Unilever takes a significant hit to its £2.60 billion ice cream business due to Coronavirus

Unilever (AMS: UNA) highlighted a hit to its business due to lockdowns in India and China as the company withdrew its full-year guidance on Thursday. The consumer goods giant said that demand for cleaning items in Europe and the United States was high but it failed to offset a sharp decline in ice cream sales.

Following the announcement, Unilever was reported trading 5% down in the stock market.

The strict social distancing measures that pushed restaurants into temporarily shutting down in the Middle East, Asia, and Russia fuelled a 3.7% decline in underlying sales in Q1, as per Unilever. The company also cited a production halt in India due to factory shutdowns and reduced shopping in China for lower sales.

Unilever’s Ice Cream Business Took The Hardest Hit

The British-Dutch transnational consumer goods company also said that its ice cream business took a massive hit in Latin America, Turkey, and Europe at large as Coronavirus restricted people to their homes and distributors especially in holiday destinations refrained from ordering new stock. Unilever values its ice cream business at £2.60 billion.

The company, however, reported higher sales for Domestos bleach, laundry detergents, personal hygiene items, and Cif cleaning products in the U.S and Europe as consumers stockpiled in preparation of the flu-like virus and its associated restrictions. In North America, the consumer goods company said that its underlying sales surged sharply by 4.8%.

At £10.87 billion, Unilever reported a 0.2% increase in its turnover in the first quarter. As per FactSet, analysts had forecast £11.15 billion for Unilever in quarterly turnover.

The company also withdrew its full-year sales guidance for 2020 on Thursday. Originally, it had anticipated a 3% to 5% growth this year. Unilever cited an increased market uncertainty due to COVID-19 but highlighted that it still plans on making payments for its interim dividend.

CEO Alan Jope’s Remarks On Thursday

According to Unilever’s CEO Alan Jope:

“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.”

At £40 per share, Unilever is currently around 10% down year to date in the stock market. Owing to the virus-driven downward rally, Unilever has now lost all of its gains that it recorded last year.

At the time of writing, Unilever is valued at £105.57 billion and has a price to earnings ratio of 21.15.