Financial Analysis of Unilever Plc: A Guide for Potential Investors

Understanding Unilever Plc: Global Footprint, Structure, and Governance

Course Name: MBA7060 Financial Management and Decision Making

Unilever Plc is one of the biggest names on the FTSE 100 and has a truly global footprint in the consumer goods sector. The company is based in London and produces food, beverages, cleaning products, and personal products around the world for a customer base in excess of 190 countries. Unilever generated a turnover of €60.8 billion in 2024, an increase of 1.9% over the preceding year, demonstrating the company's resilience and market presence in difficult economic circumstances.

Unilever governance includes a balanced board which is considered necessary for the positions of executive and non-executive directors. The board oversees strategic vision, risk management, compliance, and the pursuit of long-term shareholder value. Unilever's governance frameworks are intended to support a sustainable, accountable and compliant business. Strong governance is critical for sustainability, building investor confidence and supporting Unilever's business model in complying with a dual-listing regime (LSE: ULVR, amongst others; e.g., AMEX: UN) and provides confidence to its sizable global stakeholder base.

The Role of Financial Analysis in Investor Decision-Making

Financial analysis is an essential part of being able to consider any investment. For prospective investors, it offers a structured, clear insight into Unilever’s financial position, management, and growth potential. Investors can assess Unilever's ability to convert revenues into profit, use resources effectively, and provide returns to shareholders either through dividends or capital gains by looking at key performance indicators relating to profitability, liquidity, efficiency, and market ratios.

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Profitability Analysis: Robust Performance in a Volatile Environment

Unilever maintained its high profits this year, despite currency fluctuations and inflation:

Gross Profit Margin: 45.0% in 2024, a 280 basis point improvement from the year before, evidence of Unilever's excellent pricing, cost management, and supply chain execution.

Operating Profit Margin: 15.5% (operating profit of €9.4 billion on a €60.8 billion turnover); the underlying operating margin improved to 18.4%, a clear reflection of both restructuring and brand investment.

Net Profit Margin: 9.4%, a slight reduction from record margins but still quite solid given the ongoing global malaise.

Return on Equity (ROE): 18.1% on an underlying basis, a 190 basis point improvement from 2023, demonstrating a great return on retained capital.

The year also produced 4.2% underlying sales growth, primarily driven by volume (up 2.9%) – great news for Unilever's Power Brands and an indication that sales growth can be achieved even in the trickiest of markets. Underlying EPS soared 14.7% to €2.98, a very solid result as a consequence of operational effectiveness and successful cost management initiatives.

Liquidity Analysis: Assessing Short-Term Financial Strength

Unilever's liquidity is still a little bit murky due to what is typical for all sorts of bottlenecks and inefficiencies in the FMCG sector.

Current Ratio: Historically it will be between 0.75 and 0.85; 2024 estimates are situating near the 0.8 stage. Although below the "safe" level of 1.0, Unilever has massive cash flows, ample inventory rotation cycles, and plenty of credit-assigned liquidity; thus, liquidity risk is low.

Quick Ratio: approx. 0.45. The quantity of receivables that are flowing into the business every month are clearly in demand from companies that have credit at stake, ULT, and certainly less risky.

Low liquidity ratios are all the president has for all sorts of operating activities. Unilever came out with €6.9 billion in free cash flow from operating activities and a cash conversion of 106%. In together with operational cash, add that which can be named strategy, dividends or buyback opportunities, not so concerning.

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Efficiency Ratios: Operating Efficiency and Use of Resources

Unilever's efficiency ratios suggest disciplined management of its assets:

Inventory Turnover: 5.7 times a year; agile management of inventory and responsive to consumer demand.

Receivables Turnover: 9.8 times a year; swift collection cycles and a viable credit policy.

Asset Turnover Ratio: 0.83; shows that Unilever is able to generate a large amount of revenue for every euro of assets used.

These efficiency ratios demonstrate that even while Unilever operates a working capital turnover in its business, its assets are used productively to generate the greatest return on assets with no capital drag.

Market Performance Ratios: Shareholder Returns and Market Perception

As well as internal performance, investors assess a company’s strength by how the market prices its shares and how consistent its dividend policy is:

Earnings Per Share (EPS): €2.98 (underlying), up just under 15% year-on-year, a good sign for equity investors looking for growth.

Price-to-Earnings (P/E) Ratio: 18.2 as of August 2025 – indicative of growth expectations appropriate for a blue-chip, mature giant such as Unilever and a reflection of stable confidence from investors.

Dividend Yield: 3.2–3.5% in 2024, based on dividends paid, sufficient to provide an income investor a steady, reliable income above the sector average.

Dividend Cover Ratio: Estimated at between 1.5 and 1.6, meaning that earnings comfortably cover dividends paid, allowing some profit for reinvestment.

Payout Ratio: Estimated at 73.15% for 2024, a sensible position for a mature, stable dividend payer.

To underline Unilever’s progressive dividend policy in 2024, they increased the quarterly dividend payment by 6.1%. Additionally, they have undertaken a £1.5 billion share buyback scheme intending to enhance overall value for shareholders.

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Why Annual Reports Matter to Stakeholders

Unilever's annual report is more than just a regulatory compliance document—for stakeholders it provides key transparency on:

Financial performance, governance, and risk management,

Sustainability and environmental obligations,

Strategic position and future view from executive management.

This information allows investors to make informed decisions, builds trust with creditors, gives employees security, and discloses compliance with regulation. Unilever's 2024 annual report in particular brought together financial performance with sustainability, innovation, and macro risk reduction.

Internal Management Information: Strategic Innovation and Global Agility

When considering Unilever's investment attractiveness, investors need to assess the management approaches and innovations that are not always readily accessible through the balance sheet:

Strategic Innovation and Sustainability:

Unilever made significant investments in sustainable product development and digital transformation. For 2024, Unilever pledged “Power Brands" and launched critical digital logistics platforms, AI-based demand forecasting, and net zero carbon strategies towards an operational future. These plans generated positive movement on cost benefits and improved the company's image as a responsible global citizen.

Initiatives such as the "Future Foods" initiative intend to ultimately deliver €1 billion in sales of plant-based foods by 2027, showcasing Unilever as the ideological leader of the trend.

Responding to Global Competition and Challenges:

Crucially, Unilever is competing with, and against, larger corporations like Nestlé and Procter & Gamble. Unilever's best approach is regional localisation, as opposed to complete product nudging and a premium price product. For 2024, Unilever launched over 30 SKUs at the region level, further growing its market share and brand loyalty.

The availability of supply-chain agility – through the aid of digital transformation initiatives – allowed only Unilever to withstand global industry disruption while producing healthy earnings consistency.

Conclusion: Is Unilever a Good Investment?

In 2024, as demonstrated, Unilever Plc is a powerful strength of profitability, efficiency, total shareholder return and business foresight. The company continues to grow profit margins, generate solid cash to reinvest and pay dividends along with a long-term value creation-orientated view for its shareholders. Its abilities for innovation, overcoming supply shocks and commitment to sustainability are all elements of resilience and potential for the future.

Even if liquidity is lower than traditional 'comfort' levels, the company's strong cash generation metrics and access to credit provide some offsetting protection against low liquidity risk. For investors seeking a mix of stability, modest yield and exposure to innovative, leading-edge consumer goods, Unilever Plc offers a credible and attractive investment opportunity.

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References:

Unilever Annual Report and Accounts 2024 (PDF)

Unilever Annual Report and Accounts 2024 – Company Investor Relations

Statista – Unilever Revenue 2024

Investing.com – Unilever ADR Financial Ratios

Unilever Full Year 2024 Results Overview

StockAnalysis.com – Unilever Financial Ratios

Investing.com – Unilever PLC (ULVR) Financial Ratios

Unilever Investor Relations, Q4 2024 and other Results Presentations

All financial data sourced from Unilever’s official annual reports, investor statements, and reputable financial information platforms as of August 2025.

https://www.unilever.com/files/unilever-annual-report-and-accounts-2024.pdf

https://www.unilever.com/files/ir-q4-2024-full-announcement.pdf

https://discountingcashflows.com/company/UL/ratios/

https://www.macrotrends.net/stocks/charts/UL/unilever/financial-ratios

https://stockanalysis.com/stocks/ul/financials/ratios/

https://stockanalysis.com/stocks/ul/dividend/

https://www.dividendmax.com/united-kingdom/london-stock-exchange/household-goods/unilever-plc/dividends

https://www.fidelity.co.uk/factsheet-data/factsheet/GB00B10RZP78-unilever-plc/dividends

https://www.unilever.com/investors/annual-report-and-accounts/

https://www.hul.co.in/investors/annual-reports-and-performance-highlights/annual-reports/

https://www.unilever.com/investors/annual-report-and-accounts/archive-of-annual-report-and-accounts/

https://www.annualreports.com/Company/unilever-plc