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Third-placed Unilever still a first-rate stock

Imagine a modern business tycoon standing up and declaring his or her aims to be those of 'socialising and Christianising business relations' so that the company could 'get back to that close family brotherhood that existed in the good old days'.

The bankers would freak; the analysts would re-time their sell-programme; shareholders would revolt and the other board members would call for the men in white coats. This was the declared ambition of William Lever when he explained the exercise in profit-sharing that he had embarked upon by building the model village of Port Sunlight (Sunlight Soap) near Liverpool.

But ambitions for social cohesion don't always butter many parsnips so when Lever's firm became part of an Anglo-Dutch conglomerate, Unilever, in the 1930s it wanted to be big and the aspiration for nobility, as in so many cases, took a back seat. But big Unilever certainly became, and it is now the third biggest consumer goods company in the world after Procter and Gamble (P&G) and Nestle.

The company produces and markets branded food, beverage, cleaning agents and general care products. In addition, it is the largest ice-cream producer in the world and market leader in liquid laundering detergent in emerging markets. It is a dual-listed company being quoted as Unilever NV in Rotterdam and Unilever plc in London with a combined market cap of Unilever NV and plc of €93bn and a price-to-earnings ratio of 22.

The glue that joined Lever Bros, the British soap maker, and Margarine Unie from Rotterdam in the 1930s was palm oil, the essential ingredient of both products. At one point soap and margarine chipped in 90pc of group profits. By 1980 they contributed 40pc of profits but now, of course, Unilever has more brands then you could shake a stick at, along with factories on every continent except Antarctica. Since the early 1980s the company has made a bewildering array of corporate acquisitions like Cheesebough Ponds, Ben and Jerry's, Alberto Culver, Kalina in Russia and Hindustan Unilever in India.

The company is structured into four business units: Food, Personal Care, Refreshment and Homecare. Food has sales of €14bn for 2012, having brands like Hellmann's, Knorr and Flora. Personal care has the largest sales with €18bn; some of its brands are Dove, Tre-Semme and Toni and Guy. Refreshment brands like Magnum, PG Tips and Liptons have sales revenue of €10bn. Homecare, with brands like Cif, Surf and Domestos, have worldwide revenue of €9bn. The reach of Unilever brands is impressive: Dove is sold in 70 countries; Cif in 60; Magnum and Knorr in 40. Not unlike Nestle and Diageo, Unilever has over 400 brands in total.

Unilever is one of the largest media buyers in the world, spending €6bn per annum on advertising and promotions. This enormous spend reflects the competitive environment of the consumer goods industry with the group competing with the likes of Mars, Henkel, Nestle and Reckitts.

Its strategy has proved successful with sales of €51bn, and net income of €4.5bn, up 10pc.

Emerging markets is the prime engine of growth accounting for 55pc of total sales. Europe has 27pc of total sales, but growth is static, with the company citing southern Europe as 'challenging'. The €90m fine for price-fixing by the EU in 2011 may have inhibited price increases.

The Americas have sales of €17bn, up from €15bn due to strong growth in Latin America, particularly Brazil and Argentina. Asia, the Middle East and Africa showed increased sales from €18bn to €20bn with China, India, Indonesia and Thailand showing double- digit growth. The shares are trading at €32, just below its all-time high of €33 but up from their yearly low of €24.55, (see graph) so they are not cheap.

However, they could be relatively attractive when compared with their international peer group. Their strong presence in emerging markets is a definite plus. All in all it's a long way from those days in Port Sunlight.

Dr John Lynch is a former chairman of CIE. Nothing published in this section should be taken as a recommendation, either implicit or explicit, to buy or sell any of the shares mentioned.

Irish Independent