Unilever withdraws growth, margin guidance over coronavirus concerns

Unilever headquarters in Rotterdam, Netherlands
In sync with the global trend, consumer goods major Unilever on Thursday announced it was withdrawing its 2020 growth and margin guidance. According to a recent report citing the National Investor Relations Institute in the US, some 46 companies have withdrawn quarterly guidance and 151 annual guidance in a month.

For Unilever, this is the second time in five months that it is flagging growth concerns. In December, the company had cut its sales guidance for calendar years 2019 and 2020 in the backdrop of growth concerns in India. On Thursday, the company said the Indian market was slowing even before the lockdown had begun at the end of March.

Hindustan Unilever’s (HUL’s) stock closed down 3 per cent on the BSE at Rs 2,315.85. Unilever’s share price remained largely volatile on the London and Amsterdam stock exchanges, down nearly 2 per cent.

While research firm Nielsen has maintained its growth forecast of 6 per cent for the domestic FMCG market in January-March, companies say growth will be at half of that rate.

Unilever said underlying sales growth for the first three months of the year was flat, with overall volume growth at 0.2 per cent only. Sales growth of emerging markets, however, declined 1.8 per cent, Alan Jope, chief executive officer, Unilever, said, even as developed markets saw sales growth of 2.8 per cent in the period. Close to 60 per cent of sales for Unilever comes from emerging markets, while developed markets contribute 40 per cent to its turnover.

“Growth in India was impacted by both the slowing market and the lockdown, which stopped production and shipping for a number of days,” the company said in a statement.

In a recent update, HUL said that factory output remained at 40 per cent in line with sales, though the wider supply chain continued to be impacted by the lockdown. HUL has also continued to keep its focus on essential categories.

“We are keeping our factories running through the many unpredictable challenges,” Jope said. “We are also opening up new capacity where it is most needed, such as in hand hygiene and food,” he added.

Jope, however, did point to shifts in demand that were visible in the last few weeks including ‘upswings’ in sales of hygiene and in-home food products, combined with household stocking and near cessation of out-of-home consumption that was affecting its ice-cream business in particular.

“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,” he said.


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