Unilever Market Hypotheses

7/25/2019 Unilever Market Hypotheses

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PART A

Applicationand Critical evaluation of ecient market hypotheses for

Unilever PLC during a period from 01.01.2013 to 31.12.201

INTRODUCTION

Unilever is a British-Dutch multinational consumer goods company co-

headquartered in Rotterdam, Netherlands, and London, United

ingdom! Unilever o"ns over #$$ %rands "ith products including &ood,

%everages, cleaning agents and personal care products! 'roducts are


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availa%le in more than ()$ countries! *t is a dual-listed company

consisting o& Unilever N!+!, %ased in Rotterdam, and Unilever 'L,

%ased in London

Unilever "as &ounded in ()$ %y the merger o& the Dutch company

.argarine Unie and the British company Lever Brothers! During the

second hal& o& the /$th century the company increasingly diversi0ed

its products and e1panded its operations "orld"ide! .ost o& Unilever2s

income comes &rom 3ast .oving onsumer 4oods 53.46!

7he Dutch and U %ranches o& the company share the same %oard o&

directors and operate as a single %usiness! 7he company has t"o share

prices though, one &or Unilever N+ and one &or Unilever 'L! 8uro is the%ase currency &or all Unilever accounts, so costs, revenues and pro0ts

need to %e converted into this currency! 81change rates a9ect

Unilever2s pro0ts!

Unilever targets the su%ur%an and ur%an middle class : upper middle

segment o& the population! ;$< o& the pro0ts are created %y the top /$

%rands "ith 'ersonal are and 3ood products leading the lot! 3ood

products gives them an edge over their nearest rival 'rocter and4am%le! *nnovation and regional adaptation policies and have helped

increase their customer %ase, "ithout losing out on stringent quality

requirements! 7o meet large regional demands in Asia and A&rica,

manu&acturing processes have %een outsourced to cheaper locations!

Unilever has gro"n aggressively over the last ($ to (= years and is a

ma>or player in the 3.4 sector currently and the &uture!

833**8N7 .AR87 ?@'7?8*

7his hypothesis is %ased on the &act that it is not possi%le &or investors

to purchase undervalued stocCs and sell stocCs &or inated prices since

all the in&ormation pertaining to the said stocCs are availa%le &or

revie"! 7here%y to attain higher returns an investor has to taCe risCs

"ith his investments!


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ince the stocCs have already %een accurately priced and all the

in&ormation is transparent, the use o& any trading strategies or e1pert

stocC evaluation does not help "ith maCing or predicting pro0t or

related risCs! 7hat is, there is no &ounded scheme to &undamentally or

technically analyEe a stocC marCet trend to ensure consistent success

"ith stocC marCet trades!

7he theory has %een highly controversial over the years! ne such

argument is ho" even though priced the same, the valuation o& stocCs

may %e or seem di9erent to di9erent investors! *n addition to this the

&act that the reaction and response time o& stocCs to in&ormation and

investors vary is another point against the hypothesis! 7he &act that

human errors and anomalies a9ect stocC prices can %e used to predict

or ensure returns &rom investments! Another argument states that i&this hypothesis is true the investors can place all their assets in a given

inde1 and ensure marCet returns similar to all in the marCet and thus

minimiEe or eradicating any possi%le e1penses in the investment and

maintain the marCet inde1!

B87A

Beta is the historical measure o& risC o& a security in comparison to the

marCet as a "hole! *t also an indicator o& the security2s a%ility torespond to positive and negative s"ings as per the rally in the marCet!

7he %eta o& Unilever is $!F; "hich sho"s a very strong aGnity "ith the

marCet! 7here&ore i& the marCet has a good rally, and closes on a high,

you can rest assured that Unilever share prices "ould also increase!

As Unilever2s %eta is lesser than (, though it has a strong a tendency to

s"ing "ith the marCet, it is still less risCier than the marCet!

7he possi%ility o& Unilever2 returns is less risCy than the marCet!7he e1pected rate o& return o& Unilever %ased on risC

7he e1pected annual return o& Unilever is H!=$< "hereas the required

return as per the A'. model is #


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Evaluation of EMH for Unilever PLC- LON: ULVR

1/!/"1#- Share prices decreased by 5%

Annual report &or the year /$( "as released to the pu%lic! As per the

report, the turnover &or the year /$( had decreased %y < &rom the

previous year! 7his seems to %e reason %ehind the decline in investor

sentiment &or Unilever shares during this "eeC! 7his "as a temporary

decline triggered %y the ne"s o& a lo"er turnover! 7he shares

re%ounded the ne1t "eeC %y (

7he annual turnover o& Unilever decreased %y


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7he main reason &or the gloom in spite o& the increase in the operating

pro0t "as %ecause core operating pro0t &ell &rom ;!$= %illion 8uros to

;!$( %illion 8uros!

?ence all in all , the results "ere pale in comparison to the previous

year o& /$(/, hence the &all in share prices! *t is interesting to note thatin the previous "eeC -/$I(I/$(# -Unilever shares increased %y /ect cargo and general cargo %ased in Ke%el Ali

3ree one in the United Ara% 8mirates! 7hey customiEe comprehensive

supply chain solutions &or customers "hich are usually a com%ination

o& Marehousing, ross tuGng, 3reight, ustoms learance :

Documentation, Du%ai .unicipality *nspection and learance,?andling, *nventory .anagement and Redistri%ution!

7ri%urg has * certi0cations 5* )$$(/$$FO ?A (F$$(/$$;O

* (#$$(/$$#6 "hich is a testimonial to the stringent quality, it

incorporates into its processes and systems! 7his has made 7ri%urg

3reight ervices, the logistics service provider o& choice %y leading

companies in the .iddle 8ast! ome o& its Cey clients include


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7he unit o& measurement o& space , "hich 7ri%urg sells is Qc%m2 or cu%ic

meters "hich is essentially derived as length 1 %readth 1 height, "hich

is charged on a daily %asis!

7he rate &or ool torage is A8D (Ic%mI day "hereas &or Dry torage,

the rate is A8D $!=$Ic%mIday!

3R8*4?7 3RMARD*N4 7ri%urg moves cargo either %y sea, air or land

on %ehal& o& its customers "ithin Asia, 8urope and North America! )$o% related costs "hich are

incurred to e1ecute a particular tasC!

a6 Marehousing-i! torage costs, "hich is primarily the rent o& the &acility!ii! Utilities- D8MA!

iii! Ko% related e1penses- consuma%les liCe "rapping 0lm,pallets , straps etc!

%6 3reight 3or"arding : 7ransportationi! Actual costs paya%le to shipping lines, Du%ai ustoms,

Du%ai 'ort Morld etc!ii! 7rip charges &or trucCs procured &rom vendorsiii! Any other vendorIagency charges directly related to the

>o%!

*ND*R87 7

*ndirect costs o& 7ri%urg &or Marehousing and 3reight 3or"arding :7ransportation can %e classi0ed into the %elo" categories

i! ta9 ostsii! RegulatoryIompliance ostsiii! *nsurance costsiv! BanC osts or ost o& apitalv! *7 and ommunication osts


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vi! onsuma%les and other unallocated costs!vii! .arCeting ostsviii! 3uel osts

N! B! *n 3reight 3or"arding Dept- D8MA costs are considered as an

*ndirect ost!

H< o& its costs are .anpo"er and ta9 related e1penses , as

discussed earlier, its higher than average investments in manpo"er is

%ecause it tries to o9er e1i%ility to its customers in terms o& operating

time and e1ecution timelines as its di9erentiator &rom other logistics

companies!

&UD)ETIN) PRACTICE+

7he annual %udgeting is a very important e1ercise in 7ri%urg %ecause it

operates in an industry "here daily cash requirements are high !

7here&ore, the central theme o& the %udget is

i! 7o map the costs o& running and maintaining the e1isting

operation!ii! LinCing the %udget to drive organiEational gro"thiii! trategic Allocation o& resourcesiv! Alignment o& organiEation "ith the competitive strategy

7he %udgeting practices employed at 7ri%urg are goal driven! 7he aimis to try and achieve as much comprehensiveness as possi%le so as to

arrive at a %udget "hich is realistic and achieva%le so that

organiEational goals can %e set accordingly!

Based on the %udget, the "orCing capital requirements are determined

and arranged!

7R*BUR4 BUD4878D +I A7UAL2 /$(#

Attached is the Budgeted vs Actual 0gures o& the 7ri%urg Budget o&/$(#

*n the /$(# 7ri%urg Budget &or all divisions, the total pro>ected %udget

"as &or a revenue o& A8D H/!F million, targeting a 4ross 'ro0t o& A8D

/=! ) million and a Net 'ro0t o& A8D F million!


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7he actual achieved revenue "as A8D =F!F= million, "ith a 4ross 'ro0t

o& A8D (F!; million and a net loss o& A8D ($/,$$$!

B8R+A7*N

(! *t is noted that there is a ma>or gap %et"een the %udgeted

revenues and the actual revenues! 7his is primarily %ecause the

sales targets &or the main service o9erings o& 7ri%urg has not

%een met!/! torage ales &or Marehouse ( and Marehouse /, "hich is one o&

7ri%urg2s core services missed its %udget %y A8D !$# million! 3reight and 7ransportation "hich is another core service &or

7ri%urg did not achieve its target %y A8D /!$F million!#! 81ternal torage ales "hich is an ancillary service surprisingly

did e1ceedingly "ell and achieved more than t"ice its %udget i!e!

A8D (!F million!=! ross tuGng again a primary service &or 7ri%urg &ailed to achieve

its targeted volumes %ut it o9set some o& the gap through

un%udgeted revenue &rom it2s ancillary activities!H! Direct osts &or Marehousing have increased more than the

%udgeted rates, this is primarily due to the increase in the land

rental rates %y Ka&Ea in /$(#, increasing the storage costs!;! Ko% e1penses &or Marehousing have increased primarily due to

the increase in maintenance o& the material handling equipmentliCe 3orCli&ts, 7's etc!F! Ko% e1penses &or 3reight 3or"arding have increased %ecause o&

increase o& 7erminal ?andling harges %y D' Morld at a rate o&

A8D =$I container and 8-toCen charges %y A8D ($Icontainer

Recommendations

(! *ncrease the e1ternal storage capacity %y catering to other

industry verticals liCe chemicals, oil and gas etc!/! *ncrease the selling prices o& storage %y /$< &rom the current

rates to cover the increase in land prices %y KA3A- &or ne"customers!

! 3or e1isting customers, increase the storage tari9 %y (=< at the

time o& rene"al o& the annual contract!#! 3or &reight &or"arding customers, increase the service &ee %y A8D

$ to cover the additional cash outo"


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RE,ERENCE

.r! NoEer a%avala

4roup 3inance .anager

' Bo1 (H)), Ke%el Ali 3ree one

Du%ai, United Ara% 8mirates

7el S);( # FF(= $/= 81t! /F O .o% S);( =$ H=)$$F# O 3a1 S );(

# FF(/=$

8mail noEerTtri%urg!com

Me%site httpII"""!tri%urg!com
mailto:[email protected]://www.triburg.com/http://www.triburg.com/mailto:[email protected]

Unilever Market Hypotheses

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