Emerging markets deliver for Unilever

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BR SKIPPY Bloomberg Skippy brand peanut-butter sits on display in a supermarket in Princeton, Illinois, U.S., on Thursday, Jan. 3, 2013. Hormel Foods Corp., the maker of Spam lunchmeat, agreed to buy the Skippy peanut-butter business from Unilever for about $700 million, expanding its presence beyond meats and further into China. Photographer: Daniel Acker/Bloomberg

Bloomberg

Unilever posted quarterly sales results yesterday that missed estimates and the second-biggest consumer goods maker said growth was slowing in emerging markets while conditions remained difficult in the US and Europe.

The Anglo-Dutch group, which owns Unilever South Africa, said underlying revenue rose 5 percent year on year in the second quarter. That fell short of analyst estimates for a 5.3 percent gain.

Sales in developing markets rose 10.3 percent in the three months to June, the company said, little changed from the pace of the first three months.

Chief executive Paul Polman said on a conference call that it was not “realistic” for growth to remain at those levels after nine consecutive quarters of double-digit gains, given the tougher economic conditions.

“Slowing does not mean crashing,” Andrew Wood, an analyst at Sanford C Bernstein, said. “Despite slowing emerging markets, Unilever still delivered double-digit growth, which was basically in line with the first quarter.”

Unilever fell 1.5 percent to E30.50 at 5pm in Amsterdam, trimming this year’s gain to 5.8 percent.

“Growth is slowing in emerging markets, as macroeconomic headwinds influence consumer behaviour,” the company said. “Within this overall trend we see a mixed picture across the major countries.”

Slackening economic growth in nations such as India and China is a concern to Unilever, which gets about 57 percent of sales from developing regions. The MSCI emerging markets index has fallen 6.2 percent over the past three months, with the likes of Nestlé and Coca-Cola citing weakness in new markets.

While Unilever’s sales growth was strong in Latin America, Africa and south-east Asia, south Asia was “a little less so”, chief financial officer Jean-Marc Huet said.

In India, Unilever saw “an overall slowdown of the market, as well as the consumer, and in our business”, Huet said.

Earlier this month, Unilever spent E2.45 billion to boost its stake in its Indian subsidiary to 67 percent from 52 percent. India is Unilever’s second-biggest emerging market based on sales, behind only Brazil.

Coca-Cola said this month that profit declined for a second quarter as sales were sapped by economic weakness in China, unseasonable weather in India, and depressed consumer spending in Brazil.

Consumer spending “is still flat” in the US, Polman said, reflected in a 2 percent decline in North American underlying sales in the quarter. That compares with a 3.3 percent gain in the same period last year.

Revenue declined 1.3 percent in developed markets and 0.8 percent in Europe, with ice-cream products hurt by cool weather and sales of spreads continuing to decline.

Deutsche Bank analyst Harold Thompson said: “There was scope for Unilever to disappoint, but its first-half results and confident outlook statement remind us of the progress made in recent years.”


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