Unilever second-quarter sales slip as wet weather hits Europe

FILE PHOTO: Unilever headquarters in Rotterdam, Netherlands August 21, 2018. REUTERS/Piroschka van de Wouw/File Photo

(Reuters) – Consumer goods giant Unilever Plc (ULVR.L) UNc.AS reported slightly weaker-than-expected quarterly underlying sales growth on Thursday, hit by wet weather in Europe and moderating growth in India, but kept its full-year sales target intact.

FILE PHOTO: Unilever headquarters in Rotterdam, Netherlands August 21, 2018. REUTERS/Piroschka van de Wouw/File Photo

The company said it continues to expect full-year underlying sales growth to be in the lower half of its multi-year 3% to 5% target range and operating margin to reach 20% in 2020.

Unilever’s shares were down 1.1% in morning trade, compared to the broader FTSE 100 index .FTSE, which was flat.

The maker of Dove soap and Ben & Jerry’s ice cream said underlying sales rose 3.5% in the second quarter, but that missed analysts’ average forecasts for a 3.7% rise, according to a company-supplied consensus.

Wet weather in Europe dampened ice-cream sales following two straight seasons of hot summers, while growth in India slowed again as a late monsoon season and lower food inflation weakened rural demand.

“It seems a bit ironic with (Europe) being at super record temperatures right now, but in the quarter we are reporting, it was quite negative,” Unilever’s chief financial officer said on an earnings call with media.

Average rainfall across 12 European cities was three times higher in April and May than the prior year, while average hours of sunshine were down between 9% and 25% in the same two months, a Jefferies analysis showed.

Ice cream makes up 13% of Unilever’s group sales and about 20% of its European sales annually. In the second quarter that rises to 30% or about 1 billion pounds ($1.25 billion) in sales, Jefferies analyst Martin Deboo said in a pre-earnings note.

Growth mainly came from emerging markets, where the company continued to win volume share in places like Indonesia and the Philippines, even though sales in India decelerated to 7% in the second quarter from 9% in the previous three months.

Underlying sales in emerging markets rose 7.4% in the quarter, while they fell 1.6% in developed markets. Emerging markets contribute 60% to Unilever’s overall sales.

Turnover inched lower to 13.7 billion euros ($15.25 billion).

“Unilever themselves describe their markets as mixed, and most investors will look at these numbers as something of a curate’s egg,” said Steve Clayton, manager of the HL Select funds, which holds a position in Unilever.

Reporting by Siddharth Cavale in London and Shashwat Awasthi in Bengaluru; editing by Shounak Dasgupta, Jason Neely and Jan Harvey

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