P&G vs Unilever Executive Summary

Unilever and P& adenineG Comparative Analysis Executive stocky The Consumer Products Industry is the biggest patience in the conception at the moment, with total revenues amounting to about 50% of all goods sold. It is comparable to the GDP of the quaternary biggest economy in the world, and entails most of the products we social occasion in our e actually day lives. in that respect atomic number 18 3 key incidentors that pound the industry today developing markets, the emerge middle-class of developing countries and the millions of baby boomers in developed markets.The industry awaits many challenges no breadheless, untold(prenominal) as an increase in prices of edged visibles, crude oil, crops and commodities in particular oil prices the everlasting broadening of the industry ca designd by globalisation and an increasing tendency for consumers to shop at mass-discount shops rather than the vigorous- complete companies within the Industry. The main players in t his industry atomic number 18 Unilever, P& deoxyadenosine monophosphateG, Nestle, Johnson & antiophthalmic factorJohnson, PepsiCo, Mars and Henkel. This report revolve aroundes on the comparative analysis of Unilever and P& axerophtholG. Some of P& angstromGs most famous brands are Braun, Gillette, Oral-B and Pantene.These and the top 50% of most well known brands account for 90% of P& international axerophtholereG sales and frequently than than 90% of its profits. Furthermore, 25 of these 50 brands go as far as generating more than $1 one thousand million each in annual sales. Overall, the conjunction markets its brands in all over 180 countries crosswise the Americas, Europe, the Middle vitamin E and Africa (EMEA) and the Asian region. Despite the recent crisis, P&type AG continued to throw egression due to a out parent progress of investments in innovation, portfolio expansion, marketing support and consumer appraise. The company is as well as investing $2 bil lion in R& adenylic acidD annually.As for Unilever, the company owns more than four hundred brands, and 2 million people use Unilever an product on any effrontery day. Unilever is based in 100 countries and sells products into more than 150. The long-term goals are continuous advantage and developing a sustainable demarcation, and the company has over 6000 people working in R&D across the globe for a total of $1,3 billion worth of R&D investments in 2011. In ground of fiscal comparative analysis, market Ratios for cardinal companies manoeuvre that Unilever and P&G are attractive investments for investors.P&G has a high(prenominal) EPS on average out and is a more preferable investment soon for investors looking for high egests. The market dimensions alike show that Unilever has been improving its earnings and has a higher(prenominal)(prenominal) earning potential in the prox as its EPS, P/E and payout ratio earn been improving over epoch. P&G on the fo rmer(a) hand currently has a higher yield as shown by the Dividend reach ratio simply its performance seems to be declining gradually as evident by the worsening Market Ratios.The Liquidity ratios of some(prenominal) companies clearly point out to the fact that the companies are non in a position to meet their immediate liabilities. However, this is not a matter of concern as both companies are large, stable and ceremonious businesses. The liquidity ratios show an adverse office staff for the companies even though they are level-headed otherwise. This is because the industry is such that the companies must have high current liabilities over elongate periods of time and busted assets due to very agile lineage turnover rate.The consumer goods industry requires that a companys inventory turns be fast and the accounts payable be large over long periods of time to have a high level of efficiency and consequently profitability. It also assures both corporations a competitive ed ge and for this source liquidity ratios must remain embarrassed which may seem unhealthy but in reality is helpful in this particular industry. From 2007 to 2011 Unilever agreeablely had higher growth judge in revenue, operating and net profit. During this time span P&G profit growth rates even were veto.This indicates that P&G is from an absolute point of view lock in bigger and more paid, but Unilever is undercover work up. A aboutr look at the profitability ratios shows that both companies are doing very well with gross ratios of 43,80% (Unilever) and 50,56% (P&G). These ratios are above the 40% industry average and especially P&G is very profitable. This first indication is consistent with the further analysis of profitability ratios such as the net profit margin, which is even-tempered is 5% higher for P&G than Unilever.So far P&G has managed the increasing pressure on margins due to increasing raw material prices more successful than Unilever, but h as to even off its cost-structure to stop the ongoing negative drift of the last quintet years. Regarding efficiency ratios alike return on cracking ratios the antecedent dominance of P&Gs monetary performance cannot be confirmed. Instead, Unilever outperforms P&G in all efficiency ratios, like the return on invested capital (16,89% vs. 10,42%), the return on assets (11,26% vs. 8,99%) or the return on capital employed (16,66% vs. 14,06%) for the time span mingled with 2007 to 2011.This indicates Unilever outstanding capabilities to allocate its resources to the most profitable investments and to use the assets as efficient as possible. In impairment of the debt situation for P&G and Unilever, analysis has shown that Unilevers business is higher leveraged (D-E ratio 2,13) than P&Gs (1,09). This and the higher efficiency also explain why Unilevers return on candor is more higher (36,06%) than P&Gs (18,78%). As a result of its high profitability and low debt- to- paleness ratio, P&Gs TIE ratio is also much higher than Unilevers (11,95 vs. ,61). The analysis has shown that P&G is a more conservative financed and highly profitable business whereas Unilever is more aggressive in terms of growth. Unilever already is highly efficient and has fully grown much faster than P&G over the last quin years. If this trend is not reversed P&G will face increasing competition from Unilever in the close future. Weve calculated the average over five years for each companys activity ratios and compared them as such because these ratios seemed to be relatively stable over time.They also appear to be in line with the companies strategies and policies, starting with the Asset Turnover existence proportional to the return on equity Unilever has a turnover almost fork-like that of P&G. As weve mentioned earlier, fast inventory turnover is a singularity of the industry, but Unilever seems to be doing improve than P&G in these terms as wel l. We believe that Unilevers rivet on food products gives it a higher Inventory Turnover (9,09) compared to P&Gs household products focus (5,41).This gives Unilever a lower average age of inventory. Unilever also has a higher day Purchases Outstanding Ratio, meaning they stretch suppliers much more by taking 88,40 eld to pays them, compared to P&Gs 65,48 old age. Strictly speaking, we would expect P&G to display a higher bargaining power to do its much higher Revenue, but this ratio shows a different story. Reasons for this could be due to geography, both in terms of residues in topical anaesthetic management and in local regulations, and to the transmutation of suppliers induced by the focus on 50 or 300 brands.In terms of the Day Sales Outstanding Ratio, it is P&G that seems to have the better policy this time. They convert Accounts Receivable to currency in about 28 days versus 35 days for Unilever. Again, although smaller, this difference is strategic because it can reflect a difference in policies or diversity of suppliers. These two factors combined, low DSO and high DPO Ratios, lead to a negative Net Working gravid such as we had seen in our Walmart analysis. Compared to Assets, P&G has a negative NWC of -27% and Unilever of -20%.In conclusion, both companies show very operose financial health given the crisis, especially compared to the rest of the market. They are defensive value which show that their policies are working to stand the crisis. In absolute terms P&G is doing better as a company because it is a bigger, stronger, established firm. In relative terms the ratios winder another picture though Unilever has been catch up to P&G in recent years, and their growth and financial management seems to be stronger than that of P&G.