Geneva - The economic slowdown in emerging markets was here to stay as many countries needed to enact structural reforms to adjust to new conditions after the boom of recent years, Unilever chief executive Paul Polman said last week.
“They are still relatively stronger economies, but still fragile,” Polman said. “And you see that growth coming off now a little bit, obviously not being helped either by lower demand coming from Europe and the US. This will last a few years. And it will only be corrected if some of the reforms have been made in these places.”
Unilever, the second-largest maker of consumer goods, said in September that slowing growth in emerging markets would weigh on sales in the second half. The company gets more than half its sales from emerging economies such as China and India. So-called underlying sales rose 3.2 percent in the third quarter, the weakest increase in four years and a slowdown from the first half’s 5 percent pace, the Anglo-Dutch maker of Lipton tea reported on October 24.
“I am always surprised that I am the one who sort of has to announce there’s a slowdown in emerging markets,” Polman said, speaking on Friday at a reception in Geneva where he was awarded the 2013 World Wide Fund for Nature (WWF) Duke of Edinburgh Conservation Medal for Unilever’s efforts to reduce environmental damage.
The Amsterdam-traded shares fell as much as 1.5 percent yesterday. Weak currencies in India, Brazil and Indonesia had weighed on sales growth, the company has said.
Investors had pumped money into emerging markets since 2008, spurred by the liquidity generated by central banks, Polman said.
US Federal Reserve chairman Ben Bernanke’s statement on June 19 that the Fed might start tapering stimulus efforts this year had put pressure on emerging markets, he said.
“People were thinking interest rates in the US would go up again and then money came back to the US,” the Dutch executive said.
“You saw a lot of these emerging-market currencies go down 10 percent to 15 percent. Fortunately these countries are stronger, so you don’t have another Asian crisis.”
Polman is the first chief executive of a major multinational to receive the Duke of Edinburgh conservation award since it began in 1970.
“It’s a great honour,” he said of the prize. “WWF clearly understood you have to take some risk by working with people, coalitions together to move things forward.” – Bloomberg