The aim of this report is to provide a solid decision making tool on whether to invest in Unilever. It provides analysis and evaluation of the evolution of its profitability, liquidity and financial stability, as well as a comparison with its direct competitors Procter and Gamble (P&G) and Henkel. Methods of analysis include a thorough assessment of the financial statementsas well as ratios such as debt, current and quick ratios. Other calculations include rates of return on Shareholders’ Equity and Total Assets and earnings per share to name a few. All calculations can be found in the appendices.
Being the third largest FMCG in the world, Unilever has been maintaining this solid position over the past years and similar to its direct competitors, the company ishighly diversified and profitable. Most of our analysis does confirm this and consequently does not make Unilever stand out against its competitors.
An important indicator that makes Unilever standout from its competitors is its profitability reflected by its ROE and ROA. The ROE being driven by two pillars; both its leverage and high asset turnover, guarantee strong and solid profitabilitycompared with P&G and Henkel who rely only on one single driver like profit margin and asset turnover respectively. On the other hand, another aspect that differentiates Unilever is its high level of leverage compared to its competitors which can sometimes be seen as possessing a higher risk factor.
Regarding its geographical positioning, the main growth driver of Unilever and its future potentialis its continuing presence in emerging markets. These markets provide 53% of Unilever’s total sales in 2010 and its position in these markets is stronger than any of its competitors. Unilever has very solid and promising possibilities of exploiting further the rapidly growing emerging markets.
Considering the aforementioned factors, the fact that Unilever continues to strengthen its portfoliothrough acquisitions like Sara Lee and Alberto Culver in the past year, and the stable performance of the company in a time of uncertain consumer demand, volatile markets, and declining economies we do consider Unilever to be a very solid company with a high future growth potential, a clear strategy, and solid financial position.
Unilever is a company born in 1929 through the fusion ofthe Lever Brothers whit Margarine Unie, the first company operated in the United Kingdom producing soap and the latter operated in the foods industry in the Netherlands. Since then, the company has experienced very strong growth and diversification, with revenues over 44 Billion Euros and operating in over 60 countries in various sectors across the Fast Moving Consumer Goods industry. Unilever ownsmore than 400 brands as a result of acquisitions, however, the company focuses on what are called the "billion-dollar brands", 13 brands, each of which achieve annual sales in excess of €1 billion. Unilever's top 25 brands account for more than 70% of sales. The brands fall almost entirely into two categories: Food and Beverages, and Home and Personal Care.
In the FMCG sector, the innovationcapacity is a distinctive competence for the major players. Unilever has research laboratories in Britain, the Netherlands, the United States, and India that are major sources of innovation for the company. From gum health toothpaste to household cleaners, and from insect pollination of oil palms cloning to pregnancy tests, Unilever researchers are responsible for major innovations. This research basehas not only provided the foundation for the development of new products, but it is also indispensable for the constant upgrading and renewal of brands over the years. Finally, and most important, Unilever has distinctive strengths in management. Unilever invests heavily in its management and recruiting. The strong corporate culture coexists with numerous subcultures helps turn Unilever's...