Unilever posted a 4.7% reduction in its second-quarter turnover as it was affected by an extended truckers’ strike in Brazil and challenging market conditions.
The firm – which owns brands such as Knorr, Lipton and Magnum – recorded a turnover of €13.7 billion in the second quarter of the year. Excluding its spreads unit, the company’s foods and refreshment division saw its net sales shrink by 3.6%.
Sales in developed markets were slightly up as volume growth was mostly offset by continued competitive price deflation in Europe and North America.
Unilever completed the sale of its spreads portfolio earlier this month. A €6.83 billion deal to offload the unit – which includes brands such as Flora, Stork and Blue Band – to US private equity firm KKR was announced last year. The unit had been performing poorly as consumers switch to healthier alternatives.
In the first half of the year, Unilever recorded a 5% loss in turnover and a 2.4% shrink in net profit.
The firm said its food and refreshment division continued to build its presence in emerging markets and “sustained a strong performance in food service channels”. The company has continued to modernise its portfolio by responding to consumer needs in fast-growing segments such as organic, natural, vegan, health and wellness.
Unilever CEO Paul Polman © World Economic Forum/Flickr
In the first six months, Unilever’s ice cream brands delivered “strong growth” driven by innovations behind its premium brands. These included the launch of Magnum Core & Praliné variant and the roll-out of the Ben & Jerry’s non-dairy platform from the US into Europe. The new Kinder ice cream, launched after partnering with an Italian confectioner, was said to have had a very promising start in Germany and France.
The recent acquisitions Pukka Herbs organic herbal tea and Tazo had a “good first half” in Europe and North America.
In foods, Knorr grew ahead of the group average, primarily driven by cooking products in emerging markets, as well as innovations in on-trend segments in developed markets.
Unilever CEO Paul Polman said: “Our first-half results show solid volume-driven growth across all three divisions, which was achieved despite the effects of an extended truckers’ strike in Brazil, one of our biggest markets. Growth was driven by strong innovation and continued expansion in future growth markets. The margin improvement was of high quality and in line with our strategy, driven by further gross margin progression, increased investment behind our brands and strong savings delivery.
“The Connected 4 Growth change programme – which makes our organisation more agile and resilient – is driving the step-up in our innovation and savings programmes. As part of the continued portfolio evolution, we completed the exit from spreads on 2 July 2018. In anticipation of the disposal proceeds, we have already returned €3 billion as part of our €6 billion share buyback programme that will complete before the end of the year. We have also signed an agreement to acquire a 75% stake in the Italian personal care business Equilibra.
“Our expectation for the full year is unchanged. We expect underlying sales growth in the 3% – 5% range, an improvement in underlying operating margin and strong cash flow. We remain on track for our 2020 goals.”
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