How Will Brexit Impact Unilever?

+15.40%
Upside
48.52
Market
55.99
Trefis
UL: Unilever logo
UL
Unilever

The Brexit’s impact on consumer products giant Unilever is expected by many to be largely limited over the long term. Admittedly, the outcome of negotiations that have yet to commence is unclear. That said, the economic balances that presently prevail among countries, markets and companies are likely to persist, so long as the most pragmatic parties drive them.

Unilever has a presence in over 130 countries across the world and most of its products are manufactured locally. Unilever has taken pains in the last few years to localize its manufacturing facilities to reduce transportation costs and hedge against currency fluctuations. Therefore, the uncertainty around the UK’s trade agreement with the European Union is likely to have limited impact on Unilever.

Further, Unilever reports its financials in Euro, which has fared comparatively better than GBP. Even if the dollar continues to strengthen against the Euro, it will only benefit Unilever’s revenue from the US due to the translation impact. It is worth noting that further depreciation of the Euro is possible if more countries decide to leave the EU. [1]

Relevant Articles
  1. Should You Pick Unilever Stock At $50?
  2. Does Unilever Stock Have More Room For Growth?
  3. Unilever Stock Seems Poised For A Jump
  4. Can Unilever Stock Maintain Its Outperformance?
  5. Forecast Of The Day: Unilever’s Foods & Refreshment Revenues
  6. Forecast Of The Day: Unilever’s Foods & Refreshment Revenues

Lastly, Unilever plans to continue its existing operations in the UK undeterred even after Brexit. However, it did caution that “the way the company is run will be fundamentally different”. [2] We believe that this could potentially involve a change in the company’s primary headquarters to a location outside the UK. Nevertheless, Unilever is already co-headquartered in Netherlands in addition to London. Thus, the impact of such a transition is likely to be comparatively limited in the short term and minimal in the long term.

Our price estimate of $45 for Unilever is nearly the same as its current market price.

See our complete analysis for Unilever here

Get Trefis Technology

Notes:
  1. More countries could follow UK out of the EU…, The Telegraph, June 25, 2016 []
  2. Unilever bosses say firm ‘would be hit by Brexit’, BBC, June 16, 2016 []