Thanks to its bursting portfolio of brands including Marmite, Dove and Sure, consumer goods beast Unilever (LSE: ULVR) has long been considered a prime defensive stock by the Fool’s analysts and one that can be held for the very long term.
Based on today’s latest set of figures — covering the first six months of 2018 — I can’t see this changing any time soon, regardless of whether or not it ends up staying in the FTSE 100 index.
Despite “challenging markets“, underlying sales growth came in at 2.7%, falling to 2.5% with the inclusion of the spreads business that was sold earlier this month.
Had it not been for a truckers’ strike in Brazil, Unilever estimates that growth would have been approximately 60 bps higher at the end of the reporting period. On a more positive note, sales in emerging markets were still encouraging, moving 4.1% higher.
Overall turnover fell 5% to €26.4bn when compared to the same period in 2017, partly due to foreign exchange headwinds. Nevertheless, underlying operating margin came in 80bps higher as a result of increased gross margin and more cost-cutting.
Commenting on results, CEO Paul Polman stated that the company’s guidance on the year was unchanged and that Unilever remains on schedule to meet its 2020 goals. Underlying sales growth of between 3%-5% is still expected in 2018 along with increased operating margin.
The 2% rise in its share price this morning suggests the market is more than satisfied with that projection and builds on the positive momentum seen since in the last few months.
Taking the above into account, I remain as positive on the stock as ever and, while its future in the blue-chip index is still in doubt, continue to believe that Unilever warrants serious consideration from long-term investors.
Another company with huge international exposure and an enviable list of brands, soft drinks producer Nichols (LSE: NICL) also reported a set of interim numbers to the market this morning.
Revenue rose 2.3% to £65m in the six months to the end of June, supported by “strong performance” in the UK from both the company’s Still and Carbonate segments (where sales jumped 13.2%). Indeed, sales of Vimto significantly outperformed the market — up 9% compared to the 3.7% achieved by the market so far this year.
Overseas, things were a little less sparkling. Albeit in line with expectations, the £11.2m worth of sales was almost £5m lower than in 2017 due to ongoing conflict in Yemen and issues with shipments to Saudi Arabia. Sales to Africa were also down 3.7% (to £6.7m) although management remained confident of year-on-year growth in the region.
Despite this rather mixed update, the £13.1m in pre-tax profit still came in 2.7% higher (at £13.1m) than in 2017. While few are likely to hold the stock for the income it generates, today’s near-12% hike in the interim dividend is also likely to be welcomed by holders and underlines management’s confidence that recent momentum in the UK will continue (supported by a new marketing campaign for Vimto) and a stronger H2 in international markets.
At almost 22 times forward earnings, Nichols — like Unilever (on a P/E of 21) — isn’t cheap and, thanks to its diversified operations and defensive characteristics, is never likely to be. For me however, the stock remains a worthy addition to any ‘buy and forget’ portfolio.
Paul Summers has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Unilever. The Motley Fool UK has recommended Nichols. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.