Despite Wall Street's fear and loathing about the credit crisis, consumer-product companies keep going like gangbusters. This week, Kraft
The numbers
Total revenue grew 3%, but "organic sales growth" (adjusted for new businesses and currency effects) was a remarkable 5.8%. The company continues to shed low-growth potential businesses -- like the North American laundry division, where it battles with P&G -- in favor of higher-growth segments. This organic sales growth tops management targets of 3%-5% per year, and it was a notch stronger than Procter & Gamble at 5% and Kraft at 4%.
The operating margin of 13.7% improved by 30 basis points, excluding restructuring charges. EPS from continuing operations grew 10%, helped by lower interest expenses and tax rates. Despite rising commodity costs, Unilever continues to demonstrate its ability to adjust its prices and product mix to improve the operating margin. The company is making progress toward its goal of a 15% operating margin by 2010.
Change or die
Back in 2005, the company embarked on a strategy to reinvigorate its portfolio of brands, drive innovation, and streamline its overhead structure. In this quarter's release, the company announced plans to reduce expenses by 1.5 billion euro over the next three years, including an estimated 20,000 job cuts.
The company is also restructuring the way it manages the business. From its current operations in 100 countries across 20 product categories, it plans to shrink to 25 regions and 10 categories. This restructuring is intended to eliminate innovation bottlenecks, speed decision-making, and help new products get to market faster.
Remember, Unilever was founded in 1885, and it's easy for organizational inertia to set in. From time to time, it's necessary to rearrange the structure and allow new ideas to percolate. Unilever appears to be making solid headway in shaking the tree.
Defensive growth
With the overall market looking a bit shaky these days, finding the right stocks to earn solid returns in any market conditions can be a risky prospect. Consumer-products companies like Unilever have traditionally been considered defensive stocks -- not glamorous, but solid performers in sideways or down markets. Other companies in this same mold include General Mills
For more news from defensive growth companies, check out:
Unilever, Kraft, and Johnson & Johnson are all Motley Fool Income Investor recommendations.
Fool contributor Timothy M. Otte samples organic fare from Dallas. He welcomes comments on his articles, but doesn't own stock in any of the other companies mentioned in this article. The Fool's disclosure policy is an investor's best defense.
