Unilever restores confidence of friends

THE INVESTMENT COLUMN

For such a reliable performer, Unilever has found life a bit of a struggle this year. The Birds Eye-Walls and Persil group has already disappointed the market with its first-quarter results and its interims in August, causing the City to lower profit expectations. Long considered a safe haven in tough times, Unilever could have lost a few friends if it had disappointed for a third quarter running. The fall in the shares ahead of yesterday's announcement showed that analysts feared the worst.

That explains the collective sigh of relief when Unilever produced third- quarter figures bang on the money. Pre-tax profits for the nine months to September were up 9 per cent at pounds 1.9bn on sales 6 per cent higher at pounds 23bn. The shares jumped 22p to pounds 12.11p on a grim day for the market.

In Europe, profits were boosted by strong ice-cream sales in Britain due to the hot weather, though southern Europe did not enjoy the same boost. CK1, the new fragrance for men and women, is casting a pleasing aroma across Unilever's figures and confirms the Calvin Klein deal of the late 1980s was a shrewd one.

There are still problems, notably the Persil Power debacle, which continues to affect the group's detergent performance in Europe. Though sales this year are similar to 1994, profits are down as the company is having to spend more on advertising to try to claw back lost market share. New Generation, the replacement, is gaining ground but it is proving an expensive task.

Elsewhere, North America is going great guns and profits increased by more than 40 per cent to pounds 352m. The ice-cream business is launching new products with gusto. Margins are already into double digits. Detergents and food operations showed strong growth.

Latin America and South-east Asia did well, but other countries, including Turkey and Nigeria, are battling against higher inflation and economic uncertainty. Looking forward, it seems trading will continue to be patchy. It is particularly tough in Europe, which accounts for half of business. If that area does not make progress it is difficult to see Unilever achieving the earnings growth the market is expecting.

Merrill Lynch has left its full-year profit forecast unchanged at pounds 2.57bn, which puts the share on a forward rating of 14. Unexciting.

Bibby shake-up

bearing fruit

Until three years ago, the worst that could be said about J Bibby was that it was yet another conglomerate that had lost its way. But in 1992 the paper to scientific equipment group made a near-disastrous move into the distribution of Caterpillar earth-moving equipment in Spain and Portugal, just as the Iberian construction cycle took another violent downturn.

The result was that profits fell off a cliff, but Bibby was at last prompted to take dramatic action to reverse years of under-performance. The animal feeds to free-range eggs agricultural division was sold and the rag-bag of businesses within the industrial side rationalised. The fruits of last year's shake-up are coming through. Bibby has soared back into the black in the 12 months to September, turning a loss of pounds 10.7m into profits of pounds 32.9m. The figures were flattered by the absence this time of pounds 30.6m of exceptional items relating to the restructuring in 1994, but there was also a strong recovery from the remaining operations, which raised underlying profits from pounds 26.7m to pounds 41m.

Admittedly, materials handling, mainly the Hyster fork-lift distributor in the UK and US, was helped by better economic conditions in raising profits 22 per cent to pounds 20m.

But there should be more to come from France, where the dealership's territory has doubled.

The recent trend downwards in pulp costs after a sharp rise also bodes well for the industrial division, but the best news came from the Iberian operation, which has at last started making decent profits. The pounds 9.2m profit in the latest period compares with pounds 900,000 last time and a pounds 7m loss two years ago. With returns on capital below 11 per cent, the industrial and earth-moving sides are never likely to match the 26.5 per cent from materials handling. But there remains plenty of scope to reach the group's target of above 15 per cent in both.

Profits of pounds 36.5m this year would put the shares at 130p, up 8p, on a forward multiple of 10. Reasonable value, although the market in the shares is thin due to the 78 per cent stake held by Barlow Rand of South Africa.

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