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Unilever holds dividend, pulls guidance as ice-cream sales melt
23rd Apr 2020 07:02
(Sharecast News) - Consumer goods company Unilever maintained its quarterly dividend but pulled full year guidance on flat first quarter sales as the coronavirus pandemic hit its food service and ice-cream business.
Underlying sales were flat with volume growth of 0.2% while turnover rose 0.2% to €12.4bn (?10.86bn) including a positive impact of 0.6% from acquisitions net of disposals and negative impact of 0.4% from currency. The quarterly dividend was maintained at 41.04 cents a share.
The company on Thursday said initial household stocking of both hygiene and food products led to increased volume in some markets due to a wave of panic buying in the UK and Germany ahead of government lockdowns to stop the spread of the virus that has so far killed more than 178,000 people.
In Europe, underlying sales grew 1.4% with volume growth of 3.1% and price down 1.7%. Italy declined following a prolonged lock-down impacting out-of-home consumption.
"Across Europe, ice-cream sales declined without the normal retail sell-in ahead of the Easter holiday, which normally marks the beginning of the ice-cream season," Unilever, which make brands such as Ben & Jerry's and Magnum, said in a statement.
In China, where the pandemic began, sales also fell as restaurants closed as part of a nationwide lockdown.
Richard Hunter, head of markets at interactive investor said the current health crisis meant products from Unilver's range, such as hand sanitisers, "come into their own and the stock's defensive qualities shine through".
"Indeed, some of the company's core brands are in extra demand, from hand hygiene through to bleach and surface cleaners. At the same time, its developed markets business has shown underlying sales growth of 2.8% in the quarter, with the important US market holding up particularly well," Hunter said.
"From an investment perspective, the fact that the dividend has been maintained is reflective of the company's financial strength - despite the current economic challenges - with a well- covered yield of 3.3% providing some solace for income-starved investors, as many other companies defer dividends in a dash for cash conservation."
Hunter said the fall in ice-cream sales, normally bought outside the home not only saw a sharp reduction in tourist sales following lockdowns, but also a reticence from trade buyers "unwilling to take a view as to when the restrictions could at least be partially lifted".
"While the initial share price reaction to the numbers has not reflected the company's particular potential in these extraordinary times, for investors the appeal is more obvious, with the market consensus of the shares as a buy likely to remain intact," he added.
Hargreaves Lansdown analyst Sophie Lund-Yates said Unilever was expecting a lasting change in consumer behaviour beyond the medium term impact.
"The swings in demand won't be unwound overnight, and with no clear idea of when lockdowns will be lifted, patterns will be more difficult to decipher. Conditions won't be straightforward from here, but as a giant in the industry Unilever is in a more defensive position than many businesses," she said.
Underlying sales were flat with volume growth of 0.2% while turnover rose 0.2% to €12.4bn (?10.86bn) including a positive impact of 0.6% from acquisitions net of disposals and negative impact of 0.4% from currency. The quarterly dividend was maintained at 41.04 cents a share.
The company on Thursday said initial household stocking of both hygiene and food products led to increased volume in some markets due to a wave of panic buying in the UK and Germany ahead of government lockdowns to stop the spread of the virus that has so far killed more than 178,000 people.
In Europe, underlying sales grew 1.4% with volume growth of 3.1% and price down 1.7%. Italy declined following a prolonged lock-down impacting out-of-home consumption.
"Across Europe, ice-cream sales declined without the normal retail sell-in ahead of the Easter holiday, which normally marks the beginning of the ice-cream season," Unilever, which make brands such as Ben & Jerry's and Magnum, said in a statement.
In China, where the pandemic began, sales also fell as restaurants closed as part of a nationwide lockdown.
Richard Hunter, head of markets at interactive investor said the current health crisis meant products from Unilver's range, such as hand sanitisers, "come into their own and the stock's defensive qualities shine through".
"Indeed, some of the company's core brands are in extra demand, from hand hygiene through to bleach and surface cleaners. At the same time, its developed markets business has shown underlying sales growth of 2.8% in the quarter, with the important US market holding up particularly well," Hunter said.
"From an investment perspective, the fact that the dividend has been maintained is reflective of the company's financial strength - despite the current economic challenges - with a well- covered yield of 3.3% providing some solace for income-starved investors, as many other companies defer dividends in a dash for cash conservation."
Hunter said the fall in ice-cream sales, normally bought outside the home not only saw a sharp reduction in tourist sales following lockdowns, but also a reticence from trade buyers "unwilling to take a view as to when the restrictions could at least be partially lifted".
"While the initial share price reaction to the numbers has not reflected the company's particular potential in these extraordinary times, for investors the appeal is more obvious, with the market consensus of the shares as a buy likely to remain intact," he added.
Hargreaves Lansdown analyst Sophie Lund-Yates said Unilever was expecting a lasting change in consumer behaviour beyond the medium term impact.
"The swings in demand won't be unwound overnight, and with no clear idea of when lockdowns will be lifted, patterns will be more difficult to decipher. Conditions won't be straightforward from here, but as a giant in the industry Unilever is in a more defensive position than many businesses," she said.