morning trade?
Well, sales growth decelerated in the final quarter and the Marmite-to-Magnum supplier warned of a slower start to 2025 amid a tough market for consumer goods companies.
In addition, Amsterdam’s selection as the primary listing destination for Unilever’s soon-to-be demerged Ice Cream business left a sour taste with UK investors.
SCOOP FOR AMSTERDAM
Unilever said the demerger of its Ice Cream business, which includes the Magnum, Ben & Jerry’s and Cornetto brands, is on track to complete by the end of 2025.
But in a blow to the London stock exchange, the business will have a primary listing in Amsterdam, although like it parent, Ice Cream will continue to be listed in London and New York.
Ice Cream’s underlying sales grew 3.7% last year as the division returned to positive volume growth, but Unilever expects rising cocoa prices and dairy costs to put pressure on margins in 2025.
POSITIVES APLENTY
There were encouraging signs within Unilever’s full-year 2024 results, with underlying operating profit up 12.6% to €11.2 billion as CEO Hein Schumacher’s turnaround plan continued to deliver progress.
Underlying sales grew 4.2% with volumes up 2.9%, led by Unilever’s Power Brands, which represent roughly 75% of the company’s turnover, with management highlighting particularly strong performances from the likes of Dove, Comfort, Vaseline.
‘Fewer, bigger innovations helped to deliver volume growth consistently above 2% in each quarter,’ enthused Schumacher.
‘All Business Groups delivered positive volume growth for the year. Growth was underpinned by gross margin expansion of 280 basis points, fuelling increases in brand investment and profitability.’
Schumacher also stressed that Unilever is taking ‘decisive actions’ in Indonesia, where long-standing challenges required a reset of the business, and in China, where ‘we are transforming our go-to-market approach during a market slowdown.’
SLOW START TO 2025
Disappointingly, Unilever’s underlying sales growth decelerated from 4.5% in the third quarter to 4% in the final quarter.
And while Unilever still projects underlying sales growth for full-year 2025 to be within its multi-year range of 3% to 5%, the FTSE 100 giant warned of ‘a slower start to 2025 with subdued market growth in the near term. We expect the market and our growth to improve during the year as price increases, reflecting higher commodity costs in 2025.’
MACRO HEADWINDS
Russ Mould, investment director at AJ Bell, said the gloomy guidance ‘spoilt the party and reminded investors that Unilever is still at the mercy of the global economy and consumers’ ability and willingness to splash the cash.’
He added: ‘There is now clarity on separating the Ice Cream division. Just like a tub of Neapolitan offering three different flavours, the Ice Cream arm will also be listed in three different parts of the world. Picking the same locations as where Unilever’s shares trade makes perfect sense. Investors in London, Amsterdam and New York are already familiar with the brands and products, so there won’t be any of the drama around inheriting shares that trade in other parts of the world as that sometimes happens with demergers.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (James Crux) and the editor (Martin Gamble) own shares in AJ Bell.
