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UPDATE 4-Unilever's sales rebound masks murky outlook

Thu, 22nd Oct 2020 07:10

* Underlying sales up 4.4% vs 1.3% analyst consensus

* Turnover 12.9 bln euros vs 12.7 bln euro estimate

* Not giving short-term guidance

* CEO says economic downturn is inevitable

* London listed shares up 1% as FTSE 100 dips 0.3%
(Recasts with comments on margin, outlook; changes headline)

By Martinne Geller

LONDON, Oct 22 (Reuters) - Unilever held
back from celebrating a much stronger-than-expected return to
sales growth in the third quarter on Thursday, as the CEO said
the outlook remained "highly unpredictable".

Underlying year-on-year sales rose 4.4% for the Anglo-Dutch
maker of Dove soap, Hellmann's mayonnaise and Tresemme shampoo.
Analysts on average were expecting an increase of 1.3%,
according to a company-supplied consensus.

The upturn was led by emerging markets, which contribute
about 60% of Unilever's revenue. Sales there rose 5.3% from the
previous year, while developed markets rose 3.1%.

However, Unilever declined to give any short-term
performance targets, with CEO Alan Jope saying he was "perplexed
by talk of a quick recovery" from the coronavirus pandemic and
its economic fallout.

"We've moved from response mode to now living with COVID-19,
but the environment that we're operating in remains highly
unpredictable and we believe, an economic downturn is
inevitable," Jope said.

The company said gross margins in the second half of the
year would be pressured by higher COVID-related costs, commodity
prices and marketing spend, as well as currency fluctuations and
a shift in the sales mix toward less profitable products, such
as ice cream eaten at home.

Like its larger peer Nestle, Unilever has been
buying assets to get more exposure to fast-growing categories
like vegan foods and premium beauty and moving out of slower
categories like margarine and tea.

Nestle reported a strong acceleration in third-quarter sales
and raised its outlook on Wednesday.

Unilever withdrew its annual sales growth target in
April.

In North America, which includes the United States,
Unilever's biggest market by revenue, growth of 9.1% continued
to be driven by increased demand for food eaten at home.

"The shift of consumption towards in-home seems to be
providing a strong tailwind to the sector and is outweighing any
exposure to the out-of-home market," said Bernstein analysts.

Overall turnover was 12.9 billion euros, versus analysts'
estimates of 12.7 billion euros ($15.05 billion).

Unilever's sales had fallen 0.3% year-on-year in
the second quarter, the first drop in 16 years, hurt by steep
declines in food eaten out of the home and the pandemic's impact
on emerging markets.

The group is planning to unify its dual-headed corporate
structure into one London-based entity in a process expected to
complete next month.

Unilever said it intends to proceed with its plan despite an
"exit tax" proposal from a Dutch opposition party.

Its shares were up 0.8% at 0903 GMT, having gained about 8
percent this year through Wednesday, while the FTSE 100
has fallen 23%.
($1 = 0.8440 euros)
(Reporting by Martinne Geller;Editing by Elaine Hardcastle)

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