Unilever plc Struggles Against The China Slowdown

Shares in Unilever (LSE: ULVR) (NYSE: UL.US) slipped a little this morning after the release of its half-year results. The culprit was weaker–than-expected sales growth in emerging markets, specifically China, which seemingly weighed on the share price.

In early trading, Unilever traded as much as 2.2% lower at 2,624p, but its shares recovered most of these losses as the morning wore on.

Brands reshuffled

UnileverUnilever continues to reshape its portfolio of brands, with Ragu, Bertolli and Slim-Fast all being disposed of in recent months. On the acquisition side, Qinyuan, a Chinese water purifaction business, has joined the ranks and was said to have started well.

As always with Unilever, currency movements had a notable effect on the headline figures. Although sales fell 5.5% in nominal terms to €24.1bn, the underlying growth rate once currency effects were stripped out was 3.7%.

Headline profits showed a 12% increase in net profit to €3.0bn, but most of this was due to gains made on the aforementioned disposals. Unilever said its core earnings were just 2% higher than last year, with a higher tax charge also dragging down profits.

Still a tasty yield

Currency also had an effect on the latest quarterly dividend for UK investors, which will be paid on 10 September. Despite being the same in euro terms, the sterling equivalent will fall nearly 4% from 23.38p to 22.53p. The shares currently yield around 3.5%.

Net debt rose to €9.3bn from €8.5bn at the last year end, but Unilever said this was primarily due to the seasonal outflow of working capital.

Despite the odd negative, overall you would have to say this looks like another solid six-month performance from Unilever. As usual there was little comment from the company on what to expect for the remainder of the year other than “we remain focused on achieving another year of profitable volume growth ahead of our markets, steady and sustainable core operating margin improvement and strong cash flow.”

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Stuart Watson has no position in any shares mentioned. The Motley Fool owns shares of Unilever.