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BENGALURU, India: Second-quarter sales at Unilever fell much less than expected as a pick up in eating at home during coronavirus lockdowns boosted demand for products such as Hellmann’s mayonnaise and Breyers ice cream.
Shares in the consumer goods giant rose as much as 8.7 percent in early Thursday trading, as the Anglo-Dutch group surprised analysts who had expected a much bigger hit to sales from the closure of restaurants, schools, cinemas and outside venues.
“Overall, Unilever’s strong performance in the period and an increasingly focused strategy has led to a sigh of overdue relief from investors,” said Richard Hunter, head of markets at interactive investor.
Underlying sales fell 0.3 percent in the three months ended June 30, compared with analysts’ mean forecast for a 4.3 percent drop.
That was still the first decline in quarterly sales since the third quarter of 2004, according to Jefferies analysts.
Underlying sales in North America jumped 7.3 percent in the first half, with volumes up as much as 20 percent in some categories, Chief Financial Officer Graeme Pitkethly said. The US is Unilever’s biggest market by revenue.
Breyers, Magnum and Klondike ice-cream, along with Hellmann’s mayonnaise and Knorr soups, were strong performers in food, while Suave beauty products did well in hygiene, he said.
HIGHLIGHTS
- Helped by strong growth in North America.
- Unilever to put parts of tea business in separate unit.
- Shares jump as much as 8.7 percent.
“We see no signs of North America slowing down,” Chief Executive Officer Alan Jope told analysts, despite coronavirus-cases spiking in the US.
Other virus hot-spots were more of a concern, however.
“Things are starting to get into the toughest phase in Latin America and Africa,” Pitkethly said, adding a surge in gang-related violence in Mexico was making business difficult there.
Highlighting the huge disruptions caused by the pandemic, Unilever said food service sales declined by nearly 40 percent and out-of-home ice cream by nearly 30 percent in the first half. However, e-commerce sales were up 49 percent, with North America leaping 177 percent. Pitkethly said the firm’s food solutions business, which caters to canteens, schools and cafeterias and makes about 5 percent of group sales, was starting to recover as lockdowns are lifted.
While sales were down 70 percent in March, the decline has eased to 38 percent, with the improvement accelerating, he said.
Unilever said that after exploring options for its tea business, it had decided to keep its operations in India and Indonesia and its ready-to-drink joint venture with PepsiCo. The rest of the tea business, which sells Pukka Herb and PG Tips, will be separated into an independent entity.
Some analysts think that Unilever could ultimately be more exposed to the pandemic than rivals such as Procter & Gamble and Nestle due to its greater reliance on emerging markets, where it makes about 60 percent of annual sales.