Vending

Unilever boosts first half earnings despite falling food and personal care sales

July 23, 2020

Unilever, a global manufacturer of food, personal care and home care products (with brands including Ben & Jerry's, Breyer's and Lipton), reported healthy earnings for the first half of 2020 despite sales declines caused by COVID-19, with gains in in-home food and hygiene care sales offsetting weakened away-from-home food and personal care sales.

Earnings per share increased by 6.4% to €1.35 ($1.45) from €1.25 ($1.44), following a negative currency impact of 3.7%.

The earnings improvement was driven by reduced tax and net finance costs, as well as higher operating profit. These movements were slightly reduced by an increase in profit attributable to minority interests following the completion of the merger between Unilever's listed subsidiary in India and GlaxoSmithKline's Consumer Healthcare Limited.

"We've also been able to scale up to meet massive surges in demand in some countries and pull back where we've seen major drops," CEO Alan Jope said during the webcast. "On demand, our teams have reacted very quickly to capture the new growth opportunities that this crisis has presented."

Shoppers also moved from offline to online channels, driving e-commerce growth of 49%. "Online shopping, especially online grocery shopping, will not revert to pre-COVID levels once those restrictions are no longer in place," Jope said.

Foods and refreshment sales declined 1.7% in the first half, with volumes down 2.5%. Lockdowns in most markets led to the closure of out-of-home channels. This, together with reduced tourism, led to a reduction in out-of-home ice cream sales of nearly 30%.

Similarly, foodservice sales were down around 40% as hotels, restaurants, cafes and bars closed. At the same time, the company experienced double digit growth in retail foods business with Knorr and Hellmann's performing strongly.

Sales of ice cream for consumption in home increased by 15% in the first half and by 26% in the second quarter, significantly offsetting the declines in out-of-home channels.

"Within beauty and personal care, our skin cleansing business grew by 27% as we quickly responded to the demand for hand hygiene products. And by that we mean liquid hand wash and hand sanitizer," Jope said. "We had a very small hand sanitizer business prior to the outbreak of COVID-19."

Prior to COVID-10, the company only had two manufacturing sites. The company now has more than 60 sites producing hand sanitizers, and by the end of the first half, Jope said the hand hygiene business is already larger than that of the market leader last year in the whole of 2019.

The company has seen sustained high levels of hygiene product consumption in the U.S., Jope said, adding that the company is trying to determine how long that will continue.

"It comes back to two questions," he said. "How long will U.S. consumers remain preoccupied with hygiene? We think probably for quite some time. And how long will meals continue to be consumed at home at a differentially higher rate than normal versus consumed out-of-home?"

While visiting China during the second wave of the pandemic, Jope said it took "ages" for the consumer to return to the pre-COVID levels of restaurant eating.

For an update on how the coronavirus pandemic is affecting convenience services, click here.