Unilever PLC (LON:ULVR) has announced its 2023 Full Year Results.
Implementing Growth Action Plan at pace
| Underlying performance | GAAP measures | |||||||
| (unaudited) | 2023 | vs 2022 | 2023 | vs 2022 | ||||
| Full Year | ||||||||
| Underlying sales growth (USG) | 7.0% | Turnover | €59.6bn | (0.8)% | ||||
| Beauty & Wellbeing | 8.3% | Beauty & Wellbeing | €12.5bn | 1.8% | ||||
| Personal Care | 8.9% | Personal Care | €13.8bn | 1.4% | ||||
| Home Care | 5.9% | Home Care | €12.2bn | (1.8)% | ||||
| Nutrition | 7.7% | Nutrition | €13.2bn | (5.0)% | ||||
| Ice Cream | 2.3% | Ice Cream | €7.9bn | 0.5% | ||||
| Underlying operating profit | €9.9bn | 2.6% | Operating profit | €9.8bn | (9.3)% | |||
| Underlying operating margin | 16.7% | 60bps | Operating margin | 16.4% | (150)bps | |||
| Underlying earnings per share | €2.60 | 1.4% | Diluted earnings per share | €2.56 | (14.2)% | |||
| Free cash flow | €7.1bn | €1.9bn | Net profit | €7.1bn | (13.7)% | |||
| Fourth Quarter | ||||||||
| USG | 4.7% | Turnover | €14.2bn | (3.0)% | ||||
| Quarterly dividend payable in March 2024 | €0.4268 | per share (a) | ||||||
(a) See note 11 for more information on dividends
Financial and operational highlights
• Underlying sales growth of 7.0% with positive volumes, up 0.2% for the FY and 1.8% in Q4
• Turnover of €59.6 billion with (5.7)% impact from currency and (1.7)% from net disposals
• Underlying operating margin up 60bps to 16.7%, with gross margin up 200bps for the year and up 330bps in the second half
• Underlying EPS increased 1.4% with (9.6)% of adverse currency, up 11% on a constant basis
• Diluted EPS down (14.2)% against prior year that included €2.3 billion profit on disposal for the Tea business
• Strong cash conversion of 111% with free cash flow up €1.9 billion to €7.1 billion
• New €1.5 billion share buyback to commence in Q2
• Progress against Growth Action plan, including:
• New leadership team has embedded the plan across the organisation
• 30 Power Brands (~75% of turnover) accretive to growth and margin, with underlying sales up 8.6%
• Brand and marketing investment up 130bps to 14.3%, focused on 30 Power Brands
• Active portfolio optimisation into premium segments, announced acquisitions of K18 and Yasso and disposals of Elida Beauty, Dollar Shave Club, Suave in North America
Chief Executive Officer statement
“Today’s results show an improving financial performance, with the return to volume growth and margins rebuilding. However, our competitiveness remains disappointing and overall performance needs to improve. We are working to address this by improving our execution to unlock Unilever’s full potential.
In October, we set out a Growth Action Plan focused on three priorities: delivering higher-quality growth, stepping up productivity and simplicity, and adopting a strong performance focus.
The new leadership team has embedded the action plan at pace. We have increased investment behind our 30 Power Brands, accelerated portfolio transformation, and are driving a sharper performance focus with clear and stretching targets across the whole organisation.
We are at the early stages of this work and there is much to do but we are moving with speed and urgency to transform Unilever into a consistently higher performing business.”
Hein Schumacher
Outlook
We expect underlying sales growth (USG) for 2024 to be within our multi-year range of 3% to 5%, with more balance between volume and price.
We anticipate a modest improvement in underlying operating margin for the full year. We will deliver this through gross margin expansion, driven by a step-up in productivity and net material inflation back to more normal levels.
Growth Action Plan Update
In October 2023, we set out a Growth Action Plan to drive improved performance and competitiveness. During the fourth quarter, we moved at pace to embed it across the business.
The plan is divided into three elements but is underpinned by one simple premise: the need to do fewer things, better, with greater impact. The operational impacts will build throughout 2024.
Faster growth
1. Focus on 30 Power Brands: These gross margin accretive brands represented around 75% of Group turnover with underlying sales growth of 8.6% in 2023 and 6.5% in the fourth quarter. This is where we have concentrated our incremental brand and marketing investment, which will continue in 2024.
2. Drive unmissable brand superiority: We developed a new quantitative methodology to measure brands’ consumer appeal across multiple dimensions and have validated it in 29 strategic cells. During the first half of 2024, this will be rolled out across all 30 Power Brands in key geographies to identify performance gaps and improve competitiveness.
3. Scale multi-year innovation: We have identified multi-year, scalable innovation programmes to drive market development and premiumisation. The programmes at least double the average 2022 project size, with launches from 2025.
4. Increase brand investment and returns: In 2023, we reinvested more than half of our gross margin expansion into incremental brand and marketing investment, up 130bps to 14.3%. We will continue to step up investment in areas that drive impact and support improved competitiveness.
5. Selectively optimise the portfolio: We continue to reshape the portfolio, with the announced acquisitions of Yasso and K18 and the disposals of Elida Beauty, Dollar Shave Club and Suave.
Productivity & simplicity
6. Build back gross margin: We accelerated recovery in the second half of 2023 with a 330bps gross margin improvement, driving a 200bps improvement for the year to 42.2%. In 2024, a tight grip on costs, measured by improved net productivity, will fuel further gross margin expansion.
7. Focus our sustainability commitments: We are honing our sustainability efforts around four critical platforms: Climate, Plastic, Nature and Livelihoods. We have set exacting, short-term targets, to drive progress against our longer-term commitments.
8. Drive benefits of the organisation: The category-focused Business Groups are now fully implemented with end-to-end responsibility for strategy and performance. In 2024, this will enable sharper choices to accelerate growth and digitalisation.
Performance culture
9. Renewed team: Since October, over half of our executive leadership team has changed. Our new leaders are addressing the 2024 opportunities and challenges with urgency and decisiveness.
We are announcing today that our Chief People & Transformation Officer Nitin Paranjpe has decided to retire from Unilever later this year. Nitin has had a distinguished 37-year career with Unilever, including as CEO of Hindustan Unilever, President Home Care, President Foods & Refreshment and Chief Operating Officer of Unilever. We are pleased to announce the appointment of Mairéad Nayager as our new Chief People Officer, effective 1 June. Mairéad is currently Chief Human Resources Officer (CHRO) of Haleon PLC, having previously served as CHRO of Diageo PLC between 2015 and 2022.
10. Drive and reward outperformance: We have implemented a new reward framework across the organisation with metrics more closely aligned to value creation. A new Directors’ remuneration policy proposal has been extensively consulted on with our largest shareholders and will be voted on at the 2024 AGM.
Full Year Review: Unilever Group
| (unaudited) | Turnover | USG | UVG | UPG | A&D | Currency | Turnover change | UOM% | Change in UOM |
| Full Year | €59.6bn | 7.0% | 0.2% | 6.8% | (1.7)% | (5.7)% | (0.8)% | 16.7% | 60bps |
| Fourth Quarter | €14.2bn | 4.7% | 1.8% | 2.8% | (0.7)% | (6.7)% | (3.0)% |
Performance
Underlying sales growth in the full year was 7.0%, with positive volumes of 0.2% and 6.8% from price. Growth from the 30 Power Brands was accretive at 8.6%. Beauty & Wellbeing and Personal Care delivered strong volume growth throughout the year and Home Care returned to positive volume growth in the second half. Volume growth for the Group accelerated to 1.8% in the fourth quarter, with 3.9% volume growth from the 30 Power Brands.
Underlying price growth decelerated from 10.7% in the first quarter to 2.8% in the fourth quarter, reflecting lower net material inflation in the second half. Nutrition and Ice Cream faced the highest input cost inflation in 2023 which translated into higher pricing.
The percentage of our business winning market share* on a rolling 12 month-basis was disappointing at 37%. This poor performance reflects share losses to private label in Europe, consumer shifts to super-premium segments in North America where we currently under index and a significant reduction of unprofitable SKUs globally. Our competitiveness is not good enough and we are moving quickly to address it.
Beauty & Wellbeing grew underlying sales by 8.3%, with strong volume growth of 4.4%. Prestige Beauty and Health & Wellbeing continued to grow double-digit and now account for a quarter of Beauty & Wellbeing’s turnover. Personal Care grew underlying sales 8.9%, with 3.2% from volume and 5.5% from price, led by strong sales growth of Deodorants. Home Care grew underlying sales 5.9%, driven by 6.8% from price and (0.9)% from volume, with positive volumes in emerging markets offset by a double-digit decline in Europe. Nutrition grew underlying sales 7.7%, with 10.1% from price and volumes down (2.2)% as we responded to higher input costs and a challenging European market. Ice Cream’s underlying sales growth was disappointing at 2.3%, with price growth of 8.8% and a volume decline of (6.0)%, reflecting the impact of downtrading in the in-home channels.
Emerging markets (58% of Group turnover) grew underlying sales 8.5%, with 1.6% from volume and 6.9% from price. Latin America, Turkey and Africa delivered double-digit growth. India grew mid-single digit led by volume, with lower input costs that led to negative pricing in the fourth quarter. Sales in China grew low-single digit led by volume while the market recovery continued to be uneven and slower than expected. Growth in South East Asia was impacted by a sales decline in Indonesia in the fourth quarter as consumers avoided the brands of multinational companies in response to the geopolitical situation in the Middle East.
Underlying sales in developed markets (42% of Group turnover) grew 4.8% in the full year with 6.7% from price and (1.8)% from volume. North America delivered strong growth of 5.8% with 2.5% from volume and 3.3% from price, with continued double-digit underlying sales growth in Prestige Beauty and Health & Wellbeing. Volume growth in North America accelerated throughout the year leading to volume growth of 6.3% in the fourth quarter. In Europe, underlying sales growth was 4.1%, driven by 12.8% from price given its higher exposure to categories with significant cost inflation, and a volume decline of (7.7)%.
Turnover was €59.6 billion, down (0.8)% versus the prior year, including (5.7)% adverse foreign exchange translation and (1.7)% from disposals net of acquisitions. Underlying operating profit was €9.9 billion, up 2.6% versus the prior year. Underlying operating margin increased 60bps to 16.7%. We improved gross margin by 200bps to 42.2% with an improvement of 330bps in the second half. We more than mitigated net material inflation of around €1.8 billion through improved productivity, price and mix while stepping up brand and marketing investment by €0.7 billion, a 130bps increase as a percentage of turnover. Overheads increased by 10bps, as we continued to invest in the expansion of our Prestige Beauty and Health & Wellbeing businesses.
Capital allocation
We continue to reshape the portfolio, allocating capital to premium segments through selective bolt-on acquisitions and divesting lower-growth businesses while balancing investment in the business and shareholder returns.
Adding to our portfolio of premium brands, we announced the acquisitions of Yasso Holdings, Inc., a premium frozen Greek yogurt brand in the United States, which completed on 1 August, and K18, a premium biotech haircare brand, which completed on 1 February 2024.
We announced three disposals during the year: the Suave beauty and personal care brand in North America, which completed on 1 May; Dollar Shave Club, which completed on 1 November; and Elida Beauty, which comprises more than 20 personal care brands. It is expected to complete by mid-2024.
In 2023, we returned €5.9 billion to shareholders through dividends and share buybacks. We completed the final two €750 million tranches of our €3 billion share buyback programme. The quarterly interim dividend for the Fourth Quarter is maintained at €0.4268.
Reflecting the Group’s continued strong cash generation, the Board has approved a share buyback programme of up to €1.5 billion to be conducted during 2024, which we expect to commence in the second quarter.
*Competitiveness % Business Winning measures the aggregate turnover of the portfolio components (country/category cells) gaining value market share as a % of the total turnover measured by market data. As such, it assesses what percentage of our revenue is being generated in areas where we are gaining market share
Conference Call
Following the release of this trading statement on 8 February 2024 at 7:00 AM (UK time), there will be a webcast at 8:00 AM available on the website www.unilever.com/investor-relations/results-and-presentations/latest-results.
A replay of the webcast and the slides of the presentation will be made available after the live meeting.
