By Saabira Chaudhuri 

LONDON -- Unilever PLC reported better-than-expected second-quarter sales as a strong performance in the U.S. outweighed coronavirus-related declines elsewhere in the world.

The consumer-goods giant's shares jumped 7% in early trading Thursday after it said it had benefited from a rollout of Lifebuoy-branded soap and sanitizer products to new markets, and that grocery-store gains for its Knorr and Hellmann's brands had helped offset weaker out-of-home ice-cream sales during lockdowns.

Unilever also said it plans to spin off the majority of its tea business into a stand-alone entity, capping a review it launched earlier this year. It will retain its tea operations in India and Indonesia, as well as its Lipton ice-tea joint venture with PepsiCo Inc.

For the second quarter, the company said underlying sales growth -- a closely watched figure that strips out currency movements and deals -- declined 0.3%, well above analyst estimates for a decline of 4.3%.

Chief Financial Officer Graeme Pitkethly on a call with reporters described the quarter as "probably the most testing we've ever seen," and said the results mask huge volatility in various businesses. "Although it looks like we are flat on topline, we had record growth and record declines just one click below that," he said.

For instance, Unilever said sales at its food-service arm, which provides ingredients to restaurants, declined nearly 40% over the first six months of the year, while sales of ice cream sold for out-of-home consumption declined nearly 30%. By contrast, hand soap and sanitizer along with cleaning products logged double-digit-percentage growth.

Underlying sales in home care rose 4% in the second quarter, largely offsetting a 1.8% drop in the food and refreshment arm and a 0.9% drop in beauty and personal care.

In North America, Unilever reported second-quarter underlying sales growth of 9.5%, driven by a jump in sales of food -- especially ice-cream brands such as Magnum -- to be eaten at home and hygiene products. In Europe, where Unilever's ice-cream business is far more out-of-home focused, sold in parks and through kiosks that are popular with tourists, the company reported an underlying sales drop of 4.5%.

Underlying sales in emerging markets overall dropped 1.9% in the second quarter, with declines in big markets such as India, Brazil and the Philippines.

Overall, Unilever reported a net profit of EUR3.28 billion ($3.80 billion) for the six months to June 30, compared with EUR3 billion a year earlier. Revenue declined to EUR25.71 billion from EUR26.13 billion.

In an indication of how big companies with multiple offices may start to bring some employees back to work, Mr. Pitkethly said Unilever's employees have begun returning to offices in various parts of the world but not to its headquarters in London. He said the company would instead encourage people to drive to satellite offices outside the city.

Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com

 

(END) Dow Jones Newswires

July 23, 2020 05:26 ET (09:26 GMT)

Copyright (c) 2020 Dow Jones & Company, Inc.
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