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Flush with cash, Unilever seen adding brands

by Renee Cordes  |  Published January 25, 2013 at 1:53 PM
HoldingMoney227x128.jpgUnilever plc/NV, the Anglo-Dutch maker of Dove Soap, Ben & Jerry's ice cream, Lipton tea and Vaseline skin care products, may soon start filling its shopping cart again.

The world's second-largest consumer goods maker after Procter & Gamble Co. has lately focused on disposals rather than acquisitions, selling Bertoli and P.F. Chang's Home Menu frozen meal business to ConAgra Foods Inc. for $267 million last August, and agreeing earlier this month to sell its Skippy peanut butter business to Hormel Foods Inc. for about $700 million.

It's been quiet on the acquisition front since 2011, when Unilever added Alberto Culver Co. for $3.7 billion, Colgate-Palmolive's Colombian laundry detergents business for $215 million and 82% of Russia's top personal care company Kalina for about 25.9 billion rubles ($862.7 million), all while continuing to shed noncore businesses.

On Wednesday, CFO Jean-Marc Huet said the company had no plans to use its €4.3 billion ($5.8 billion) in cash to buy back shares, fueling speculation that it's on the prowl for buying opportunities in emerging markets, which accounted for more than half of its €53.1 billion in 2012 sales.

"Unilever is very proud of its emerging-market position and certainly would like to expand it, especially in Russia and China, where it's probably a bit late and wants to grow its positions," said Richard Withagen, an analyst with SNS Securities in Amsterdam. He said acquisitions are likely to be in personal care, saying that Unilever is good at identifying relatively unknown, niche targets.

With a few exceptions, Unilever has largely pursued targeted, bolt-on acquisitions -- a strategy that analyst Charlie Mills of Credit Suisse Group in London said makes sense to continue.

"I don't think they have anything large in mind, but they will continue to make selective acquisitions as and when good positions become available," he said, adding that the strategy has been "very clear, well-thought out and pretty successful." He also expects a few, "relatively small," further food disposals.

Unilever dates back to 1872, when the Jurgens and Van der Bergh families began producing margarine in the Netherlands to export to the U.K., and is now a 400-brand powerhouse. Earlier this week, it marked a milestone in CEO Paul Polman's 2009 goal to double sales to €80 billion by surpassing the €50 billion threshold for the first time and posting an annual operating profit of €7 billion, slightly above expectations. The stock has risen nearly 22% in the past 12 months and was trading at €29.84 Friday, giving Unilever a market value of €89.28 billion.

The record results will put pressure on Nestlé SA, the world's largest food company, due to report results Feb. 14, and France's Danone SA, the world's largest yogurt maker, due to post results Feb. 19.

"We continue to make good progress in transforming Unilever into a sustainable growth economy," Polman, dressed in a space suit to promote the company's new Axe Apollo deodorant, told analysts Wednesday.

Despite a tough year ahead marked by intense competition and volatile commodity costs, he said the company is targeting "another year of profitable volume growth ahead of our markets, steady and sustainable core operating margin improvement and strong cash flow."

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Tags: Alberto Culver Co. | Bertoli | Colgate-Palmolive | Jean-Marc Huet | Kalina | P.F. Chang's | Paul Polman | Procter & Gamble Co. | Unilever plc/NV

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Renee Cordes

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