Financial Analysis of Unilever

Created By Pei Yin ,MA Ling Yin

Table of Content
1. Company overview

2. Swot analysis

3. Company strategy

4. Financial Analysis

(a)invest returns

(b) performance indicator

（1） profitability

（2） liquidity

（3） Gearing

1. Company overview
Unilever is one of the world's largest consumer products companies. They produce
and market a wide range of foods, home and personal care products. Their leading
brands include Dove, Lipton, Magnum, Omo and Rama. They are the number one
producer of frozen foods in Europe, They are also a leader in the branded olive oil
category the most important brand being Bertolli. They are the largest seller of
packet tea in the world through our Lipton and Brooke Bond brands.
the company has a primary listing on the London Stock Exchange and is a
constituent of the FTSE 100 Index. Unilever N.V. has a primary listing on
Euronext Amsterdam and is a constituent of the AEX index.
2. SWOT Analysis
Then we start to access company internal environment using SWOT Analysis:
Strength Unilever has some of the strongest brands in the consumer goods
industry. This strength enables the company to penetrate markets and effectively
compete against other firms. The broad product mix shows the extent of
Unilever’s business growth。

Weaknesses-Unilever’s weaknesses is the imitable nature of its products. For

example, even though the company heavily invests in its product development
processes, other firms can imitate Dove and Rexona products. Also, in spite of its
broad product mix, Unilever is weak because of limited diversification in businesses
outside the consumer goods industry.

Opportunities -Unilever has opportunities to diversify by entering businesses

outside the consumer goods industry. Diversification reduces market-based risks
and improves business resilience. On the other hand, product innovation can
increase Unilever’s product attractiveness by addressing the needs of -increasingly
health-conscious consumers.

Threats- Unilever faces tough competition, which is a threat based on the strengths
of other firms in the industry. Competitors threaten to reduce the company’s market
share and corresponding financial performance. Product imitation is also a major
threat against Unilever. Also, retailers impose a threat by selling their own brands.
These brands are known as house brands, store brands or generic brands.

3. Company Strategy

Unilever sustainable living plan strategy

4. Financial analysis

Invest Returns
According to our researching, we Create a below sheet with stock fingers
showing monthly stock price of Unilever in both 2017 and 2018 and we used
below formula to calculator and find out stock return for each period.

Figure 4.1
 Figure 4.2

After calculation using above formula, we find out the invest returns on 2017 is
39% which is quite positive, the return on 2018 becomes -0.86%. which is
negative. However, in the long run, according to below figure 4.3, the stock price
has been increasing since IPO and once it has boosted up to 207.03 % of its IPO,
although the Unilever stock had been facing downhills while the market was in
downturns. but the overall performance is beating the market. the green line
illustrates the stock performance of the S&P500. And the Blue line illustrates the
stock Performance of Unilever which is outperformed S&P 500 in general.

Unilever Stock performance from 1999 to 2019

Figrue 4.3
According our group research and above Figure 4.3 analysis, Unilever pays out more
stable dividend compared with other companies, is provides a constant cash outflow
that can satisfy the liquidity requirement for investor. the company pays dividends
seasonally which is four times a year, which in February, May, August, November.

Performance Indicator
1. Profitability
 In order to analysis Unilever profitably, our group conducted profitability
analysis through four indicators: Operating Margin, Net Profit Margin, Return
on Asset and Return on Equity. then We used formula to calculate related figure
and create table as below.
According to figure 5.1. Operating profit Margin shows the percentage revenue
remaining after paying all operating cost. Unilever has achieved an operating
margin of 24.6% in 2018, operating margin growth 8% compared to 2017 and it
is highest among the three years.

Figure 5.1
Net profit is after taxes income divided into by total revenue for the same period,
it shows you how much of revenue is left after all cost, of any kind are subtracted,
as we can see in figure 5.1, Unilever net profit margin 19.2%. which is 7% growth
from previously year, higher growth compare with 1.6% growth from 2016 to 2018.
ROE and ROA has shown the same trends.
According to our analysis Unilever has shown us its stable stable profitability and
bring prospect.

5. liquidity Ratios
liquidity ratios are used to analysis and determine a company financial ability to meet
short term liability, our group caulated current ratios , quick ratios and cash ratios in order
to measure how quickly Unilever is able to convert its asset into cash.
 Figure 5.2
A high current ratio indicates that the company has good liquidity to meet the
short term liability.as we can see from Figure 5.2, although the current ratios from
2016 to 2018 are lower then 1, however it has shown a steady average growth of
0.05% each year, and quick ratios has presented the same trends, Quick ratios is
known as acid test ratio, which is similar to current ratio, but quick ratios represent
a more stringent test of liquidity. The cash ratios provides a further indication of
the ability of the business to meet its maturing obligation, as we can see from
Figures 5.2, cash ratio went through a slight drop in 2017 ,this indicate the
operating cash flow for the year are not quite sufficient to cover current libility at
end of 2017, however it came up to 0.16 on 2018.

6. Gearing Ratios

Gearing Ratios is company debt to equity. Gearing shows the extent to which firm
operation are funded by lender versus shareholders, it measures a company
financial leverage, higher gearing ratios shows a high proportion of debt to equity
and, and lower gearing would be the opposite,
Our group calculated gearing ratio and created below figures5.3, as we can see
there is substantial increase in the level of gearing over the three years, this is
mainly due to substantial incease in the contribution of long term lender, however
high leverage is not necessarily rad flag, if invested properly, Debt can help a
company expend its operations. which possible increase returns to shareholder.

Figure 5.3