LONDON — Unilever can’t get enough of brands in the prestige and premium beauty space.
Although the company has declined to comment on market speculation that it’s a contender to buy Space NK from Manzanita capital, it’s still in an acquisitive mood — or at least that’s what it is signaling to shareholders.
On Wednesday during a presentation to analysts, chief executive officer Paul Polman discussed a broad range of topics — including Unilever’s plans to base its legal entity in the Netherlands — and put the spotlight on the company’s vigorous M&A activity in the beauty arena in particular.
He touted Unilever’s M&A model, “which allows us to pivot our portfolio faster” and reminded his audience that the multinational had made 24 acquisitions since January 2015.
Those brands include Living Proof, Dermalogica, SheaMoisture and Carver Korea. Earlier this year, it pledged to buy a 75 percent stake in the Italian personal-care business Equilibra.
He pointed out that the M&A focus was on “personal care, prestige, premium price brands in the mass market, new channels and naturals,” and that by 2019 the new acquisitions would contribute an additional 3.5 billion euros to turnover and one billion euros to e-commerce.
While he didn’t offer any clues about what the next acquisition would be, it was clear that he wants shareholders on board with the strategy in what has become a hot M&A market for skin care, color cosmetics, all-natural and wellness brands.
Polman was speaking shortly after Unilever released its 2018 first half results on Thursday, which saw adverse currency effects, new acquisitions and the truckers’ strike in Brazil dent first-half sales and profits despite “solid, volume-driven growth” across all divisions.
Turnover in the six months to June 30 fell 5 percent to 26.4 billion euros on a reported basis, although the figure was up 2.5 percent on an underlying basis. Profit fell 2.4 percent to 3.24 billion euros in the period. Operating margin was 17 percent on a reported basis, and 18.6 percent underlying.
Unilever said that in the half, its prestige beauty business grew in excess of 6 percent. The company said last year’s acquisitions of the Carver Korea, hair-care specialists Sundial Brands and Schmidt’s Naturals, based in Portland, Ore., all grew strongly, and will contribute to underlying sales growth from the first full year of ownership.
Overall, the company said its beauty and personal care division continued to grow with innovations behind global and local brands. Turnover in the division rose 2.7 percent on an underlying basis to 10.1 billion euros.
Skin care performed well, driven by Vaseline, Pond’s and Lakmé in India, and Dove body polish in North America. In hair care, volume-led growth was driven by Sunsilk and Dove, the company said.
Further underlining its new M&A strategy, the company also confirmed its exit from the spreads business on July 2, having sold it to KKR and Remgro in South Africa.
Underlying sales growth projections for the year will be in the 3 to 5 percent range, with an improvement in underlying operating margin and strong cash flow. “We remain on track for our 2020 goals,” Polman said.
Unilever, which is looking to simplify its dual-headed shareholder structure and base itself as a legal entity in the Netherlands, plans to hold general meetings for Unilever NV and for Unilever PLC shareholders on Oct. 25 and 26, respectively. It is looking to making its final move to the Netherlands by year-end.