Unilever Withdraws Growth, Margin Guidance Over Coronavirus Concerns

In sync with the global trend, consumer goods major Unilever on Thursday announced it was withdrawing its 2020 growth and margin guidance amid the coronavirus pandemic. Earlier this week, Infosys had suspended guidance for the current financial year because of business uncertainties. According to a recent report citing the National Investor Relations Institute in the US, some 46 companies have withdrawn quarterly guidance and 151 annual guidance in the last one month.

For Unilever, this is the second time in five months that it is flagging growth concerns. In December, the company had cut its sales guidance for calendar years 2019 and 2020 in the backdrop of growth concerns in India, its largest market by volume and second-largest by value.

On Thursday, the company said the Indian market was slowing even before the lockdown had begun at the end of March, alluding to challenges the domestic fast moving consumer goods (FMCG) market has faced for a few quarters now. Hindustan Unilever’s (HUL’s) stock price was down 3 per cent on the BSE at the close of trade, touching Rs 2,315.85 per share.

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While research firm Nielsen has maintained its growth forecast of 6 per cent for the domestic FMCG market in January-March, companies say growth will be at half of that rate as supply chain constraints and labour shortage have marred production since the nationwide lockdown began on March 25.

Unilever said underlying sales growth for the first three months of the year was flat, with overall volume growth at 0.2 per cent only. Sales growth of emerging markets, however, which includes India, declined 1.8 per cent, Alan Jope, chief executive officer, Unilever, said, even as developed markets saw sales growth of 2.8 per cent in the period.

Close to 60 per cent of sales for Unilever comes from emerging markets, while developed markets contribute 40 per cent to its turnover.

"Growth in India was impacted by both the slowing market and the lockdown implemented at the end of March, which stopped production and shipping for a number of days," the company said in a statement.

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In a recent update, HUL said that factory output remained at 40 per cent in line with sales, though the wider supply chain continued to be impacted by the lockdown. HUL has also continued to keep its focus on essential categories including food and hygiene as demand for these products remains high, much like other key manufacturers in the market.

“We are keeping our factories running through the many unpredictable challenges in local operating environments across our value chain,” Jope said. “We are also opening up new capacity where it is most needed, such as in hand hygiene and food,” he added.

Jope, however, did point to shifts in demand that were visible in the last few weeks including “upswings” in sales of hygiene and in-home food products, combined with household stocking and near cessation of out-of-home consumption that was affecting its ice-cream business in particular.

“We are adapting to new demand patterns and are preparing for lasting changes in consumer behaviour, in each country, as we move out of the crisis and into recovery,” he said.