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Unilever heralds “lasting changes in consumer behaviour”

But first-quarter performance was mixed
Unilever heralds “lasting changes in consumer behaviour”

The days are getting longer and the temperature is rising. But – for the next few weeks at least – the dulcet tones of the Mr Whippy van, so evocative of the British summer, shall remain muted. Such songs of sunshine have been replaced by the sound of running taps, as we all wash our hands for the umpteenth time. Measures taken to stem the spread of Covid-19 have transformed the way we live our lives – from how we shop, to how we eat, to how we clean.

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And that transformation could be more than just temporary. Personal goods giant Unilever (ULVR) is “preparing for lasting changes in consumer behaviour”, in a move that could be seen to demonstrate the group’s readiness for the ‘new normal’ that comes after this pandemic.

However, in the short-term, the impact of the virus has been mixed for Unilever – hitting sales for its ice-cream and out-of-home food businesses, while sending its disinfectant brands flying off the shelves. For the first quarter to March, underlying revenues did not move – landing at €12.4bn (£10.9bn).

On a geographical level, this stasis reflected a 1.8 per cent contraction in emerging markets – tempering a 2.8 per cent improvement in developed markets. Segmentally, foods and refreshment slipped by 1.7 per cent – as distributors demonstrated reluctance to commit to buying ice-cream stock ahead of an uncertain holiday and tourism season. Restaurants in China and other countries also closed, hitting out-of-home food service – although this was somewhat mitigated by households in the US and Europe stocking up on savoury goods and condiments.

Home care was Unilever’s top performing division, with underlying sales up by 2.4 per cent after a surge in demand for Cif surface cleaners and Domestos bleach. And, somewhat encouragingly for the group, chief executive Alan Jope noted that greater purchasing of hygiene products “is one of the changes that we expect to see beyond the immediate crisis”. Moreover, income-seekers will have been heartened by the maintenance of Unilever’s quarterly dividend – underpinned by what management referred to as a “strong balance sheet and cash position”.

But the hindrances endured by Unilever stood in starker relief when Nestlé (SW:NESN) offered up its own numbers just one day later. The Switzerland-listed behemoth enjoyed organic growth of 4.3 per cent during the first quarter – underpinned by “strong momentum” in the Americas and the European, Middle Eastern and North-African region. Specifically, North America grew at a high single-digit rate – supported by improvements in pet products, beverages and baking ingredients. As more stateside customers stayed at home, frozen food also saw high single-digit growth.