Consumer Goods Subsector Pitch

by

Eddie Lin, Dre Farinas, Nathan Shadnik

• SMH (Semiconductors)• Beta of 1.22

• GILD (Pharmaceuticals)• Beta of .8, P/E of 12.61, EPS $8.80, Mkt Cap

160.69B

• SDRL (Oil Exploration)• Beta of 1.8, P/E of 1.64, EPS $8.17

• UL (Consumer Goods)• Beta of 0.56, P/E 21.79, EPS $2.05

Current HT Holdings

Agenda

• Company Background• Capturing value• Leadership• UN vs. UL

• Unilever’s Competitive Advantages

• Unilever Stock Evaluation

• Risks

• Growth Catalysts

• Competitor Analysis

• 10-k and Review

• Lasting Impressions

Company Background

-Wide array of brands (400)

-Serves a multitude of segments within a far-reaching market

Multiple revenue streams:-Nutritionally balanced foods- Ice creams - Soaps/skin care- Luxurious shampoos - Everyday household products.

How Unilever Drives Profit

Leadership Vision• Paul Polman, CEO• CEO since January 2009• Unilever’s Sustainable Living plan

• “Ambitious vision to fully decouple growth from overall environmental footprint and increase positive social impact”

• “Our purpose is to make sustainable living commonplace.”

• “We are developing new business practices that grow both our company and communities, meeting people's desire for more sustainable products and creating a brighter future. The Unilever Sustainable Living Plan will help us double the size of our business while reducing our environmental footprint and increasing our positive social impact. And we're working in partnerships where we can help change things on a global scale: deforestation and climate change; water, sanitation and hygiene; and sustainable agriculture and smallholder farmers.”

UL vs. UNUN is Unilever NV• Foreign tax

withheld of 15%

UL is Unilever PLC• 0% foreign tax

withheld• Favorable choice

for IRA

Relatively similar shares with only difference being tax implications

Why We Love Unilever

• We see a competitive advantage over it’s main competitor, Procter & Gamble, because:• It’s food business provides portfolio

diversity• Strong grip in emerging markets. P&G

dominates North America, but Unilever gets two-thirds of it’s business from China and Brazil (emerging mkt. revenue grew 5.7% last yr.)

• Cheaper P/E in comparison to P&G (21.18 vs 23.96)• High dividend yield (2.87%)

• Successful socially responsible brands

UL’s FinViz Analysis

Risks

• A P/E of 21.5 suggests a fast-growing entity such as a tech company (in comparison to Apple’s P/E of 17)

• A global economic downturn would hurt Unilever’s earnings

• Foreign exchange has been a factor in Unilever’s success with the company’s exports being cheaper in comparison to US-based competitors (this is out of the company’s control), but if the Euro strengthens, its reported financials will improve

Future Growth CatalystsStrategic acquisitions mentioned earlier:• Acquired Camay and Zest from P&G, as well as REN Skincare in

an effort to boost its personal care portfolio

• A wider portfolio allows it to cater to a large array of market segments, as well as lessening individual brand risk

• Upside in revenues due to the larger size of personal care portfolio and reach across emerging segments

Falling crude oil and natural gas prices will lower the company’s raw material costs, as well as lowering transport costs. If oil remains low, costs should stay low and profitability should ensue.

Competitor Analysis

Competitor Analysis

Income Statement

• Year on year relatively flat revenues (49.80bn to 48.44bn), though the company grew net income 6.79% from 4.84bn to 5.17bn.

• A reduction in the selling, general and administrative costs as a percentage of sales from 24.45% to 22.95% was a component in the net income growth despite flat revenues

Cash flows

• Operating – $5,543 Billion

• Investing – Capital Expenditures (2,535), Inflows 1,911

• Financing – Dividends Paid (3,189), Retirement of stock (341)

• Total change – (134 mil)

• Cash Flow Margin of 11.44%.

Balance Sheet

• Debt to total capital ratio 47.15%

• Last year’s 52.22%

Dividends:

• Year on year, both dividends per share and earnings per share excluding extraordinary items growth increased 5.95% and 8.33%, respectively.

• The positive trend in dividend payments is noteworthy since only some companies in the Personal & Household Prods. industry pay a dividend. Additionally when measured on a five year annualized basis, dividend per share growth is above the industry average relative to its peers, while earnings per share growth is in-line with the industry average.

10-K Analysis

2014 Review

Simultaneously improving cost-structure while increasing market scale:- “Unilever continued to grow ahead of its markets in 2014- “Re-affirmed its reputation for consistent top and bottom line growth, ensuring continued returns for investors”-“Our business is growing ahead of our markets with 60% gaining share and we believe this growth is also competitive and consistent”

Steady and consistent:-“In a volatile environment consistency of results is key. Our model calls for consistent, competitive, profitable and responsible growth. With 2.9% underlying sales growth, and good profit progress, this is the fifth consecutive year of top and bottom line growth. - Achieved despite a challenging external environment

• Eurodollar Cross Rate• 60% of revenue from Emerging Markets• Strong history of acquisitions –> organic

growth• Attractive dividend• Continually lowering SGA expenses

Key Takeaways