Annual results day sees the shares take a tumble.
During bull runs, so called "defensive" shares will often come close to following the market, but they'll excel during bearish times when anything associated with risk takes a pummelling. And they don't come much more defensive than Unilever (LSE: ULVR), which has beaten the FTSE 100 index over the past ten years, soundly hammering it over the last five.
Unilever reported its annual results today, and at first glance, the headlines make for gloomy reading, with Chief Financial Officer Jean-Marc Huet telling reporters that he cannot recall a more challenging year than 2011.
Fourth quarter revenues fell short of City forecasts, pundits across the press are calling it "disappointing", and the shares fell more than 3% in morning trading, hovering around 2015p as I write.
Pre-tax profit came in at €6.25bn, up 2% on last year, and that translated to a 1% rise to €4.6bn after tax. Earnings per share remained flat at €1.46, and a final quarter dividend of €0.225 was announced (18.79p in real money).
Some perspective please
But hang on a minute. Underlying sales grew 6.5% over the year, with the fourth quarter's "disappointing" sales still managing to beat last year's final quarter by 6.6% (while the suits had estimated 6.8%). Growth in overseas markets also helped offset the worst effects of the squeeze in Europe. And that's bad?
OK, the boost was mainly through rising prices, with the actual volume of goods sold only growing by 0.1%. But that is in one of the worst trading years we've seen for a long while, when so many are seeing sales and profits falling. And though profits are being squeezed everywhere, Unilever's underlying operating margin was barely unchanged, down a smidgen to 14.9% from last year's 15%.
The future looks safe
I reckon this set of results was fine, and though next year is expected to be similarly tough, I think we'll see similarly steady figures again. With the current price putting the shares on a P/E of about 16 with a dividend yield of a little under 4%, I think that's probably a fair valuation for the long term.
What is it that makes Unilever such a safe bet? Well, how long can you go each day without using a Unilever product? I managed about 15 minutes before washing with Dove soap this morning, and teapots across the country will have been filled with Lipton's. And with the world's second largest producer of consumer goods after Procter & Gamble (NYSE: PG.US) claiming that "160 million times a day, someone somewhere chooses a Unilever product", I don't think we have any need for concern.
More from Alan Oscroft:
> The Motley Fool owns shares in Unilever.
