Unilever second-quarter sales slip as wet weather hits Europe

Consumer goods giant Unilever Plc UNc.AS 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 it continues to expect full-year underlying sales growth to be in the lower half of its multi-year 3 percent to 5 percent target range and operating margin to reach 20 percent in 2020.

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

The maker of Dove soap and Ben & Jerry’s ice cream said underlying sales rose 3.5 per in the second quarter, but that missed analysts’ average forecasts for a 3.7 percent 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 percent and 25 percent in the same two months, a Jefferies analysis showed.

Ice cream makes up 13 percent of Unilever’s group sales and about 20 percent of its European sales annually. In the second quarter that rises to 30 percent or about 1 billion pounds (US$1.25 billion) in sales, Jefferies analyst Martin Deboo said in a pre-earnings note.

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 percent in the second quarter from 9 percent in the previous three months.

Underlying sales in emerging markets rose 7.4 percent in the quarter, while they fell 1.6 percent in developed markets. Emerging markets contribute 60 percent to Unilever’s overall sales.

Turnover inched lower to 13.7 billion euros (US$15.25 billion).