Who are Unilever Caribbean?

12 December 2014

Unilever Caribbean Limited operates a manufacturing and distributionbusiness from its headquarters in Champs Fleurs in Trinidad. Approximately half of the value of its sales is derived from products manufactured in Trinidad with the remaining amount derived from goods imported from other companies located within the global Unilever brand.

Unilever Caribbean is responsible for servicing the domestic Trinidad and Tobago market together with 15 export markets all located within the Southern Caribbean. At December 31 2013, exports accounted for 39% of the total turnover of the company.

The company has a December 31 year-end and is part of the worldwide Unilever Group.

What type of products does the company sell?

Unilever Caribbean’s products slot into four categories: home care, personal care, foods, and refreshment.

Home care comprises powdered detergents, dish-washing liquids and fabric conditioners. Personal care comprises hair care products, deodorants, oral care products, skin cleansing products, and hand and body care products.
Foods comprises spreads, cooking aids, dressings and savoury snack products.
Refreshment comprises teas, juices, and ice cream.

Flat on the top – a question of turnover

For the year ended December 31 2013, turnover grew by a modest 2.17% to $579.37m. For the nine months ended September 30 2014 this trend has continued with turnover growing by just under 2% period on period.

While the company has performed above expectation in Trinidad and Tobago, Suriname, and Barbados it has struggled in Guyana, St. Lucia and most of the tourism based economies.

The company maintains a healthy operating profit margin consistently in the region of 40% meaning that it continues to manage the direct cost of selling its product in the market.

Flat in the middle – a question of operating profit

In the year ended December 31 2013, operating profit rose by 9.3% to $85.3m. However, in the nine months ended September 30 2014 operating profit is flat with growth of just under 1%. Moreover as at September 30 2014 the company has only achieved 64% of the operating profit it earned in the year ended December 31 2013.  The final quarter – which includes the Christmas period – should in theory provide scope for making up any lost ground but given prevalent market conditions expect a relatively flat operating profit at December 31 2014.

Slightly more attractive in the bottom – a question of profit before tax

Because of Unilever Group’s policy of allocating profit and losses on the disposal of brands to group companies, Unilever Caribbean benefited from a one-off windfall of $8m in the year ended December 31 2013 arising from the sale of brands owned by the parent company.

As a result, the profit before taxation for the year ended December 31 2013 was 19.6% above that of the year ended December 31 2012 (without the one-off gain the growth in operating profit would have been just over 9%).

The period ended September 30 2014 also includes a gain from the disposal of group brands of $5.5m. Including this amount, profit before tax is 8% above the corresponding nine months ended September 30 2013.

Loved by the Stock Market?

At December 31 2011, the ordinary stock price of Unilever Caribbean stood at $32.50. As at the time of writing this blog entry, the price has reached $64.25. Over this period the company has consistently out-performed the composite market index.

Factors to consider

Investors and potential investors should also consider the following:

  • Unilever has a strategic vision to double the size of its business while reducing its environmental footprint and increasing its positive social impact. These are laudable targets and it is commendable that the company is already recycling approximately 75% of the waste it produces on site at Champs Fleur.
  • The company has sizeable retained earnings and plans to invest significant sums in the areas of information technology and manufacturing. In the short to medium term this should allow the company to further reduce manufacturing and operating costs driving down to an improved bottom line.
  • The company and by extension the Unilever Group remain committed to continuing to manufacture in Trinidad and Tobago.
  • In the year ended December 31 2013 Unilever Caribbean madegains in market share in all its key segments particularly in Trinidad and Tobago.
  • Overall the company is holding its ground in a Caribbean marketplace that still appears hung-over from the effects of the global recession and the knock on effect that has had on the regions tourism income.
  • The company has a very healthy gross profit percentage consistently around 40%. Its operating percentage is traditionally around 14% and has fallen in the period ended September 30 2014 to less than 13%. This highlights that the company needs to do a lot more to control both its manufacturing costs and the costs at which it imports product from other companies within the Unilever Group. Ideally we would like to see this percentage climb to around 18%.
  • The company has no long term third party debt. Therefore any profit it makes belongs totally to the equity shareholders.

Hold, Buy, or Sell?

If you already have Unilever as part of your portfolio, we recommend continuing to hold this stock. If you don’t, consider making an investment.

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