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Interim Results

Unilever reports strong progress as sales rise

20 July 2017 07:24

Unilever reported strong progress against the strategic objectives set out for 2020.

Underlying sales grew 3%, ahead of our markets, with growth in all our categories and sub-categories except for spreads.

Turnover increased 5.5% to €27.7 billion, which included a positive currency impact of 1.7% and 0.8% from acquisitions net of disposals.

Gross margin improved by 40bps to 43.1% driven by margin-accretive innovations and acquisitions as well as our discipline in driving savings programmes.

Brand and marketing investment contributed 130bps to margin progression.

This reflects:

1) a recalibration of advertising spend in the overall market;

2) strong savings delivery from our zero based budgeting programme; and

3) innovation and support plans which are weighted towards the second half of the year, particularly in Personal Care.

For the year as a whole, we expect our brand and marketing investment to be maintained at last year's level in absolute terms.

Overheads were reduced by 10bps, driven by a further reduction in the underlying cost base partially offset by investment in new business models including retail-led brands and e-commerce.

Underlying operating margin improved by 180bps to 17.8%. Operating margin was 17.5%.

Chief Executive Officer Paul Polman said: "Our first half results show continued growth well ahead of our markets and a substantial step-up in profitability despite the persisting volatile global trading environment.

"It once more shows the validity of Unilever's long-term compounding growth model.

"Our change programme 'Connected 4 Growth' ('C4G'), which started in the autumn of 2016, is delivering ahead of plan.

"The transformation of Unilever into a more resilient, more competitive and more profitable business is accelerating.

"C4G is making our business even more agile, less complex and increasingly responsive to fast-changing consumer trends.

"The resulting increase in innovation speed and effectiveness will allow us to grow ahead of market.

"We see this as a proven way of delivering long-term shareholder value.

"C4G also enables a further step-change in margin expansion and cash flow delivery as we secure efficiencies from the roll-out of our savings programmes and benefit from the investments we have made over the last few years.

"The actions we are taking keep us on track for another year of underlying sales growth ahead of our markets, in the 3 - 5% range.

"We anticipate accelerating growth in the second half of the year driven by the phasing of our innovation plans and a step-up in brand and marketing investment.

"We now expect an improvement in underlying operating margin this year of at least 100 basis points and strong cash flow."

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