Profit warning deals blow to Unilever share

Profit warning deals blow to Unilever share

Dutch-British company Unilever has sent out a profit warning, as it predicts “a weakened growth in plenty of emerging countries” and a “flat to slightly lower” turnover in developed markets.

Slowdown in emerging countries

The owners of brands like Axe, Bertolli, Dove and Lipton expect the underlying sales growth in the third quarter to be a mere 3 to 3.5 %. The first six months saw an underlying sales growth of 5 % and analysts expected Unilever to maintain that number in the third quarter.

 

Unilever puts most of the blame for the failed target on the emerging countries, as they are experiencing a slower growth. The situation is worsened by the weakened local currencies compared to the euro. The developed Western markets will manage to hold onto a “flat or slightly lower turnover”.

 

Lowest exchange rate in 11 months

The profit warning is not a complete surprise, because Unilever had already mentioned in the second quarter that the market situation had worsened. However, investors were not pleased: the Unilever share dropped 3 % in Amsterdam, its lowest point in 11 months. London followed suit, dropping 3.6 %.

 

Unilever’s management points out that it is still on track to reach its previously mentioned goals for 2013: a volume growth and a durable improvement of the operational margins in its core activities. Paul Polman, CEO, expects an “underlying sales growth in the fourth quarter”.

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