Unilever expects poor sales due to Covid-19 lockdown habits
The company expects an even worse quarter two, but believes people will focus more on personal hygiene products even after the pandemic
Bengaluru — Unilever ditched its annual sales targets on Thursday and warned that its performance could deteriorate in the current quarter as it adjusts to a world in which people consume more at home.
The Anglo-Dutch maker of Dove soaps and Knorr soups said it has been hit by changes caused by the Covid-19 pandemic, with more people eschewing restaurant visits and ice-creams in the sun and cooking their own meals instead.
“Things will get more difficult before they get better,” CEO Alan Jope said on a call, pointing specifically to the effect on ice-cream sales and a food solutions business that caters to canteens, restaurants and cafés.
Unilever, however, said it is positive that people will focus more on personal hygiene, driving sales of laundry detergents, hand sanitisers and soap-based products even after the pandemic subsides.
The FTSE-100 listed company has accelerated production of hand sanitisers, once a small part of its business, and has 30 facilities globally producing the hydro-alcoholic gel.
Unilever also said it would prioritise development of less expensive, value-for-money products as it expects economies across the world to enter into a period of slow growth.
“We are adapting to new demand patterns and are preparing for lasting changes in consumer behaviour, in each country, as we move out of the crisis and into recovery,” Jope said.
Underlying sales were flat in the first quarter, kept steady by increased sales in the US and Europe, where consumers stocked up on laundry detergents, Domestos bleach, Cif cleaning products and personal hygiene items.
However, growth was stalled by stringent lockdowns that curbed restaurant visits and shopping in China and led to factory shutdowns that halted production in India from the middle of last month.
Sales of ice-cream out of home — a €2bn annual business for Unilever — were badly affected as places such as parks, beaches and tourist sites were closed.
Unilever withdrew its sales performance targets for the year, which had forecast growth at the lower end of a 3%-5% range, saying it could not “reliably assess the effect” of the coronavirus, although it said it will still pay its interim dividend.
Its rival Nestlé is due to publish quarterly sales figures on Friday while France’s Danone, this week, withdrew its financial guidance for 2020 but posted higher first-quarter sales.
Unilever shares, which fell as much as 5.5% in early trading, were down 2.2% at 4,151p by 11.30am GMT.
“Unilever is proving to be less resilient than major peers so far and the first half of the year will continue to look weak with a likely worse second quarter,” JPMorgan analysts wrote in a note on Thursday, pointing to US rival Procter & Gamble’s 6% underlying sales growth during the period.
Since China started re-opening its economy this month, Unilever has seen “significant recovery”, Jope said but cautioned that social-distancing rules would continue to hit its food service business there. China contributes 5% to total group sales, with a fifth coming from food service.
Jope also said it was again selling and manufacturing in India, its second-biggest market, at good capacities. The pandemic has also pushed more people to shop online, with e-commerce sales rising 36% in the quarter. In the US, those sales nearly doubled.
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