A broad portfolio of food and home brands has enabled consumer goods giant Unilever to fight its way through the pandemic.
The maker of Domestos bleach, Dove soap and Cif cleaner benefited from increased demand for cleaning products in the early stages of the health crisis. Its shares rose and Unilever briefly became the most valuable company on the FTSE 100 index last year. And the company behind Marmite, Colman’s Mustard and Magnum ice cream benefited from the forced shift to eat less and cook at home, which some analysts believe could be a long-term shift.
Unilever CEO Alan Jope believes that increased demand for soap and cleaning products is another trend that will persist as people become attached to washing their hands more frequently and improving hygiene at home.
With China and other economies around the world reeling from the pandemic, consumers are again spending more. When Jope presents Unilever’s first-half results on Thursday, it is expected to reveal underlying sales growth of 5.3%, including 4.8% growth in the second quarter, and an underlying operating profit of 4.8 billion. of euros (4.1 billion pounds sterling), slightly below the euros. 5.1 billion in 2020. Sales growth will have decelerated from 5.7% in the first quarter, but the 4.8% expected would still be a decent figure. Global turnover is likely to remain stable at € 25.7 billion due to currency effects.
The dividend will be of special interest to shareholders. Analysts expect 148 pence per share by 2021, which would make Unilever the fifth-largest dividend payer on the FTSE 100 in terms of cash.
Despite the benefits, Unilever will have to deal with other challenges ahead, including higher costs from rising global prices for food, commodities, freight and crude oil, as well as those that could be the world’s first sugar and salt taxes to be applied. food production in the UK (although the company notes that the UK is only 5% of its business).
The UN World Food Price Index, which tracks monthly changes in a basket of major types of food, has roughly doubled since the start of the pandemic. This will be felt most acutely in the developing world, where consumers are more likely to cook from scratch. Analysts expect Unilever to pass on food price inflation in most cases.
Capitalizing on trends towards healthier and more sustainable eating and living, the firm plans to launch more plant-based ice cream after the success of its vegan versions of Magnum and Ben & Jerry’s. In one of its new strategic priorities, it set plans in February to expand its vegan food ranges to a plant-based food business of € 1 billion a year within five to seven years, compared to € 200 million. current euros.
Unilever also wants to gain a larger share of the luxury beauty and nutritional supplement markets, another fast-growing area, and recently acquired Paula’s Choice, an American online skincare brand founded by Paula Begoun in 1995, known for its jargon-free dictionary of ingredients.
Unilever will also update its plans to sell most of its tea business, which has annual sales of 2 billion euros.
Steve Clayton, director of equity funds at Hargreaves Lansdown, which owns Unilever shares, said: “We are seeing many companies beginning to highlight the strength of the recovery seen in many economies around the world. Will Unilever be another to point this out? Perhaps, but the group’s strong exposures to emerging markets could hold it back, given that countries like Brazil and India have had rather serious problems with the pandemic in recent months.
But the group also has a lot of positives going for it. There seems to have been a sustained shift towards preparing more meals at home in Western nations and this can only help. Perhaps we’ve already seen ‘maximum disinfectant’, which could create a headwind for the home care division. But growth trends in the first quarter were strong and overall we expect a decent impression from Unilever when they report. “