Wednesday tips round-up: Unilever, Sirius Minerals

22nd Jan 2014 08:46

The latest figures out on Tuesday from Unilever and SAB Miller should cheer investors. Both companies revealed good growth in emerging markets. However, if one looks deeper into the numbers they will find that in the case of the latter they come with an important caveat. Whereas five years ago food sales at Unilever accounted for about 60 per cent of the firm's profits now that proportion is closer to 50 per cent. The reason for that is the ease of selling personal care products in emerging markets. The consumer goods giant does not provide a detailed breakdown of its assets for each operating segment nor data on returns on capital. Even so, that the food unit is a laggard is quite clear. This is why some observers are now saying the company should split itself into two businesses. That would allow the emerging-markets focused personal care products provider to fetch a higher earnings multiple in markets than is now the case. On the other hand, such a division would also carry costs, even if only in terms of loss of scale. However, if Unilever can't return its food arm to growth, then perhaps it should let it go to someone who can, says the Financial Times' Lex column. Shares of potash miner Sirius Minerals have been under the weather ever since the planning process for its proposed new mine on the North Yorkshire national park hit a snag last summer. The company now has potential buyers for almost all of the 5m tonnes of the mineral a year which it expects to be producing by 2018. Simply put, the demand for potash is there. Unfortunately, the success of its £1.1bn project hinges on the successful conclusion of the above planning process, as do the returns on the bonds which will be issued to finance the project. However, its ability to issue that debt only requires that 2m tonnes of that production be nailed down beforehand. That may be achieved before it submits for planning permission again in July. There are also other imponderables, such as what will happen to potash prices but the stock still looks like a fair long-term speculative bet, says The Times' Tempus. ABPlease note: Digital Look provides a round-up of news, tips and information that is impacting share prices and the market. Digital Look cannot take any responsibility for information provided by third parties. This is for your general information only as not intended to be relied upon by users in making an investment decision or any other decision. Please obtain a copy of the relevant publication and carry out your own research before considering acting on any of this information.