Comparison of Financial Performance: Unilever vs Reckitt Benckiser

Running Head: Financial Management
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Financial Management
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Comparison of financial performance between Unilever and Reckitt Benckiser
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Executive Summary –
Unilever and Reckitt Benckiser are largest companies from consumer goods sector. They
directly deliver their products and services to the customers with high level of innovations
and continuous improvement in their products and services through new technologies and
innovative or sustainable products. The main source of revenue for Unilever is their personal
care products and main source of revenue for Reckitt Benckiser are their health and home
products which are delivering to their customers. By comparing the financial performance
through calculating various ratios as profitability ratios, liquidity ratios, efficiency ratios,
gearing ratios and investment ratios, we find that Unilever had more profit margin and return
on assets as compare to Reckitt Benckiser during the past three years. Unilever has more
efficient in managing their liabilities and use its assets, company has more ability to repay its
shorts term obligation and long term debts, they have more equity than its assets and
company also has gave more return to their investor as compare to Reckitt Benckiser over the
past three years. Future prospects of Unilever will more bright than Reckitt Benckiser
because as per analysts also earning of Unilever will continuously increase in the next couple
of years. So, we can say that, investor should buy the shares of Unilever because it will give
more return to them as compare to Reckitt Benckiser.

Comparison of financial performance between Unilever and Reckitt Benckiser
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Table of Contents
Introduction –.............................................................................................................................3
Financial Analysis of Unilever and Reckitt Benckiser –...........................................................4
Ratio analysis of Unilever and Reckitt Benckiser..................................................................4
Corporate Strategy and the future prospects –...........................................................................7
Conclusion and Recommendations –.......................................................................................10
Learning Statement –...............................................................................................................11
References................................................................................................................................14
Appendixes-.............................................................................................................................17
Appendix 1...........................................................................................................................17
Appendix 2-..........................................................................................................................19

Comparison of financial performance between Unilever and Reckitt Benckiser
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Introduction –
The consumer goods sector is a category of companies which relate to products purchased by
person rather than by industries and manufactures. Companies which are includes in
consumer goods sector deliver their products to the customers with high level of innovation
and at high rate of turnover and in this sector, market is highly competitive. It includes
companies which are involved in clothing, food production, electronics, beverages and
automobiles (Viardot, 2017). There are various companies which are involved in consumer
goods sector and out of this Unilever and Reckitt Benckiser is largest company from
consumer goods sector. Unilever is an oldest multinational company and British Dutch
transactional company from consumer goods sector and it’s headquartered in London, United
Kingdom and its products are food, beverages, beauty products, cleaning agents and personal
care products. Unilever is fifth most valuable company in terms of revenue and sale in
consumer goods sector.
Unilever sell their products in 190 countries in whole world and it has approx. 400 brands but
company focus on 13 brands which have sales in billions (About US, 2019). Food and
beverages is main source of revenue for Unilever because it contributes 40 per cent of the
total revenue of the company and another source of revenue for the company is to segment its
products. Personal care products are also main source of revenue for the company and it is
generated about 20.6 billion euros out of total revenue as 50.9 billion euros in 2018 (Revenue
of the Unilever Group worldwide 2005-2018 by product segment, 2019). Reckitt Benckiser is
a British multinational company which includes in consumer goods sector and its products
relate to health, hygiene and home products and its revenue is 11.5 million pounds in 2017
(About US, 2019). Environmental factors are affecting to the revenue of the company and it
includes economic, legal, political, social and technological factors (Munro and Belanger,
2017). The report consists of comparative financial performance of Unilever and Reckitt
Benckiser, their corporate strategy and future prospects of both companies.

Comparison of financial performance between Unilever and Reckitt Benckiser
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Financial Analysis of Unilever and Reckitt Benckiser –
There are various techniques and tools for the calculation and analysis of financial
performance of the company. The ratio analysis, the portfolio analysis and capital budgeting
are the main tools which are used by the company for analysis of financial performance
(Bhimani, 2012). The ratio analysis is an important tool which is used by Unilever and
Reckitt Benckiser for analysing their financial performance (Peterson Drake and Fabozzi,
2012). For a comparative financial performance of Unilever and Reckitt Benckiser, we
calculate various ratios as profitability ratio, liquidity ratio, efficiency, gearing and
investment ratio.
Ratio analysis of Unilever and Reckitt Benckiser (Appendix 1 and Appendix 2) –
1. Profitability ratios – Profitability ratios are calculated by investor to compare the
profitability between two companies in same industry or in same sector. This ratios
show that at what extent operation of the company are effective (Tulsian, 2014). For
Unilever, profit margin and return on assets are high and also improving over the
three year period but in case of Reckitt Benckiser, their profit margin are low and also
did not increased during the past three years because revenue of Unilever was €
5,37,15,000 and revenue of Reckitt Benckiser was €1,15,12,000 in 2017, so revenue
of Unilever was more than Reckitt Benckiser by €4,22,03,000 and revenue of
Unilever was also more than Reckitt Benckiser in 2016 & 2015, so it effect positively
on the gross profit and operating profit of the Unilever and it also shows that cost of
operations and long and short term debts were low for Unilever as compare to Reckitt
Benckiser.
2017 2016 2015
Unilever R.B. Unilever R.B. Unileve
r
R.B.
Profitability Ratio
Net profit margin 11.27 0.54 9.83 0.19 9.21 0.20
Operating margin 16.3 0.27 14.6 0.28 13.88 0.27
Return on assets 10.06 16.7 9.19 10.17 9.39 11.42
2. Liquidity ratios – Liquidity ratios are calculated by investor to compare the liquidity
position between two companies in same sector. This ratios measure ability of the

Comparison of financial performance between Unilever and Reckitt Benckiser
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company to repay its short term obligations (Brigham and Houston, 2012). Ideal
current ratio is 2: 1. In 2015 and 2016, Unilever had more ability to repay its short
term obligations as compare to Reckitt Benckiser because Unilever’s current assets I
2016 was €1,38,84,000 and current liabilities was €2,05,56,000, so there ratio were
0.68 and current assets of Reckitt Benckiser was €34,50,000 and current liabilities
were €54,01,000, so there ratio was 0.64, so it shows that Unilever had more ability to
repay its short term obligations but in 2017, Unilever had 0.73 ability to repay its
short term obligations whereas, Reckitt Benckiser had 0.82 ability to repay its short
term obligations, so the company grew faster from 2016 to 2017 because in 2017
Reckitt Benckiser had current assets €54,24,000 and current liabilities €65,76,000,
current assets were less than current liabilities only by €11,52,000 whereas currents
assets of Unilever was €1,69,83,000 and its current liabilities were €2,31,77,000,
which is more by current assets by €61,94,000, so it shows that Reckitt Benckiser had
more ability to manage its short term obligations as compare to Unilever in 2017.
2017 2016 2015
Liquidity Ratio Unilever R.B. Unilever R.B. Unileve
r
R.B.
Current Ratio 0.73 0.82 0.68 0.64 0.63 0.57
Quick Ratio 0.56 0.64 0.47 0.50 0.63 0.44
3. Efficiency Ratio – This ratio is used by the investor to measure the financial
performance of the company in which they want to invest. This ratios measure the
ability of company to use it assets and at what extent company have ability to manage
its liabilities. It also measure in how many time firms are able to manage its business
through assets and liabilities (Leach, 2010). So, the efficiency level of both company
decline during the past three years. Efficiency ratio of Unilever decline less as
compare to the efficiency ratio of Reckitt Benckiser from 2016 to 2017 because
receivables of Unilever was €42,04,000 and its total current assets were €1,69,83,000
in 2017 which was increased from 2016 to 2017 by €30,99,000 and total current
assets of Reckitt Benckiser in 2017 was €54,24,000 and in 2016 was 34,50,000, so it
was increased from 2016 to 2017 by €19,74,000, it shows that increment in total
current assets were more in Unilever. So, as per ratio analysis of both companies,