Companies across sectors are launching support packages for vulnerable companies in supply chains in the wake of the Covid-19 pandemic.
Unilever is to provide €500m of cash flow relief for its most vulnerable SME suppliers as part of support measures.
The company has also committed to protect its workforce in the short-term from sudden drops in pay as a result of market disruption or being unable to perform their role.
In a trading statement for the first quarter of this year, Unilever said that the restrictions in many countries varied in severity. It said that it had been able to maintain supply of product in the face of the disruption caused by the virus but said that it was responding to changing patterns of demand.
It said there had been upswings in sales of hygiene and in-home food products, combined with stockpiling and an almost total halt to out of home consumption. The company predicted that there would be lasting changes to consumer behaviour and that it was preparing for growth in “a new normal”.
The statement said: “We are now focused on redeploying people to those parts of the business that are seeing high demand. We have been able to maintain the supply of product and we are keeping our factories running through the many unpredictable challenges in local operating environments across our value chain. We are also opening up new capacity where it is most needed, such as in hand hygiene and food.”
Underlying sales growth for the first quarter of the year was flat year-on-year, with turnover up 0.2%.
The company said: “We will continue to adapt throughout this crisis. However, the unknown severity and duration of the pandemic, as well as the containment measures that may be adopted in each country, mean that we cannot reliably assess the impact across our markets and our business. We are therefore withdrawing our previous growth and margin outlook for 2020.”
UK water and waste company Severn Trent has arranged for £38m to be paid to its smaller suppliers early to help support them through the crisis. The company has arranged for immediate payment to be made to SMEs for at least the next three months to help them through the difficult economic conditions.
Helen Miles, chief commercial officer at Severn Trent, said: “We know how hard it is for the smaller companies we work with at the moment which is why we wanted to do what we could to help them.
“We’ve got more payments lined up and we’re carrying on placing orders because we’re still working hard to make sure our four million customers, hospitals and care homes have the water services they need in this difficult time.”
Fast Retailing, which owns the Uniqlo fashion chain, said it would not change payment schedules to suppliers where production had already started, and that it would use fabrics or materials already sourced to fulfil orders, or provide compensation if such materials later become unnecessary.
It added that it would adjust production schedules to ensure partner factories were not exposed to unacceptable financial risks or pressures.
Waitrose has also launched initiatives to support its most vulnerable suppliers, while Morrisons last month pledged support to suppliers to help them manage production volumes and cash flow.
Earlier this month, Primark set up a fund to cover the wages of garment workers, and also pledged to pay £370m to its suppliers for products that have already been ordered, after being criticised for cancelling millions of pounds worth of orders.
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