Unilever, the maker of Dove soap, says the slowdown in underlying revenue growth in emerging markets such as Brazil, Argentina and China reflects weakening economic growth and price increases necessitated by sliding currencies. Photo: Bloomberg

Matthew Boyle London

Unilever’s revenue grew less than analysts predicted in the second quarter as Asian emerging markets continued to slow and the struggling food business posted another sluggish result.

Underlying sales increased 3.8 percent year on year in the three months to June, the maker of Dove soap and Lipton tea reported yesterday. The median estimate of 15 analysts was for a 4.3 percent increase.

The slowdown in emerging markets such as Brazil, Argentina and China reflects weakening economic growth and price increases necessitated by sliding currencies.

Almost two-thirds of food sales come from mature markets such as the US, which has prompted the sale of brands such as Slim-Fast and Ragu. The volume of food sold by Unilever in the quarter was little changed despite the benefit of Easter falling in the period.

“Unilever’s foods business is the real dog,” Rahul Sharma, the managing director of Neev Capital in London, said, citing a lack of innovation and frequent price rises, which had damped sales, particularly in the US.

Unilever shares were little changed at e32.29 (R456) as of 12.04pm in Amsterdam.

Chief financial officer Jean-Marc Huet said the Easter benefit to underlying sales growth in the quarter was less than the 0.4 percentage points to 0.5 percentage points lift he had predicted earlier in the year.

He declined to be more specific. Unilever has introduced new food items such as spreads with butter, and Huet said sales of spreads had been “stable” in the quarter after declining about 5 percent in the first three months of the year.

The volume of goods sold rose 1.9 percent in the quarter, lower than the 2.5 percent median estimate, as growth in shipments of health and beauty, home-care, and refreshment products such as tea and ice cream all slowed from the first quarter.

“The absence of quarter-on-quarter acceleration is disappointing in our view, given the impact of Easter phasing,” James Edwardes Jones, an analyst at RBC Europe, said.

Underlying sales in emerging markets increased 6.6 percent, trailing the 10 percent expansion in the same period of last year, while revenue in developed markets rose 0.3 percent. Underlying sales exclude the effect of acquisitions, disposals and currency fluctuations.

Growth in Unilever’s markets had slowed to 2.5 percent on average from 4 percent a year ago, chief executive Paul Polman said, noting that the company was still holding or gaining market share in 60 percent of its businesses, up from 55 percent last year, helped by new products such as compressed deodorants and Clear anti-dandruff shampoo, which has just entered Japan.

Total revenue in the quarter fell 5.5 percent to e24.1 billion, hurt by the weakness of currencies such as the Argentine peso, Venezuelan bolivar and the Indonesian rupiah against the euro. Argentina accounted for about 2 percent of sales, while Venezuela represented less than 0.5 percent, Huet said.

The core operating margin, a measure of profitability, was unchanged at 14 percent in the first half, measured in current exchange rates. – Bloomberg