Thursday, 23 July 2020

Unilever thrives in lockdown despite sales dip



Unilever’s first-half results on Thursday showed that the consumer products giant stayed relatively strong globally during a period that included lockdowns in many countries. Yet its underlying sales still dipped slightly, falling 0.1%, with sales volumes declining 0.3%, although it saw price growth of 0.2%. 

Overall, turnover fell 1.6% to €25.7 billion. This included a positive impact of 1.1% from acquisitions and a negative impact of 2.5% from currency exchange effects. 

But underlying operating profit excluding currency increased 3.8% to €5.1 billion, although a negative impact of 3.2% from currency dragged that figure down to just a tiny increase on a reported basis.

In its giant Beauty & Personal Care unit, turnover was up 10.6% while underlying sales growth dropped 0.3% with volumes up by 0.1% and prices slipping by 0.4%.

Beauty & Personal Care underlying sales declined 0.3%, with volume growth of 0.1% and negative pricing of 0.4%. This is the company’s biggest business unit and it has been growing in recent periods as the firm has made key acquisitions.

Skin cleansing saw mid-teens volume-led growth, as it “quickly responded to the critical need for hand hygiene to prevent the spread of Covid-19”. It rolled out its Lifebuoy hygiene brand to over 50 markets and increased its hand sanitiser capacity by around 600 times across several brands. This also helped contribute to double-digit growth for Suave. 

But lockdowns in so many markets and “reduced personal care occasions amidst restricted living”, led to lower demand for skincare, deodorants and haircare overall, which each saw volume and price drops. Yet the division's largest brand, Dove, “remained resilient”, with mid-single-digit growth. 

The expanding Prestige portfolio “was impacted by health and beauty channel closures in many markets” however. And as well as store closures, it could also have been impacted by consumer belt-tightening.

Good news though was the fact that the underlying operating margin in Beauty & Personal Care increased by 50bps, although the gross margin was lower, due to negative pricing and an impact from the product mix, while overheads increased. Yet this was offset by a reduction in brand and marketing investment through lockdown periods.

CEO Alan Jope said: “Performance during the first half has shown the true strength of Unilever. We have demonstrated the resilience of the business — in our portfolio, in a continued step-up in operational excellence, and in our financial position — and we have unlocked new levels of agility in responding to unprecedented fluctuations in demand.

“Our focus for the rest of 2020 will continue to be volume-led competitive growth, absolute profit and cash delivery as this is the best way to maximise shareholder value”.

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