Unilever Sales Growth Hurt as Emerging Markets Slow

Unilever, the world’s second-biggest consumer-goods maker, reported quarterly sales that missed estimates and said growth is slowing in emerging markets.

So-called underlying revenue rose 5 percent in the second quarter, the Anglo-Dutch maker of Lipton tea said today in a statement. That fell short of the average estimate of 14 analysts polled by Bloomberg for a 5.3 percent increase.

Slower growth in countries such as India is a concern to Unilever, which has been relying on developing markets to combat declining consumer demand in recession-wracked Europe. The MSCI Emerging Markets Index, a barometer of developing economies, has fallen 6.2 percent over the past three months, with the likes of Nestle SA and Coca-Cola Co. citing weakness in newer markets.

“Growth is slowing in emerging markets, as macroeconomic headwinds influence consumer behaviour,” Unilever said today. “Within this overall trend we see a mixed picture across the major countries reflecting different local circumstances. Developed markets remain sluggish with little sign of any recovery in North America or Europe.”

Unilever fell 0.8 percent to 30.70 euros at 9:03 a.m. in Amsterdam trading, trimming this year’s gain to 6.5 percent.

Underlying sales in developing markets rose 10.3 percent in the second quarter, the company said, little changed from the first-quarter’s 10.4 percent increase.

Indian Acquisition

While sales growth was strong in South America, Africa and Southeast Asia, south Asia was “a little less so,” Chief Financial Officer Jean-Marc Huet said by phone.

In India, Unilever sees “an overall slowdown of the market, as well as the consumer, and in our business to a certain extent,” Huet said.

Earlier this month, Unilever spent 2.45 billion euros ($3.2 billion) to boost its holding in its Indian subsidiary to 67 percent from 52 percent. Hindustan Unilever Ltd. is due to report first-quarter earnings tomorrow.

Coca-Cola, the world’s biggest beverage company, said this month that profit declined for a second straight quarter as sales were sapped by economic weakness in China, unseasonable weather in places such as India, and depressed consumer spending in Brazil. Nestle, the largest food company, has also experienced a slowdown in emerging-market growth.

Consumer spending “is still flat” in the U.S., Chief Executive Officer Paul Polman said on a conference call, reflected in a 2 percent decline in North American underlying sales in the quarter.

Unilever said the volume of goods sold rose 3 percent in the second quarter, meeting estimates.

Total revenue rose 0.6 percent to 13.3 billion euros.

Underlying sales growth excludes the effect of acquisitions, disposals and currency fluctuations.

The core operating margin, a measure of profitability, widened by 40 basis points to 14 percent in the first half.

(Source: Bloomberg)