UNILEVER N.V. Common Stock (NYSE: UL) stock fell over 1.4% in the pre-market session of Feb 5th, 2021 (Source: Google finance) after the company in the fourth quarter of FY 20 has reported 0.9% fall in the adjusted earnings per share to €2.12. The company generated free cash flow of €7.7 billion in 2020 compared to €6.1 billion in the prior year. The improvement was driven by the favorable working capital movements, as the company has increased the focus on receivables. Capital expenditure fell after re-phased investments light of Covid-19, and there was a reduction in cash tax paid partly driven by tax on disposal of Spreads in the prior year. The closing net debt was €20.9 billion compared to €23.1 billion as at 31 December 2019 driven by higher free cash flow and currency impact. Net debt to underlying EBITDA was 1.8x as at 31 December 2020 versus 1.9x in the prior year. The Return on invested capital has decreased to 18.0%, compared to 19.2% in the prior year. This reflects higher goodwill and intangible assets from the Horlicks acquisition and lower underlying operating profit after tax.
Moreover, for the full year the company grew underlying sales by 1.9%, with volumes growing 1.6% and 0.3% from price. In the fourth quarter underlying sales growth was 3.5%, with volumes of 3.3% and 0.2% from price. The growth was driven by hand and home hygiene products, laundry and in-home food and refreshments. Food solutions and out of home ice cream sales fell due to channel closures. Underlying operating profit was €9.4 billion, which represents a decline of 5.8% including a negative impact from currency of 6.5%. Underlying operating margin contracted by 60bps and gross margin reduced by 50bps, including a negative impact of 90 bps from additional costs needed to adapt and run the supply chain and adverse mix from Covid-19.
Furthermore, Emerging market rose 1.2% as China and India returned to growth, after strict lock-downs in the first half of the year. China returned to growth in the second quarter as restrictions were eased, delivering high single digit growth in the second half. Latin America rose in mid-single digit and Indonesia grew slightly, though declined in the final quarter. Developed markets grew 2.9%, on the back of strength in North American in-home foods. Europe declined for the full year, but grew in the fourth quarter.