MARKET COMMENT
Slim Fast Fattens Up Unilever

By David Kuo (TMFDragon)
November 2, 2001

Carburton Street, London -- It is quite ironic that a company that generates over 50% of its turnover from foodstuff should report higher third quarter revenues boosted by a better performance from its dieting products. But such is the case with Unilever (LSE: ULVR) and Slim Fast, and that's what makes it an interesting company for investors. Unilever not only boasts a wide product mix but its products can be found in just about every corner of the world.

This morning Unilever related its third quarter story. Turnover jumped 13% to £13.6b and operating profit before exceptional items, interest and amortisation improved 25% to £2.1b implying that operating margins rose to 15.7% from 13.7%. However, the cost of restructuring the business and the increased interest payments as a result of acquiring the new marques caused pre-tax profits at the company to decline by 32% to £1.0b. The company added its "Path to Growth" programme was on track to deliver additional cost savings.

Unilever is essentially a global marketing company and "Path to Growth" is its unique strategy to change the product mix of the company by identifying growth areas and cost saving opportunities. The company's product mix had become unwieldy with too many overlapping products brought about by years of expansion. Through "Path to Growth", Unilever aims to reduce the product mix to a more manageable portfolio of just 400 growth products down from a peak of almost 1600 brands. Path to Growth is far from complete but as the strategy unfolds Unilever is likely to continue to deliver margin improvements firstly through productivity gains and secondly through cost synergies.

More on the Unilever discussion board.

The author own shares in Unilever.