Unilever records 5.7% sales growth in Q1, announces US$3.6bn share buyback program

UK – Consumer packaged goods giant Unilever has reported a 5.7% growth in sales for the quarter ending March 31st as strong performance in emerging markets offset declines in Europe, where volumes were impacted by lockdowns.

Emerging markets grew 9.4% driven by strong double-digit growth in China and India, following strict lock-downs in the prior year.

Latin America grew high-single digit while South East Asia declined, driven by Indonesia. Developed markets, on the other hand, grew 0.8%, with mid-single digit growth in North America offset by a decline in Europe.

The company further noted that acquisitions which included functional nutrition brands Horlicks, Liquid I.V. and SmartyPants Vitamins, had a positive impact of 1.9% on the company’s bottom line although there was a negative impact of 8.0% from currency related items.

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The company’s Food and Refreshment segment reported underlying sales growth of 9.8% with 7.3% achieved from volume and 2.3% from pricing.

Unilever noted that the price growth of 2.3% was led by tea as the company increased prices in India in response to significant commodity inflation.

The company’s out-of-home ice cream returned to growth, with strong performance in emerging markets offsetting declines in Europe due to ongoing lock-down restrictions which have impacted the buy-in for the summer season.

In-home ice cream grew double digit as demand for food consumed at home remained high. The Magnum brand launched its new Double Gold Caramel Billionaire innovation in stick and pint formats.

The owner of Lipton Tea noted that operational separation of Unilever’s Tea business is progressing well and is expected to complete this year.

“We continue to evaluate the most value creating model, including an IPO, a demerger, a joint venture or a disposal, and we have also appointed an external CEO to lead this business into its next phase,” Unilever said in a statement.

According to Unilever, the tea business that will be separated generated revenues of around €2 billion (about US$2.4 billion) in 2020.

This business excludes the company’s tea operations in India and Indonesia and the partnership interests in the ready-to-drink tea joint ventures.

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Following a strong quarter, the company announced that it will commence a share buyback programme of up to €3 billion (about US$3.64 billion) in May, in one or more tranches, to be completed by the end of the year.

“This reflects our strong cash flow delivery and balance sheet position, and is in line with our capital allocation framework,” the company said.

For 2021, Unilever expects to deliver underlying sales growth within its multi-year framework of 3-5% although the company noted that Covid-19 continues to cause additional supply chain costs and a negative margin mix.

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