Unilever stock climbed on Thursday as the consumer goods giant launched a strategic review of its tea business amid declining demand.
The Lipton and PG Tips owner reported net profit of €6 billion in 2019, a 38% drop from the previous year, as it blamed a slowdown in South Asia and market softening in China.
The company, which said demand for black tea in developed markets was declining, is now mulling a sale of its tea business. The stock climbed 1.8% in early trading.
Sales grew 1.5% in the fourth quarter, while underlying sales growth of 2.9% for the full-year fell below the company’s multiyear range target of 3-5%.
Sales growth in 2020 will land in the lower half of the multiyear range, Unilever added.
The company warned in December 2019 that it would miss sales targets for last year and endure a tough start to 2020, sending shares tumbling 5%.
The Anglo-Dutch conglomerate has been hit by a slowdown in India and China, while the Ben & Jerry’s owner has also been affected by lower ice cream sales in 2019 compared with those during 2018’s hot summer.
Unilever has been focusing on premium tea as well as fruit and herbal tea in recent quarters in a bid to revive the struggling unit. The segment continued to weigh on its results last year, as sales in its food and refreshments business, which includes ice creams and Hellmann’s mayonnaise, rose 1.5% in the year with volumes falling 0.2%.
Looking ahead.
Chief Executive Alan Jope reiterated the company’s plan to improve brand awareness and focus on faster growing areas. Low-growth brands are under threat, as seen with the company’s spreads business that was sold in 2017 for £6 billion. The tea business could well be the next in line.
Despite missing sales targets and profits plunging, Unilever’s portfolio of global household names remains strong and the company expects a recovery in the second half of 2020. However, Jope warned the impact of the coronavirus remains “unknown.”
"Tea" - Google News
January 30, 2020 at 06:55PM
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Unilever Stock Climbs as Lipton Owner Mulls Sale of Tea Brands - Barron's
"Tea" - Google News
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