Today,
Underlying sales declined 0.1% with volume declining 0.3% and price growth of 0.2%
Turnover decreased 1.6% including a positive impact of 1.1% from acquisitions net of disposals and negative impact of 2.5% from currency
Underlying operating profit excluding currency increased 3.8%, before a negative impact of 3.2% from currency
Underlying earnings per share up 6.4%, including a negative impact of 3.7% from currency
Free cash flow up
Quarterly shareholder dividend maintained at
Completed acquisitions of Horlicks brand from GSK, enhancing presence in healthy nutrition
Announced plans to unify the Group legal structure under a single parent company
A statement from CEO
'Performance during the first half has shown the true strength of
We have also taken action to strengthen the strategic future of the company by announcing proposals to unify our dual-headed legal structure, progressing the strategic review of our global tea business and making new commitments to help protect the climate and regenerate nature.
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
Our markets
The spread of Covid-19, combined with the lockdowns and restrictions that have been implemented in many countries, has led to significant changes in the operating environment in our markets. Consumer demand patterns have been impacted by channel closures, more time spent in the home and the critical importance of hygiene.
Market growth in
Overall performance
Underlying sales declined 0.1% with volumes declining 0.3% and price growth of 0.2%. Developed markets grew 2.4% whilst emerging markets declined 1.9%.
The impact of Covid-19 on our business in the first half varied widely across our channels and categories. Channel closures as a result of lockdowns in our markets negatively impacted our food service, out-of-home ice cream and Prestige businesses. Food service declined by nearly 40% and out-of-home ice cream declined by nearly 30%. Shoppers moved from offline to online channels, driving ecommerce growth of 49%.
As people spent more time in their homes, we saw growth in home consumption of foods, ice cream and tea. It also meant that consumers had fewer personal care occasions from going to work or socialising, and we saw a decline in our personal care business, except for hygiene products. The effectiveness of good hygiene practices against the spread of Covid-19 increased demand for our hand and home hygiene products, which each grew double digits. Consumers eating and cleaning more at home, and focusing more on hand hygiene, led to underlying sales growth in
The lockdowns introduced in our markets during the first half varied in severity, with some having a more significant impact on the supply and availability of goods, particularly those in
Turnover decreased 1.6%. There was a positive impact of 1.1% from acquisitions net of disposals and a negative impact of 2.5% from currency.
Underlying operating profit was
As consumer habits and the status of lockdowns have been changing during this period, we have been quick to adapt and reallocate our brand and marketing investment week-by-week. In response to lockdowns in our markets, we reduced spend in some channels and geographies while maintaining investment in growth opportunities. This, combined with a deflationary environment in media rates, led to a reduction in brand and marketing investment by 100bps during the period.
In the second half of the year, we expect to see higher brand and marketing investment, as lockdowns ease and we support brand campaigns and product innovations tailored to the new environment. Gross margin reduced by 30bps driven by costs to adapt and run our supply chain in response to Covid-19, ensuring the safety and continuity of our operations, as well as an adverse mix effect. Overheads increased by 20bps, including an adverse currency mix.
We delivered free cash flow of
Covid-19 response and support measures
We have put in place a wide-ranging set of measures to support global and national efforts to tackle the Covid-19 pandemic.
In our own operations, strict protocols for hygiene and physical distancing are in place for our sourcing units and distribution centres. Our office-based employees have been working from home since March, with some limited reopening of office workplaces in selected countries, where stringent requirements have been met.
We are supporting global efforts to tackle Covid-19, contributing
Our financial strength remains robust and we have not sought Covid-19 related financial support from any governments.
Strategic review of tea
In January, we announced a strategic review of the global tea business, which includes leading brands such as Lipton,
This review has assessed a full range of options. We will retain the tea businesses in
The balance of
The tea business that will be separated generated revenues of
Recent acquisitions
During the second quarter, we completed the acquisitions of the health food drinks portfolio of
Beauty & Personal Care
Beauty & Personal Care underlying sales declined 0.3%, with volume growth of 0.1% and negative pricing of 0.4%.
Skin cleansing saw mid-teens volume-led growth, as we quickly responded to the critical need for hand hygiene to prevent the spread of Covid-19. We rolled out our Lifebuoy hygiene brand to over 50 markets and increased our hand sanitiser capacity by around 600 times across several brands. This helped contribute to double digit growth for Suave.
Lockdowns in our markets and reduced personal care occasions amidst restricted living, led to lower demand for skin care, deodorants and hair care, which each saw volume and price decline. The division's largest brand Dove remained resilient, with mid-single digit growth.
Our Prestige portfolio was impacted by health and beauty channel closures in many markets. Consumer oral care demand remained robust. However, the category saw negative volumes related to disruption caused by lockdowns in key markets.
Home Care
Home Care underlying sales grew 3.2%, with 2.9% from volume and positive pricing of 0.3%.
We saw increased consumer demand for household cleaning products, such as Cif surface cleaners, and our home and hygiene brands delivered high-teens underlying sales growth. Working with environmental health experts, Domestos educated consumers about targeted cleaning of high-touch surfaces in the home to help prevent the spread of Covid-19 and saw strong double-digit growth.
Strict lockdowns in
Foods & Refreshment
Foods & Refreshment underlying sales declined 1.7%, with volumes down 2.5% and positive pricing of 0.8%.
Lockdowns in most markets led to the closure of out-of-home channels. This, together with reduced tourism, led to a reduction in out-of-home ice cream sales of nearly 30%. Similarly, food service sales were down around 40% as hotels, restaurants, cafes and bars closed. At the same time, we saw double digit growth in our retail foods business with Knorr and Hellmann's performing strongly.
Sales of ice cream for consumption in-home increased by 15% in the first half and by 26% in the second quarter, significantly offsetting the declines in out-of-home channels. Magnum and
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Safe Harbour
Where relevant, these actions are subject to the appropriate consultations and approvals.
This announcement may contain forward-looking statements, including 'forward-looking statements' within the meaning of the United States Private Securities Litigation Reform Act of 1995. Words such as 'will', 'aim', 'expects', 'anticipates', 'intends', 'looks', 'believes', 'vision', or the negative of these terms and other similar expressions of future performance or results, and their negatives, are intended to identify such forward-looking statements. These forward-looking statements are based upon current expectations and assumptions regarding anticipated developments and other factors affecting the
Because these forward-looking statements involve risks and uncertainties, there are important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements. Among other risks and uncertainties, the material or principal factors which could cause actual results to differ materially are:
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