Unilever Registers Less Sales Drop in Q2
Consumer goods giant Unilever PLC displayed a better performance during the coronavirus lockdowns. The surge of eating at home during the lockdowns drove demand for its foods and essential items.
The Anglo-Dutch company revealed on Thursday that its second-quarter sales dropped by 0.3% in the three months ending on June 30.
The figure was less than what analysts had expected. The group gained more demand for some products. His included Knorr soups, Breyers, Magnum, and Klondike ice-cream ice cream, Hellmann’s mayonnaise, as well as Suave beauty products.
As a result, the London-based firm saw its shares jump by 8.7% in early trading on Thursday. The stock was last up by around 9.2%.
Head of markets Richard Hunter said Unilever’s success in the period and its increasingly focused strategy has provided investors a sigh of overdue relief.
Analysts had forecast a 4.3% drop in its underlying sales in three months ending on June 30. The latest decline was still the first fall in quarterly sales since the third quarter of 2004, according to analysts.
The company’s chief financial officer (CFO), Graeme Pitkethly, said the group posted a 7.3% improvement in its underlying sales in North America during the first half, with volumes climbing as much as 20% in some categories.
The US is currently the consumer goods giant’s biggest market by revenue.
Unilever’s Potential Headwinds
While chief executive Alan Jope stated that they see no signs of North America slowing down, despite the rise in the number of COVID-19 cases in the US, other locations, where a large number of people had tested positive for the virus, were more of a concern.
Some analysts also believed Unilever could eventually be more exposed to the pandemic than its competitions like Procter & Gamble (P&G) Company and Nestlé SA because of its bigger reliance on emerging markets, where it generates around 60% of annual sales.
Things are starting to get into the toughest phase in Latin America and Africa. This is according to Pitkethly. He added that an increase in gang-related violence in Mexico was weighing on the business there.
With the pandemic causing major disruptions in its business, Unilever’s food service and out-of-home ice cream sales almost weakened by 40% and 30% respectively in the first half. On the other hand, sales in the e-commerce segment advanced 49%, with North America rising by 177%.
The CFO also said the firm’s food solution business, which caters to canteens, schools, and cafeterias and accounts for about 5% of group sales, was beginning to pick up as coronavirus lockdown measures are lifted.
While sales tumbled by 70% in March, the slump has been reduced to 38%, with growth gaining momentum, Pikethly stated.
