Unilever hits FTSE peak after avoiding Covid slump
Consumer goods firm now the index’s most valuable company but tea division faces an uncertain future
UNILEVER has seized the top spot as Britain’s most valuable listed company after dodging a Covid sales hit and suggesting its PG Tips tea business could float on the stock market.
Shares in the consumer goods titan soared after it said sales were almost flat in the first half of the year, far better than a sharp fall predicted by analysts.
Shares rose almost 8pc, adding about £9bn to Unilever’s value and leaving it worth just under £122bn. It has now leapfrogged drugmaker AstraZeneca to take the top spot in the blue-chip FTSE 100 index.
The company said its tea business will be carved out by next year following a slump in Britons drinking the brew. The division, which had sales of €2bn (£1.8bn) last year and owns brands including Lipton, Pukka and PG Tips, could be sold outright, demerged or listed on the stock market separately. Unilever will hold on to its tea business in India and Indonesia, as well as ready-to-drink joint ventures such as its Lipton tie-up with Pepsi.
Alan Jope, the chief executive, said the process will be a formal legal and financial separation rather than simply shifting people around. Unilever wants the division to act as if it were independent, paving the way for a sale or float. He added: “We have no idea what the final outcome will look like.”
Global chaos in the wake of the pandemic has triggered a major shake-up on the FTSE 100. Royal Dutch Shell was knocked from its perch at the top earlier this year after shedding tens of billions of pounds in value following a collapse in the oil price. Meanwhile, AstraZeneca shares jumped when the company emerged as a leading player in the race for a Covid-19 vaccine.
Unilever has been helped by its status as an essential consumer goods stalwart, with customers still buying many of its products even in deep recessions.
Mr Jope also warned that UK staff will only make a “very gradual” return to the office from September, in a further blow for Boris Johnson’s hopes of a return to normal.
Unilever – which makes goods from Domestos bleach to Marmite – employs about 6,000 people in the UK.
Ministers are pushing for a rapid march back to normality from September amid fears of disaster for town and city centres if commuters stay at home.
The plans already suffered a setback earlier this week when NatWest said 50,000 of its staff will not return until next year.
Mr Jope said: “We anticipate that it will take many more months before we’re back to a steady state, and we think we will never be 100pc back.”
In the first half of the year, demand for cleaning products and items typically consumed at home offset big falls in grab-and-go categories and beauty.
Unilever’s underlying sales fell 0.3pc in the second quarter compared with a 3.9pc decline forecast by analysts. Pretax profits rose 4pc to €4.5bn.
The company said that lockdown meant that consumers had less reason to put on make-up because they were not going to work or meeting friends.
This led to a 0.9pc fall in sales in its beauty and personal care division to €5.3bn, a drop offset by a scramble for hand soap and surface wipes to help prevent the spread of the virus.
The maker of Magnum and Ben & Jerry’s ice cream has been looking for acquisitions over the past six months despite the pandemic, Mr Jope said.
He added: “If good opportunities emerge, we’re certainly in a strong position, especially with our healthy balance sheet, to take advantage of that.”