Unilever share price surges 8% as Q2 sales better than expected

Shares at Anglo-Dutch conglomerate Unilever (LON:ULVR) have surged more than 8% on Thursday after the company reported better than expected figures as part of its H1 2020 results.

The consumer goods giant – which owns a number of household names, including Dove, Ben & Jerry’s and PG Tips – recorded a €25.7 billion turnover in the first half of 2020, falling just 1.6% year-on-year.

Underlying sales slipped just 0.3% in the three months leading up to 30 June, compared with market analysts’ predictions of 4.3% drop, while the company’s underlying operating margin rose to 19.8% from 19.3% in 2019.

Overcoming the cautious projections for H1 2020, Unilever pulled in a pre-tax profit of €4.5 billion – up from €4.3 billion in H1 2019.

A closer look

Analysts were expecting a much sharper drop in sales for the period between April to June, as worldwide lockdown measures stifled the retail sector and billions of people were confined to their homes in an effort to prevent the spread of coronavirus.

With the widespread closure of restaurants, cinemas and ‘non-essential’ stores, Unilever appears to have suffered from a drop in sales of hygiene products as millions were forced to work from home at the peak of the pandemic.

Beauty and personal care underlying sales fell by 0.3% as people abandoned offices for the comfort of their own homes. The company reported that global lockdowns led to a fall in demand for skin care, deodorants and hair care products.

Dove – Unilever’s largest beauty brand – nonetheless remained resilient with mid-single digit growth, as well as double-digit growth for Suave as the company increased its hand sanitiser production by more than 600% to keep up with greater demand for personal disinfectants.

Home cleaning products enjoyed a surge in sales during lockdown, with underlying sales up 3.2% as consumers flocked to purchase Cif and Domestos products to clean their homes and disinfect surfaces that may have been contaminated with coronavirus.

Teaming up with environmental health experts, Domestos helped to educate consumers on how to effectively cleanse surfaces to prevent the spread of infection, subsequently reporting ‘strong’ double-digit growth in H1.

Food and refreshment sales suffered the most, with underlying sales down 1.7%, with food service sales down 40% due to restaurant and eatery closures and out-of-home ice cream sales slipping 30% as the tourism industry ground to a halt.

However, household favourite brands Knorr and Hellman’s performed well with double-digit growth, while at-home ice cream consumption soared by 26% in Q2 – with Magnum and Ben & Jerry’s enjoying a surge in sales as both ‘continue to grow strongly’.

CEO statement

Unilever CEO Alan Jope released a statement alongside the company’s H1 results, saying:

“Performance during the first half has shown the true strength of Unilever. We have demonstrated the resilience of the business – in our portfolio, in a continued step-up in operational excellence, and in our financial position – and we have unlocked new levels of agility in responding to unprecedented fluctuations in demand.

“From the start of the Covid-19 crisis, we have been guided by clear priorities in line with our multi-stakeholder business model to protect our people, safeguard supply, respond to new patterns of consumer demand, preserve cash, and support our communities.

“Our focus for the rest of 2020 will continue to be volume led competitive growth, absolute profit and cash delivery as this is the best way to maximise shareholder value.

“I would like to thank every member of the Unilever team for the outstanding commitment they have shown in the most difficult of circumstances”.

Investor insight

The company’s optimistic results sent Unilever’s share price soaring by 8.55% or 370.00p to 4,700.00p at BST 13:38 23/07/20, finally gaining ground lost since shares first began to fall back in February.

Unilever’s dividend yield stands at 0.031%, with its P/E ratio at 24.16.

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Junior Journalist at the UK Investor Magazine. Focuses primarily on finance and business content. Has personal interests in Middle Eastern politics, human rights issues, and sustainability initiatives.