Unilever says slower growth in emerging markets will impact results

By Simon Pitman

- Last updated on GMT

Related tags Personal care Sales growth Stock market

Unilever says slower growth in emerging markets will impact results
Unilever has triggered some concerns in the personal care market over a lower profit warning ahead of its third quarter results, due out later this month.

The company issued a statement on Monday saying that it has witnessed a weakening in the market growth of many of the emerging markets it is present in during the third quarter, underlining that it now forecasts sales growth of 3.0 to 3.5 per cent during for the third quarter.

The company’s previous forecast for sales growth during the quarter had been an estimated 5.5 per cent, representing a considerable impact on group sales that would otherwise have topped €14bn.

At close of business on Monday the company’s share prices had fallen by almost 4 per cent, wiping an estimated €4 billion off its share price and the stock has continued to tumble further since then.

The company pointed out its belief that significant currency weakness had accelerated a cooling down in these markets during the past year, which many experts say has been exacerbated by rising inflation rates.

Feeling the pinch

Unilever’s emerging markets account for approximately 50 per cent of its revenue, but right now it is exposure in markets such as Brazil, India and Thailand, where the company is really feeling the pinch due to fluctuating economic conditions.

In particular, the Indian market has been causing concern, with many personal care and cosmetics players reporting slower than expected growth on account of the country’s growing trade deficit following the rupee’s crash against the US dollar.

Looking ahead, Unilever CEO Paul Polman said he believes that the underlying sales would still continue to improve in the fourth quarter, as well as re-asserting that the company would continue to grow ahead of the markets it competes in.

But if this is the case, many smaller players who are not in such a strong position may be soon be feeling the pinch if revenues from emerging markets continue to slide.

A different story this time last year...

This time last year, the position for Unilever was quite different, with the company reporting second quarter group sales growth of 5.8 percent and personal care sales of 10.4 per cent – figures that were largely driven by an 11 per cent growth in revenues from emerging markets.

With the European market still remaining subdued and the North American market showing fairly timid signs of recovery, the opportunities to implement strategies that might repeat the sort of performance that was seen last year are looking increasingly difficult to pinpoint.

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