Unilever launches $1.6 billion buyback as CEO demands improvements

Unilever, launched a 1.5 billion euro ($1.6 billion) share buyback on Thursday after volumes increased for the first time in 10 quarters, although its CEO said its performance needs to improve. "Our competitiveness remains disappointing and overall performance needs to improve," Hein Schumacher said in a statement. "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.

While the maker of Dove soap and Hellmann's condiments said its full-year underlying operating profit rose 2.6 per cent to 9.9 billion euros and its underlying operating margin was up 60 basis points to 16.7 per cent, it missed analyst expectations for an operating profit of 10.4 billion euros and a margin of 16.9 per cent. Unilever's shares rose as much as 4 per cent on Thursday, hitting their highest point since it last reported earnings in October. The stock has fallen about 2 per cent over the past year.

The consumer goods industry has struggled to protect margins as everything from sunflower oil and shipping to packaging and raw commodities became more costly as a result of the pandemic.
These increases worsened after Russia invaded Ukraine in 2022, sending energy costs to record highs. But some companies are starting to ease price hikes, in step with slowing inflation, hoping to lure back shoppers who traded down to cheaper products and retailers' private labels.

The percentage of Unilever's business winning market share on a rolling 12 basis was "disappointing" at 37 per cent, the company said, hurt by it cutting back its portfolio, raising prices and changing shopper habits. In October, it was 38 per cent.

Analysts and investors have been warning Unilever and other big consumer firms that this lost market share would be tough to recover once consumers had been put off by high prices. "Investors should not expect quick fixes. (Unilever's) the plan isn't just about cutting costs and increasing efficiency - it's designed to make Unilever a more innovative business, with stronger, faster-growing brands," Charlie Huggins, manager of the quality shares portfolio at Wealth Club, said. "This requires increased brand and marketing investment, and will not be quick or easy to achieve," Huggins added.

Unilever said it expects "modest improvement" in underlying operating margin for the full year and underlying sales growth within its multi-year 3 per cent to 5 per cent range. The company reported a roughly 5 per cent rise in fourth-quarter underlying sales, meeting analysts' average forecast, a company-provided consensus showed. Underlying fourth-quarter price growth was 2.8 per cent and underlying volumes were up 1.8 per cent, rising for the first time since the second quarter of 2021.