Surge in eating at home cushions virus hit for Unilever

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Updated 23 July 2020

Surge in eating at home cushions virus hit for Unilever

BENGALURU, India: Second-quarter sales at Unilever fell much less than expected as a pick up in eating at home during coronavirus lockdowns boosted demand for products such as Hellmann’s mayonnaise and Breyers ice cream.

Shares in the consumer goods giant rose as much as 8.7 percent in early Thursday trading, as the Anglo-Dutch group surprised analysts who had expected a much bigger hit to sales from the closure of restaurants, schools, cinemas and outside venues.

“Overall, Unilever’s strong performance in the period and an increasingly focused strategy has led to a sigh of overdue relief from investors,” said Richard Hunter, head of markets at interactive investor.

Underlying sales fell 0.3 percent in the three months ended June 30, compared with analysts’ mean forecast for a 4.3 percent drop.

That was still the first decline in quarterly sales since the third quarter of 2004, according to Jefferies analysts.

Underlying sales in North America jumped 7.3 percent in the first half, with volumes up as much as 20 percent in some categories, Chief Financial Officer Graeme Pitkethly said. The US is Unilever’s biggest market by revenue.

Breyers, Magnum and Klondike ice-cream, along with Hellmann’s mayonnaise and Knorr soups, were strong performers in food, while Suave beauty products did well in hygiene, he said.

HIGHLIGHTS

  • Helped by strong growth in North America.
  • Unilever to put parts of tea business in separate unit.
  • Shares jump as much as 8.7 percent.

“We see no signs of North America slowing down,” Chief Executive Officer Alan Jope told analysts, despite coronavirus-cases spiking in the US. 

Other virus hot-spots were more of a concern, however.

“Things are starting to get into the toughest phase in Latin America and Africa,” Pitkethly said, adding a surge in gang-related violence in Mexico was making business difficult there.

Highlighting the huge disruptions caused by the pandemic, Unilever said food service sales declined by nearly 40 percent and out-of-home ice cream by nearly 30 percent in the first half. However, e-commerce sales were up 49 percent, with North America leaping 177 percent. Pitkethly said the firm’s food solutions business, which caters to canteens, schools and cafeterias and makes about 5 percent of group sales, was starting to recover as lockdowns are lifted.

While sales were down 70 percent in March, the decline has eased to 38 percent, with the improvement accelerating, he said.

Unilever said that after exploring options for its tea business, it had decided to keep its operations in India and Indonesia and its ready-to-drink joint venture with PepsiCo. The rest of the tea business, which sells Pukka Herb and PG Tips, will be separated into an independent entity.

Some analysts think that Unilever could ultimately be more exposed to the pandemic than rivals such as Procter & Gamble and Nestle due to its greater reliance on emerging markets, where it makes about 60 percent of annual sales.


Iraq pledges full compliance with OPEC+ oil cuts

Updated 8 min 37 sec ago

Iraq pledges full compliance with OPEC+ oil cuts

  • Prince Abdulaziz bin Salman Al-Saud, the Saudi Arabian energy minister, and his Iraqi counterpart, Ihsan Ismail, reaffirmed their commitment to the cuts
  • Under tough economic pressure, Iraq had struggled to meet the full cuts, but Ismail promised to reach 100 percent this month

DUBAI: Iraq has pledged to meet in full its obligations under the OPEC+ oil production cuts that have been credited with rebalancing global crude markets after the mayhem of April’s “Black Monday” when prices crashed around the world.

In a telephone call between Prince Abdulaziz bin Salman Al-Saud, Saudi Arabian energy minister, and his Iraqi counterpart, Ihsan Ismail, the two men reaffirmed their commitment to the cuts, which have helped to pull the oil price back from historic lows.

Brent crude, the global benchmark, has more than doubled in the past three months.

Under tough economic pressure, Iraq had struggled to meet the full cuts, but Ismail promised to reach 100 percent this month. Iraq has now committed itself to an ambitious program of compensation to make up for past overproduction.

Iraq will further reduce production by 400,000 barrels per day this month and next, Ismail said, bringing its total cut to 1.25 million barrels daily. That level of cuts could be adjusted when final estimates of compliance are assessed by the six “secondary sources” that monitor OPEC+ output.

“The two ministers stressed that efforts by OPEC+ countries toward meeting production cuts, and the extra cuts under the compensation regime, will enhance oil market stability, help accelerate the rebalancing of global oil markets, and send a constructive signal to the market,” a joint statement added.

Prince Abdulaziz thanked Ismail for his efforts to improve Iraq’s compliance with the agreement.

Iraq had been the biggest laggard in the move toward 100 percent compliance by the 23 members of the OPEC+ alliance.

Officials in Riyadh told Arab News that Iraqi compliance had reached about 90 percent, a high level by the country’s previous standards but still short of the new targets.

Saudi Arabia has been forcefully advocating full compliance with the targets in an effort to remove oil from the global market as demand is still badly affected by the economic fallout from the COVID-19 pandemic.

The oil market will be under the spotlight later this month when the joint ministerial monitoring committee of OPEC+ energy ministers convenes virtually in the most recent of the monthly meetings set up to oversee the state of the global industry.

Oil had another strong week on global markets, breaking through the $45 barrier for the first time since early March on signs that the glut in US oil stocks was easing, as well as reductions in the amount of “floating crude” stored in tankers on the world’s oceans.

The price spiked on news of the Beirut explosion, which some analysts believed could herald a deterioration in regional security and a threat to oil exports.

Brent crude was trading at $44.70 on international markets.