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Unilever’s new chief executive Hein Schumacher is open about the problems facing the consumer staples giant. When the company released a third-quarter trading update last month, he noted that “the quality of our growth, productivity and returns have all underdelivered” over recent years.
Part of the story is to do with merger and acquisition misadventures. Investors were dismayed by the failed £50bn bid for GSK’s consumer healthcare arm, now Haleon, early last year. As part of a new action plan, Schumacher said there would be “no major or transformational acquisitions” on his watch. A pruning has now begun — Dollar Shave Club, which Unilever acquired for $1bn (£800mn) in 2016, is being sold.
The third-quarter results highlighted the tough job the new chief has on his hands. Underlying sales growth came in at 5.2 per cent in the period, with revenue down 3.8 per cent to €15.2bn (£13.2bn) on the back of currency headwinds and consumer downtrading. Volumes fell by a painful 10.7 per cent in Europe as shoppers looked elsewhere for cheaper foods.
The percentage of Unilever’s business winning market share, meanwhile, fell from 41 per cent to 38 per cent quarter-on-quarter.
The new action plan includes a primary focus on the company’s top 30 brands, and targets of annual underlying sales growth of 3-5 per cent and a return on invested capital in the mid-teens.
Some recent buying activity on the board could signal director confidence about the refreshed strategy. Schumacher picked up €62,000-worth of shares on the Amsterdam Stock Exchange on November 22. In London, a person closely connected with director and chair designate Ian Meakins acquired £995,000-worth of shares on the same day.
The shares trade hands at 16 times forward consensus earnings, according to FactSet, below the five-year average of 19 times.
AstraZeneca chair sees past vaccine headwinds
Michel Demaré, non-executive chair of the AstraZeneca board, appears bullish about the company’s prospects. It was revealed on November 23 that Demaré, who took up his post in May, had purchased 2,000 shares earlier in the week.
He initially acquired 1,000 shares at a price of £101.05 each on November 21 — and picked up another tranche at £101.70 apiece the following day. Shares in the blue-chip drugmaker are down 12 per cent this year, in part because sales of its Covid-19 products have effectively dwindled to zero (after declining by more than $2bn in the first half).
AstraZeneca’s fellow Covid vaccine makers have suffered a similar fate. Pfizer, for instance, is down 41 per cent since 1 January — while Moderna has fallen 56 per cent.
AstraZeneca’s relative buoyancy is no doubt a testament to the strength of its drug pipeline: it’s well known as a world leader in oncology, and it is trying to make inroads in the higher-margin field of rare diseases. In July, it agreed to purchase and licence the assets of Pfizer’s early-stage gene therapy portfolio.
More recently, it announced a licensing deal with a Chinese company for a trial-stage weight loss pill — showing that it’s also keen to compete in the thriving obesity drug market.
Demaré’s purchase may indicate that he thinks investors are undervaluing these future assets. He will hope it won’t be long before they catch on.
