unilever f n lash ote u 14th 2020

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FLASH NOTE – UNILEVER SEPTEMBER 14TH, 2020

Analyst: João Calado, CFA

With the contribution of: Francisco Fonseca

Research:

[email protected]

Source: Big Research;

Source: BiG Research;



Notes: All quotes were updated in Bloomberg at 11h45 of September 14th, 2020.

Relevant Information: Use the following link to view our most recent publications: https://www.big.pt/InformacaoMercados/TradingIdeas/Index/-1 Use the following link to see our recommendation history: https://www.big.pt/pdf/Newsletters/nld.pdf

Unilever (Ticker: UNA)

Description Unilever is one of the world’s largest and oldest consumer goods businesses, and around 2.5 bn people use the company’s products every day. Unilever has a growing portfolio of brands, in which 12 of them have an annual turnover of more than EUR 1 billion and 84% are either top 1 or 2 market positions. The group divides its operations in three segments: Beauty & Personal Care (42% of sales), Foods & Refreshment (37%) and Home Care (21%). Their largest markets are America (with 32% of sales) and Europe (22%), followed by Asia, Africa and Middle East. Nowadays, Unilever employs more than 150 thousand people and manages over 300 factories.

Investment Case Leading Position: Unilever is one of the leading groups in every segment, and 84% of its brands are either top 1 or 2 markets positions. Focus on healthier options: Consumer’s desire for plant-based and healthier products is growing rapidly. Unilever has already a broad range of brands exposed to this category, and the last acquisitions were also in line with that trend.

Dependency on emerging market’s growth: Over the past years, both Europe and North America have experience low comparable growth, leaving emerging markets with the most attractive growth opportunities. Nevertheless, the latter’s comparable growth has also decelerated in 2019, and covid-19 pandemic can extend that negative trend for a longer than expected. Free Cash Flow Generation: Unilever has consistent and predictable cash flows with an operating cash flow yield higher than 6%. Also, capex accounts for less than 20% of the total operational cash flow, leaving Unilever with a robust margin to pursue fast-growing opportunities (acquisitions), reduce debt or recompensate shareholders.

Ticker Site BiG UNA

Ticker BiGlobal Trade UNA

Ticker BT24 UNA

Ticker BiG Power Trade UNA

P/E Ratio 2020E 21.02

P/BV Ratio 8.65

EV/EBITDA 13.84

Unilever

Price 51.62

52 week high 55.70

52 week low 38.42

YTD 0.8%

Average daily volume (un) 4,826,040

Market Capitalization (mn) 136,583

Beta 0.68

Dividend 1.64

EPS 2.15

Price and Performance (Values in USD)

Buy 13

Hold 11

Sell 4

Analysts Consensus (last 3 months)

Sales (USD mn) 51,980

EBITDA (USD mn) 10,690

Number of Employees 153,000

ROA 8.8%

ROE 41.6%

D/E 2.02

Dividend Yield 3.18%

Financial Data

Source: Company’s data

Asia and Africa46%

North America18%

Latin America14%

Europe22%

Revenue Distribution (2019)

Beauty & Personal Care

42%

Home Care21%

Foods & Refreshment

37%

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Research:

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Stable Financial Position: Unilever doesn’t have the most robust balance sheet - Net Debt/EBITDA of 2x -, nevertheless is far from being distress. There is still space, if needed, to leverage the current financial position to complete an acquisition. Dividend Distribution: Unilever is a dividend Aristocrat and has increased dividends by an average of 8% yoy over the last 38 years, with no reductions. The current dividend yield is 3.2%.

E-commerce opportunity: In 2019, Unilever's e-commerce sales grew 30% yoy, accounting for 6% of total turnover. During the first semester of 2020, online sales grew close to 50%, accounting for 8% of total sales. Unilever wants to invest and increase its presence within the online retail. For that, the group aims to build a balanced e-commerce model that includes e-commerce retailers, bricks and mortar online sales, and direct-to consumer businesses.





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Research:

[email protected]



Income Statement - Sales: Beauty & Personal Care is the largest segment accounting for 42% of sales,

followed by Foods & Refreshment and Home Care with 37% and 21%, respectively.

- CoGS (56% of revenues): o Distribution and Production accounts - 13% of revenues o Raw and packaging materials and goods purchased for resale – 40% of

revenues. - Selling and administrative expenses (25% of revenues):

o Brand and marketing investment – 14% of revenues o Overheads – 11% of revenues. R&D is included here and accounts for less

than 2% of revenues. - Other operating expenses:

o 2019: includes a restructuring cost of EUR 1.1 bn attributed to supply chain optimization projects and organizational change programs across markets all of which have been further accelerated during 2019.

o 2018: includes a gain of EUR 4.3 bn on disposal of spreads business to KKR. - Effective Tax: around 27%

Free Cash Flow - Unilever has a robust operational cash flow generation, and in 2019 achieved up to

EUR 8 bn - Op. CF Yield above 6%. The group invests around EUR 1.5 bn in capex, which less than 3% of sales.

- The dividends declared in relation to 2019 were EUR 1.64 (2018: EUR 1.55) per NV ordinary share and GBP 1.43 (2018: GBP 1.35) per PLC ordinary share, which corresponds to a dividend yield of ~3.2%. The dividend distribution was not affected by covid-19 pandemic.

IS (USD mn) 2017 2018 2019

Revenues 53,715 50,982 51,980

COGS 30,484 28,703 29,102

Selling expense 13,731 12,816 12,931

Other (gain) 543 -3,176 1,239

Operating Income 8,957 12,639 8,708

Interest and other income 1,004 608 627

EBT 7,953 12,031 8,081

Others (gain) -173 -361 -211

Taxes 1,670 2,572 2,263

Non controlling 433 419 401

Net Income (Shareholders) 6,023 9,401 5,628

Earnings Per Share 2.14 3.48 2.14

FCF (USD mn) 2017 2018 2019

Operational Cash Flow 7,796 7,318 8,056

Net Income 6,456 9,788 6,026

D&A 2,025 2,216 1,982

Elimination of (profits)/losses on

disposals

-298 -4,313 60

Changes in WC -9 -793 -68

Others -378 420 56

Investment Cash Flow -5,879 4,644 -2,237

Capex -1,621 -1,424 -1,429

Acquisitions/disposals -4,335 5,757 -945

Outros 77 311 137

Financial Cash Flow -2,020 -12,113 -4,667

Debt change 6,247 4,001 999

Dividends -3,916 -4,066 -4,209

Share Repurchase -5,014 -6,020 -

Change in short-term borrowings 2,695 -4,026 337

Others -2,032 -2,002 -1,794

Forex -9 72 -179

Change in fcf -112 -79 973

Cash at the end of period 3,169 3,090 4,063

1.82 1.88 2.14

3.48

2.14

1.25

2015 2016 2017 2018 2019 H1 20

Earnings Per Share (EUR)



+10% yoy Source: Company’s data

0%

5%

10%

15%

20%

25%

47000

49000

51000

53000

55000

2015 2016 2017 2018 2019

Revenue (USD mn)

Operating Margin Organic Growth

5.0%

8.0%

11.0%

14.0%

17.0%

20.0%

-4,000

-2,000

0

2,000

4,000

6,000

8,000

10,000

2017 2018 2019

Operational CF (EUR mn)

Capex ROIC

2015 2016 2017 2018 2019

Beauty & Personal Care 20074 20172 20697 20624 21868 2.6% 20.7%

Home Care 10159 10009 10574 10131 10825 6.1% 12.7%

Foods & Refreshment 23039 22532 22444 20227 19287 1.5% 14.6%

Total 53272 52713 53715 50982 51980 2.8% 16.4%

SegmentsRevenue

Growth (LfL)

Operating

Margin

Revenue (USD mn)





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Research:

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Revenue Growth

Balance Sheet - Unilever has around EUR 6 bn available in cash and total debt of EUR 28.8 bn, thus

the company’s net debt is EUR 22.8 bn. - The group’s leverage ratio (Net debt/EBITDA) is close to 2x, signaling a robust balance

sheet. - Goodwill and intangible assets (brands) represent almost half the company’s book

value mainly as a result of several acquisitions over the years and the increase in the portfolio of brands.

- Regarding access to funding, as of June 30, Unilever had EUR 1.3 bn available in commercial paper and EUR 7 bn in accessible undraw standby facilities.

Last results (1st Semester 2020) Revenues: Comparable sales declined 0.1% yoy, in which developed markets grew 2.4% yoy whilst emerging markets declined 1.9% yoy. - The impact of Covid-19 varied widely across channels and categories. Channel

closures as a result of lockdowns in markets negatively impacted the food service (hotels, restaurants, etc.), out of home ice cream and Prestige businesses. Food service declined by nearly 40% yoy and out of home ice cream declined by nearly 30% yoy. Shoppers moved from offline to online channels, driving e-commerce growth of 49% yoy.

- As people spent more time at home, Unilever saw growth in home consumption of foods, ice cream and tea. It also meant that consumers had fewer personal care occasions from going to work or socializing, and thus there was a decline in the personal care business, except for hygiene products.

- The effectiveness of good hygiene practices against the spread of Covid-19 increased demand for the hand and home hygiene products, which each grew double digits.

- Greater tendency for stockpiling in US positively affected The Americas market. - E-commerce represented over 8% of the business in the first half (vs 6% in 2019),

growing by 49% yoy (62% yoy in Q2).

EPS: +9.2% yoy to EUR 1.25 Free Cash Flow: EUR 2.9 bn (vs EUR 1.5 bn H1 2019). The improvement was primarily led by favorable WC movement as Unilever enhanced the focus on receivables management, as well as reduced capex following a review of all spend in light of the Covid-19 crisis.

Balance Sheet (mn) 2019 2Q20

Assets 64,806 70,378

Cash & Equivalents 5,092 5,955

Receivables 6,695 6,955

Inventories 4,164 4,646

PP&E 12,062 11,374

Goodwill 18,067 19,675

Intagible 12,962 16,049

Other Assets 5,764 5,724

Liabilities 50,920 52,154

Debt 28,257 28,805

Accounts payable 14,762 14,602

Deferred taxes 2,573 3,276

Other liabilities 5,328 5,471

Total Shareowner's Equity 13,886 18,224

Total Equity and Liabilities 64,806 70,378

Source: Company’s data Acronyms: USG: Underlying Sales Growth, UVG: Underlying Volume

Growth; UPG: Underlying Price Growth






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Research:

[email protected]

Debt - The company’s bonds maturity is the following (well distributed):

-

- As of June 30 (end H1), total cash & undrawn facilities were EUR 11.9 bn, which

represents 2.7x coverage of debt maturing in 1 year.

Earnings call (H1 2020, 30 July)

“And to avoid any doubt, I'm repeating in that our margin target outlook is withdrawn both for this year and beyond. Our focus for the year will continue to be volume-led competitive growth, absolute underlying operating profit and cash delivery. Margin is simply a byproduct of this.”

“we know from experience of many crises over the years that protecting volumes during a recession is the key to long-term competitive growth. In fact, brands which grow volume during recessions tend to grow value share over the subsequent five years, 1.4 times faster than those that don't. And we've seen strong recent increases in our household penetration for our brands. We're now just over 50% of our business winning volume market share.”

“So, we're investing more of our marketing spend on communication”

“As part of shaping our portfolio, it was actually in the second quarter that we completed the acquisition of GSK's health food drinks portfolio in India, Bangladesh, and 20 other predominantly Asian markets. We've acquired those iconic brands, Horlicks and Boost, and is very much in line with our strategy of announcing our presence in healthy nutrition”

“Currencies and commodities have been very volatile in the first half and we've seen an acceleration of currency depreciation through the second quarter.”

“at the end of December was that somewhere around 40% of our business was coming from businesses where we were growing penetration. That is now solidly above 50%. “






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Research:

[email protected]

Management

Alan Jope (CEO): - Alan Jope has extensive experience across many of Unilever’s markets globally. Alan

was born in Scotland and joined Unilever in London in 1985, subsequently living and working in North America for 14 years and in Asia for 13 years. Before being named CEO in 2019, he was serving as President of Beauty & Personal Care (BPC), Unilever’s largest Division with an annual turnover of EUR 21bn in 2017.

- From 2009, Alan led Unilever's business in China and North Asia, doubling its size. He was appointed to Unilever’s Leadership Executive in 2011. His previous senior roles have also included President, Russia, Africa & Middle East, global category leader for several of Unilever's Foods businesses, and President of Unilever's Home & Personal Care business in North America. Earlier, Alan worked in a number of sales and marketing roles in the UK, Thailand, and the US.

- Alan holds a Bachelor of Commerce from Edinburgh University, Scotland. He also graduated from Harvard Business School's General Management Program in 2001.

- Remuneration: EUR 4.9 mn o Fixed: EUR 1.5 mn o Variable: EUR 3.4 mn

▪ Bonus: EUR 1.8 mn ▪ Shares: EUR 1.6 mn

Graeme Pitkethly (CFO):

- In 2015, Pitkethly was Appointed Unilever’s Chief Financial Officer and member of the Unilever Leadership Executive.

- Graeme joined Unilever in 2002 and was previously Executive VP and General Manager of the Unilever UK and Ireland business. Prior to this he held a number of senior financial and commercial roles within Unilever, including Senior VP of Finance for Global Markets, Global Head of M&A, Head of Treasury, Pensions and Tax and CFO of Unilever Indonesia.

- Graeme brings considerable internal and external experience to the role having spent the earlier part of his career in senior corporate finance roles in the telecommunications industry and at PwC.

- Graeme is a Chartered Accountant and holds a bachelor’s degree in Applied Chemistry from Strathclyde University.

- In a personal capacity, Graeme is Vice-Chair of the Financial Stability Board Task Force on Climate-related Financial Disclosures (“TCFD”).

- Remuneration: EUR 4.3 mn o Fixed: EUR 1.1 mn o Variable: EUR 3.2 mn

▪ Bonus: EUR 1.1 mn ▪ Shares: EUR 2.1 mn

Graeme Pitkethly (CFO)

Alan Jope (CEO)





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Research:

[email protected]

Main segments & brands

Beauty & Personal Care (42% of revenues): Main Categories

• skin cleansing (soap, shower)

• skin care (face, hand and body moisturizers)

• hair care (shampoo, conditioner, styling)

• deodorants categories

Main Brands: Axe, Clear, Dove, Lifebuoy, Lux, Pond's, Rexona, Signal, Suave, Sunsilk, TRESemmé, Vaseline 2019 Performance:

• Deodorants delivered strong, broad-based growth, supported by double digit growth from Dove.

• Growth in skin cleansing was muted by price reductions as a result of lower commodity prices.

• Growth was weak in hair care with high competitive intensity in the US and continued pressure from local players in China. Japan and Europe also underperformed.

• In skin care, Pond’s and Vaseline continued to perform well, with on-trend innovations such as Pond’s Glow Up cream.

• Oral care grew slightly and natural variants such as charcoal, aloe and clove drove growth in Smile.

• Prestige brands continued to deliver double digit growth, with strong performances from brands such as Dermalogica, Hourglass and Living Proof.

0%

5%

10%

15%

20%

25%

17000

19000

21000

23000

2015 2016 2017 2018 2019

Beauty & Personal Care

Revenue Operating Margin Organic Growth


0%

5%

10%

15%

20%

25%

2015 2016 2017 2018 2019

Adjusted Operating Margin

Beauty & Personal Care Home Care Foods & Refreshment

0%

1%

2%

3%

4%

5%

6%

7%

2015 2016 2017 2018 2019

Organic Growth %

Beauty & Personal Care Home Care Foods & Refreshment

Source: Company’s data Source: Company’s data





8




Research:

[email protected]

Foods & Refreshment (37% of revenues):

• ice cream

• savoury (soups, bouillons, seasoning)

• dressings (mayonnaise, ketchup)

• tea categories

Main Brands: Ben & Jerry’s, Breyers, Brooke Bond, Heart (Wall’s), Hellmann’s, Knorr, Lipton, Magnum, Pukka, Sir Kensington’s, Unilever Food Solutions 2019 Performance:

• Ice cream grew, however volumes declined due to a strong comparator from a particularly good European summer in the prior year.

• Tea also had price-led growth with declining volume due to subdued consumer demand for black tea in developed markets. Premium black tea, black tea in emerging markets and fruit and herbal variants performed well.

• Savoury declined in Europe, most notably in Germany as a result of the loss of a key customer for a period of time, sales to this customer have now resumed The newly-acquired brand The Vegetarian Butcher entered a partnership with Burger King to offer the Rebel Whopper across 25 countries in Europe.

Focus on:

• increasing plant-based products

• reducing the salt, sugar and calories in their products, and adding even more fortified ingredients

• making brands more widely available

0%

10%

20%

30%

40%

16000

18000

20000

22000

24000

2015 2016 2017 2018 2019

Foods & Refreshment







9




Research:

[email protected]

Home Care:

• fabric category (washing powders and liquids, rinse conditioners)

• cleaning products

Main Brands: Cif, Dirt is Good (Omo, Persil), Domestos, Seventh Generation, Sunlight Home Care has been the company’s fastest growing segment with comparable sales growth consistently higher than 5%. Also, the profitability improved considerably over the past years. Performance 2019:

• Home and hygiene performed well, benefitting from products such as Cif surface sprays with natural cleaning ingredients.

• Hand dish wash saw continued growth momentum, with good performance from Sunlight with recycled packaging.

• Fabric performance was supported by ongoing market development driven growth in India, where we also launched premium detergent brand Love & Care. In China we successfully launched Love Home & Planet. Home Care turnover in Africa was lower than expected and declined driven by a reduction in both volume and price.

0%

5%

10%

15%

8500

9500

10500

11500

2015 2016 2017 2018 2019

Home Care







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Research:

[email protected]

Main Markets Europe: over the past years, comparable growth has been close to 0%, nevertheless the operating margin slightly improved. The European market has been characterized by deflationary conditions. The portfolio of brands hasn’t changed considerably. Asia & Africa: in this segment rely the company’s largest growth opportunities, and comparable growth has been consistently higher than 5%. In addition, the operating margin has also been constantly improving.

2015 2016 2017 2018 2019

Asia & Africa 22425 22445 23266 22868 24129 5.0% 18.3%

Europe 13553 13163 12924 12094 11369 -0.6% 14.1%

The Americas 17294 17105 17525 16020 16482 2.4% 16.3%

Total 21944 21944 24677 24651 25287 2.9% 16.8%

SegmentsRevenue Growth

(LfL)

Operating

Margin

Revenue (USD mn)

0%

5%

10%

15%

20%

25%

10,000

12,500

15,000

17,500

20,000

22,500

25,000

2015 2016 2017 2018 2019

Asia and Africa

Revenue (EUR mn) Organic Growth Adjusted Operating Margin

-5%

0%

5%

10%

15%

20%

25%

10,000

11,000

12,000

13,000

14,000

15,000

2015 2016 2017 2018 2019

Europe




Source: Company’s

10%

12%

14%

16%

18%

20%

22%

2015 2016 2017 2018 2019

Adjusted Operating Margin

Asia and Africa The Americas Europe

-4%

-2%

0%

2%

4%

6%

8%

10%

2015 2016 2017 2018 2019

Organic Growth

Asia and Africa The Americas Europe

-8%

-6%

-4%

-2%

0%

2%

2015 2016 2017 2018 2019

Acquisition/Divestiture Growth

Disposals Acquisitions Total

-2%

-1%

0%

1%

2%

2015 2016 2017 2018 2019



Source: Company’s






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Research:

[email protected]

The Americas: In this segment there are two main regions that have been reporting different growth rates. On one hand, as in Europe, North American comparable growth has been close to 0%, and margins have not improved significantly. On the other hand, Latin America has been growing constantly (5% yoy in 2019) and improving its operating margins gradually.

Acquisitions and Disposals In order to deliver long-term superior value, accelerating growth is a top priority. One of the main strategies Unilever has been following is making acquisitions in fast-growing segments like plant-based foods and prestige beauty. Over the past five years, the group acquired over 30 businesses, including nine in 2019. Many recent acquisitions are growing in double digits, including Prestige portfolio, Seventh Generation and Sir Kensington's. However, some, such as Blueair, haven’t performed as expected in recent years. Main Disposals:

• Spreads business (2018): Unilever’s Spreads business included brands such as Becel, Flora, Country Crock, Blue Band, etc. Operated across 66 countries around the world and in 2016 the business had revenues of EUR 3 bn, EBITDA of EUR 0.68 bn, and assets of EUR 1.1 bn. Unilever sold the business for EUR 6.8 bn on a cash-free, debt-free basis.

Main Acquisitions:

• The Vegetarian Butcher (2019): The acquisition fitted with Unilever’s strategy to expand its portfolio into plant-based foods that are healthier and have a lower environmental impact. With this acquisition, Unilever is responded to the growing trend among consumers to increasingly opt for vegetarian and vegan meals. At the time, the products made by The Vegetarian Butcher were being sold in over 4 thosand outlets in 17 countries and the business had approximately 90 workers.

Source: Company’s

0%

5%

10%

15%

20%

10,000

12,000

14,000

16,000

18,000

2015 2016 2017 2018 2019

The Americas


-5.0%

0.0%

5.0%

10.0%

15.0%

2013 2014 2015 2016 2017 2018 2019

Organic Growth

Latin America North AmericaAcquisitions

2020

Ice cream business - Chile

2019

Lenor Japan - kin care business

Astrix S.A - olivian manufacturer of home and personal care

brands

Fluocaril and Parogencyl - oral care brands from P&G

Graze - UK’s leading healthy snacking brand

Tatcha - apanese inspired skincare brand

OLLY Nutririon - Premium wellbeing business in the

vitamins, minerals, etc

Garancia - French derma-cosmetic brand

2018

The Vegetarian Butcher - UK

Betty Ice - Romanian ice-cream producer

Equilibra (75%) - Italian personal care and wellbeing brand

Quala - beauty & personal care and home care brands

Schmidt's Naturals - beauty & personal care company

Disposals

2020

Liquid I.IV - Health-science nutrition and wellness (US)

2019

Alsa - baking and dessert business

Spreads business

Source: Company’s

-3%

-2%

-1%

0%

1%

2%

3%

2015 2016 2017 2018 2019



Source: Company’s





12




Research:

[email protected]

Tea Business: In January Unilever announced a strategic review of its global tea business, which includes leading brands such as Lipton, Brooke Bond and PG Tips. This review has assessed a full range of options. The group will retain the tea businesses in India and Indonesia and the partnership interests in the ready-to-drink tea joint ventures. The balance of Unilever’s tea brands and geographies and all tea estates have an exciting future, and this potential can best be achieved as a separate entity. A process will now begin to implement the separation, which is expected to conclude by the end of 2021. The tea business that will be separated generated revenues of EUR 2 bn in 2019.

Unification of Unilever’s legal structure Unilever has announced plans to unify its group legal structure under a single parent company, Unilever PLC, creating a simpler company with greater strategic flexibility. There will also be no changes to the manufacture and supply of Unilever products in The Netherlands and the United Kingdom as a result of unification. For example, the headquarters of Unilever’s Foods & Refreshment Division, which was created in 2018, and is around 40% of Unilever by turnover, will continue to be based in Rotterdam. Also, there will be no significant changes to Unilever’s footprint in the United Kingdom as a result of unification, in either jobs or investment. The Home Care and Beauty & Personal Care Divisions will continue to be headquartered in the United Kingdom, as they are currently. Unilever NV shareholders will receive one new Unilever PLC share in exchange for each Unilever NV share held. Unilever PLC will continue to be incorporated in the UK and will remain UK tax resident. This will result in a single parent company, having one class of shares, one market capitalization, and a single global pool of liquidity.

Risks

Plastic packaging: Unilever uses a significant amount of plastic to package its products. A reduction in the amount of virgin plastic, the use of recycled plastic and an increase in the recyclability of the packaging are critical to the company’s future success. Not only is there a risk around finding appropriate replacement materials, due to high demand the cost of recycled plastic or other alternative packaging materials could significantly increase in the foreseeable future and this could impact the business performance. Unilever could also be exposed to higher costs as a result of taxes or fines if they are unable to comply with plastic regulations which would again impact the profitability and reputation.

Fast changes in consumer preferences: Consumers preferences are constantly evolving. Consequently, Unilever must be able to anticipate the trend changes, and adapt its

portfolio of brands accordingly. A failure in this process can jeopardize the strength of the customer relationships and company’s ability to obtain pricing and competitive trade terms. Supply Chain: The group’s business depends on purchasing materials, efficient manufacturing and the timely distribution of products to customers. The supply chain network is exposed to potentially adverse events such as physical disruptions, environmental and industrial accidents, trade restrictions or disruptions at a key supplier, which could impact the ability to deliver orders to customers. The cost of the products can be significantly affected by the cost of the underlying commodities and materials from which they are made. Changes in trade relationships between Europe and the UK as a result of Brexit could give rise to both a supply and cost issue. Treasury and Tax: Unilever is exposed to a variety of external financial risks in relation to Treasury and Tax. The relative values of currencies can fluctuate widely and could have a significant impact on business results. Further, because Unilever consolidates its financial statements in EUR, it is subject to exchange risks associated with the translation of the underlying net assets and earnings of its foreign subsidiaries.





13




Research:

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Relative Valuation Unilever is trading with cheaper multiples, considering both P/E and EV/EBITDA (19.8 vs 24.6 and 13.8 vs 16.8, respectively). Partially, that can be explained with the company’s lower ROA, EBITDA Margin and a CFO/Capex. Nevertheless, Unilever pays a higher dividend yield (3.4% vs 2.6%) and has a higher FCF yield (6.6% vs 4.1%).

Graph

Source: BiG Global Trade

Calendar October 22nd, 2020: 3Q Earnings release


NameMarket Cap

(mn)Currency P/E 2020 EV/EBITDA Div. Yield

1 Yr. Price

∆ROA

NetDebt/

EBITDACFO/Capex

Margin

EBITDAFCF / Price

COCA-COLA CO/THE 218,595 USD 27.9 20.7 3.2% -8.8% 10.0% 3.0 5.1 31.2% 3.2%

NESTLE SA-REG 313,338 CHF 25.7 16.7 2.5% -2.9% 10.7% 1.6 4.3 23.4% 3.7%

COLGATE-PALMOLIVE CO 66,226 USD 26.1 16.2 2.3% 3.2% 18.2% 1.5 9.4 27.0% 5.0%

JOHNSON & JOHNSON 390,935 USD 18.7 13.7 2.6% 15.2% 9.7% 0.4 6.7 33.9% 4.5%

UNILEVER NV 129,400 EUR 19.8 13.8 3.4% -15.5% 8.8% 2.1 5.9 20.9% 6.6%

Average exc. Unilever 24.6 16.8 2.6% 1.7% 12.1% 1.6 6.4 28.9% 4.1%





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Research:

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Appendix Q2 and H1 2020 Comparable Grow by Segments

Source: Company’s data Acronyms: USG: Underlying Sales Growth, UVG: Underlying Volume

Growth; UPG: Underlying Price Growth





15




Research:

[email protected]

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unilever f n lash ote u 14th 2020

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