Unilever: Brazil truckers’ strike “a significant headwind”

20 Jul 2018 --- Unilever’s half-year results have been impacted by an extended truckers strike in Brazil while overall “challenging market conditions” have also affected the British-Dutch transnational consumer goods company. Net profit dropped from €3.3bn (US$3.8bn) to €3.2bn (US$3.7bn) in the first half of the year. Turnover also fell five percent to €26.4bn (US$30.6bn).

There was an underlying sales growth, excluding spreads, of 2.7 percent with volume 2.5 percent and price 0.2 percent while turnover decreased 5.0 percent including an adverse translational currency impact of 8.9 percent.

Underlying earnings per share up 7.8 percent after a currency impact of (10.8) percent, constant underlying EPS up 18.6 percent. Emerging markets underlying sales growth of 4.1 percent with volume 3.3 percent and price 0.8 percent.

“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,” says CEO Paul Polman.

“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 packaged goods sector is struggling with slow growth amid changing consumer preferences and Unilever is one of the first consumer goods companies to report earnings this quarter.

The company says that overall market conditions remained challenging in the first half. However, there was an encouraging improvement in volumes and a lower contribution from price growth, particularly in emerging markets. The truckers’ strike in Brazil presented a “significant headwind in the second quarter” which Unilever expects to partially reverse in the second half of the year.

Foods & refreshment
Unilever says the division continued to build its presence in emerging markets and sustained a strong performance in foodservice channels. At the same time, Unilever continued to modernize the portfolio by responding to consumer needs in fast-growing segments such as organic, natural, vegan, health and wellness.

Ice cream delivered strong growth driven by innovations behind Unilever’s premium brands, including the launch of Magnum Core & Praliné variant, an indulgent ice cream experience, as well as 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, also had a very promising start in Germany and France, according to the company. 

In leaf tea, volume-led growth continued to be driven by strong innovations in India and Unilever continued to transform its portfolio in Europe and North America, but growth was held back by a decline of the black tea business. 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. These included the launch of Knorr mini meals in Europe, snack products with natural and nutritious ingredients, and Knorr Selects side dishes in the US. 

Hellmann’s continued to communicate strong natural claims and in the US launched Hellmann’s Real Ketchup, made with six ingredients and sweetened only with honey. However, sales in dressings were slightly down in an intense promotional environment.

“The Connected 4 Growth change program, which makes our organization more agile and resilient, is driving the step-up in our innovation and savings programs. 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 program that will complete before the end of the year,” adds Polman.

“We have also signed an agreement to acquire a 75 percent stake in the Italian personal care business Equilibra.”

“Our expectation for the full year is unchanged. We expect underlying sales growth in the 3 percent – 5 percent range, an improvement in underlying operating margin and strong cash flow. We remain on track for our 2020 goals.”