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 Reports and Commentary from the Investment World

Reports and commentaries are posted here on a regular basis.




Unilever Plc (ULVR.L) (UN.NYSE)

160 million times a day, someone somewhere chooses a Unilever product.  From feeding the family to keeping your home clean and fresh, the Unliver brands are household names, such as PG Tips, Lipton tea , Knorr soups and stock cubes, Flora margarine  and Dove and Lifebouy soap. Unilever is the world's biggest ice cream manufacturer, with an annual turnover of €5 billion. They make the yummy "Magnum" brand!

In a history that goes back over 100 years, Unilever's success has been influenced by the major events of the day – economic boom, depression, world wars, changing consumer lifestyles and advances in technology. In the 1890s, William Hesketh Lever, founder of Lever Bros, wrote down his ideas for Sunlight Soap – his revolutionary new product that helped popularise cleanliness and hygiene in Victorian England. It was 'to make cleanliness commonplace; to lessen work for women; to foster health and contribute to personal attractiveness, that life may be more enjoyable and rewarding for the people who use our products'.

In the late 19th century the businesses that would later become Unilever were among the most philanthropic of their time. They set up projects to improve the lot of their workers and created products with a positive social impact, making hygiene and personal care commonplace and improving nutrition through adding vitamins to foods that were already daily staples. Lever Brothers actually went so far as to create a whole village - Port Sunlight Village, for its workers in The Wirral, Lancashire, England. This degree of philanthropy in Victorian England was unparalleled. The combination of a happy, healthy and
efficient workforce was a vision held by some philosophers and luminaries of the time but Lever was one of the first entrepreneurs to realise such a dream.  From his middle-class upbringing in
Bolton, Lancashire to his ambitious trips around the world, Lever employed lessons learned to good effect in housing and employing the workforce of his soap business.

Today,Unilever is a recognised leader in sustainability. It has led the Food sector on the Dow Jones Sustainability Index for the past 11 years – an achievement matched by no other company.

Although the UK economy is going through a very difficult time, some of the blue chip companies that make a lot of their revenues from emerging markets will continue to grow strongly.  Unilever and Diageo (already in our portfolio), with relatively steady revenue growth over many years and extensive emerging markets exposure look set to do well in 2010. Unilvere is growing aggressively in Russia and China
and many other emerging economies.

For years, Unilever was the underdeliverer - the leviathon company that just plodded along. But restructuring, a leaner organisational structure, better operating margins, easing commodity costs and a hefty increase in advertising has positioned Unliver to finally deliver its promised growth spurt. Volume growth accelerated during 2009, reaching 5% by the 4th quarter. Cashflow from operational activities was up by Euro 1.4 billion in the 4th quarter 2009. Unilever’s shares outperformed the UK market last year  and we believe there is more upside to come. The company has been one of only a few to maintain its dividends. Following shareholder approval at the 2009 Annual General Meetings, Unilever moved to quarterly dividends from 1 January 2010, establishing a simpler and more transparent dividend practice. Quarterly interim dividends will be paid in March, June, September and December. For investors looking for steady and secure income these shares could fit the bill.

Speaking at The Economist’s Sustainability Summit Chief executive Paul Polman said that "Unilever has set itself the challenge of doubling the size of its business whilst at the same time reducing its environmental footprint". Polman said that "the key to making this goal happen is by inspiring consumers to switch to a more sustainable way of living through the brands they choose."

We believe that after a patch in the doldrums, Unilever is ready to deliver good growth and good dividends to investors during 2010.

Buy Unilever up to 1950p or for US investors up to $30


Disclaimer: All the information above is provided as a service for individuals and institutions. It should in no way be construed as a recommendation as an investment. Investment decisions should be based on the risk tolerance and planning horizon of the investor. Market participants must understand that past performance is also not a guarantee or predictor of future results.