Unilever PLC/N.V.

The stable outlook reflects our view that Unilever will be able to achieve organic growth of about 3% and report stable S&P Global Ratings-adjusted operating profit in 2019, as improvements from cost-saving programs will be largely offset by restructuring costs. We assume that Unilever will continue its portfolio review strategy by adding bolt-on acquisitions to foster future growth. We estimate that Unilever should be able to maintain adjusted debt to EBITDA of 2.0x-2.5x and FOCF to debt of about 25% over the medium term, both of which are commensurate with the current rating. We could consider a negative rating action if Unilever consistently reports weak organic growth, and its key products lose market share, translating into lower operating profits. This

...Unilever maintains a strong focus on organic revenue growth. The group targets organic revenue growth in the 3%-5% range, which is in line with the targets set by other large competitors in the branded consumer goods sector like NestlT S.A. and Procter & Gamble Co. In 2019, Unilever's revenue growth will probably be at the lower end of the 3%-5% range, supported by its large exposure to new fast-expanding markets. However, the other elements that play a crucial part in Unilever stabilizing organic growth at a healthy level are its ability to be the first to offer new products that respond to consumers' changing preferences; an increase in its exposure to rapidly expanding channels like ecommerce; and continuous revision of the product mix to reduce the contribution from products that are no longer appealing. In line with its ambition to foster profitable growth, Unilever has consistently increased its exposure to beauty and personal care in recent years. In 2018, this division represented...

Full Report