Consumer goods giant Unilever Plc reported slightly weaker-than-expected quarterly underlying sales growth on Thursday, hit by wet weather in Europe and moderating growth in India, but kept its full-year sales target intact.

The company said that it continues to expect full-year underlying sales growth to be in the lower half of its multi-year 3 per cent to 5 per cent target range and operating margin to reach 20 per cent in 2020.

Unilever's shares were down 1.1 per cent in the morning trade, compared to the broader FTSE 100 index, which was flat.

The maker of Dove soap and Ben & Jerry's ice cream said that the underlying sales rose 3.5 per cent in the second quarter, but that missed analysts' average forecasts for a 3.7 per cent rise, according to a company-supplied consensus.

Wet weather in Europe dampened ice-cream sales following two straight seasons of hot summers, while growth in India slowed again as a late monsoon season and lower food inflation weakened rural demand.

“It seems a bit ironic with (Europe) being at super record temperatures right now, but in the quarter we are reporting, it was quite negative,” Unilever's Chief Financial Officer said on an earnings call with media.

Average rainfall across 12 European cities was three times higher in April and May than the prior year, while average hours of sunshine were down between 9 per cent and 25 per cent in the same two months, a Jefferies analysis showed.

Ice cream makes up 13 per cent of Unilever's group sales and about 20 per cent of its European sales annually. In the second quarter that rises to 30 per cent or $1.25 billion in sales, Jefferies analyst Martin Deboo said in a pre-earnings note.

Growth in emerging markets

Growth mainly came from emerging markets, where the company continued to win volume share in places like Indonesia and the Philippines, even though sales in India decelerated to 7 per cent in the second quarter from 9 per cent in the previous three months.

Underlying sales in emerging markets rose 7.4 per cent in the quarter, while they fell 1.6 per cent in developed markets. Emerging markets contribute 60 per cent to Unilever's overall sales. Turnover inched lower to $15.25 billion.

“Unilever themselves describe their markets as mixed, and most investors will look at these numbers as something of a curate's egg,” said Steve Clayton, manager of the HL Select funds, which holds a position in Unilever.

Published on July 25, 2019