Unilever: soaring on the back of volumes

Results for Unilever Pakistan, a leading consumer goods company, beat analysts expectations considerably.
Where a slightly conservative year-on-year growth in key indicators was expected due to the dicey economic conditions of the country and anticipated downside to the companys sales because of the floods, the results depict healthy growth in both the top and bottom-line in CY10 over CY09.
The top-line growth was mainly led by a growth in volumes. Increased innovation and greater advertising, with many successful products such as Badami, Cornetto, Double Chocolate and Knorr spurring the growth.
Despite the problem of power outages in the country, the ice cream sector remained the star performer, with a growth of 33 percent, which was mainly volume-based. The home and personal care category also recorded impressive double-digit growth on the back of strong volumes.
However, rising cost of inputs and commodity prices affected the gross margins which declined by 2 percentage points relative to the prior year.
Yet, even though commodity prices have been rising, so have farm incomes. And for a company which has enjoyed considerable growth in the rural sector over the past few years, particularly in the home and personal care business, this spells positive news. Unfortunately, however, the tea business, which represents around 30 percent of the companys sales, was affected by the smuggling practices. The company is pressing the government to reduce the import duty and sales tax on tea, in order to create a level playing field for all players field in the tea industry.
Going forward, the company is likely to pass on the input price pressures onto the consumers, since they were not entirely passed-through in CY10. Further, a growing penetration into the rural economy and the rise in farm income are also likely to spur greater growth for the company in 2011.

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ULEVER P&L                CY10        CY09         chg

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Rs (mn)

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Sales                  44,671      38,188          17%

Cost of Sales          30,094      24,853          21%

Gross Profit           14,577      13,335           9%

Gross Margin               33%         35%          9%

Distribution costs      9,033       7,180          26%

Admin expenses          1,220       1,030          18%

Operating profit        4,970       4,943           1%

Profit after taxation   3,273       3,056           7%

EPS (Rs)                  246         230

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Source: KSE notice