News Column

Unilever Slumps in Emerging Markets

October 1, 2013

Rupert Steiner, Daily Mail

Oct. 01--Unilever last night issued a surprise warning that trading in the emerging markets has disappointed over the past three months.

Shares in the consumer goods giant are likely to come under pressure today over fears that it will lead to lower profits for the year.

The firm, whose brands include Marmite and Persil, issued an unscheduled update at 5pm after the stock market closed in which it blamed weak currencies and a slowdown in sales at its crucial developing markets for worse than expected trading.

On the last day of its third quarter, the Anglo Dutch firm said underlying sales growth is likely to fall to between 3pc and 3.5pc, down from the 5pc posted for the second quarter, and short of the 4.5pc to 5pc range analysts had expected.

Key markets such as India and Brazil have helped offset slow growth in the developed markets in recent times but chief executive Paul Polman said they are now weakening.

In a bleak statement Polman said the emerging markets slowdown has accelerated as a result of 'significant' currency weakening and the developed market remained 'flat to down'. Currency in markets like Indonesia have tanked which means the maker of Magnum ice-cream and Liptons tea is not earning as much in dollars after cash has been converted.

A source said it is too early to say whether this will have an impact on profit but much depends on how the final quarter plays out.

Unilever (down 17p to 2440p) generated about 57pc of its pounds sterling 42bn of annual sales from developing and emerging markets, a fact that has weighed on its share price as currency routs crimp demand and weigh on profits in several markets including India.

Polman has been refocusing the manufacturer on emerging markets such as Brazil and India rather than slow-growth Europe.

The first signs of a slowdown came in the second-quarter when sales growth slowed to 10.3pc from 10.4pc in the emerging markets when weak currencies were once again blamed.

This has meant that those countries have had to pay more to import raw materials driving up the price of goods.

At the time Polman said the slowdown was not significant and when asked if it was a blip or a trend he said: 'It's a healthy, well-managed business and I wouldn't call it either � it's rounding, some quarters it's up and others down.'


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Original headline: Unilever suffers slump in poor emerging markets

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Source: (c)2013 Daily Mail (London)

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