Unilever Withdraws 2020 Guidance, Raises Concerns Over India

Unilever Plc. highlighted uncertainties in its key emerging markets, including India, as the consumer goods giant withdrew its financial guidance for the year after the new coronavirus pandemic clobbered sales.

The parent of Hindustan Unilever Ltd.—India’s largest fast-moving consumer goods company—reported flat sales for the quarter ended March, according to a statement, compared with analysts’ estimates of 2.1 percent growth. Unilever had earlier guided for less than 3 percent growth in the first six months of calendar year 2020 and below 4 percent for the full year.

The company’s developed markets contributed 2.8 percent growth, while sales in emerging markets—that include India, China, South East Asia and Latin America, among others—declined 1.8 percent during the three-month period.

Shares of HUL were trading as much as 2.6 percent lower at Rs 2,323 apiece. That compares with a 1.01 percent gain in the benchmark Nifty 50 Index.

The novel virus outbreak, which has so far infected more than 2.6 million worldwide, including over 183,000 deaths, has brought the whole world to a standstill. In India, it disrupted an already slowing as the nation went into the world’s strictest lockdown to curb spreading of the highly contagious pathogen. Only sale of essential items were allowed.

While the Indian market—which according to an annual report contributes a tenth to Unilever’s consolidated revenue—had begun slowing before the lockdown at the end of March, the strict shutdown stopped production and shipping for a number of days, according to the statement.

“A total lockdown in India stopped production and shipping in the last seven days of March,” Graeme Pitkethly, chief financial officer at Unilever, which owns 61.9 percent in HUL, said in a conference. “India witnessed supply chain disruptions following severe lockdown. There was a significant disruption despite our goods being classified as essentials.”

According to the statement, India’s personal care businesses, especially skin and hair care were impacted because of the lockdown. Also, price reductions in developed markets were driven primarily by India, it said.

“We’re very confident that we are back up selling and manufacturing in India. Not at full strength, but at some good strength,” Alan Jope, chief executive officer of Unilever, said. “It takes the company four to five days to get relaxations to run factories in India.”

Globally, Jope expects a significant shift in consumer behaviour towards online shopping and proximity shopping—that’s near to home.