Unilever has struggled in its third quarter: European deflation, negative exchange rate effects, dwindling Chinese demand and weaker growth in emerging markets have pushed its quarterly turnover down 2 %.
Smallest growth in past 5 years
The British-Dutch manufacturer of food and beauty brands (like Knorr, Lipton, Axe and Dove) experienced a 2 % turnover drop to 12.2 billion euro in its previous quarter. Excluding negative exchange rate effects the company had a 2.1 % underlying growth, the smallest growth in the past 5 years. More so, the majority of that underlying growth was only achieved through price hikes.
Food sales dropped nearly 1 %, mainly because of a weak margarine market, while the disappointing European summer did not help ice cream sales (- 1.1 %). Soap, shampoo and deodorant sales went up (+ 1.1 %), but its growth increase is clearly fading as Chinese demand has also dropped. Its Home Care branch, Unilever's smallest division, grew 2.1 %.
The European market remains its weakest, falling 4.3 %, while the other markets managed growth. Asia went up 3.1 %, while the Americas even grew 6.8 %.
"Everything is going against us"
Financial manager Jean-Marc Huët explained to press agency AFN that everything is currently going against Unilever. "The results do not meet our expectations and sales have slowed down more than we had forecast at the start of the year. It has not only slowed down in China and South East Asia, but the unrest in the Middle East and Russia have also hampered us."
Deflation in Great Britain and France is part of the European problem, according to Huët. "We see clear opportunities to create structural growth in the long term, but we are currently in a perfect storm", he said.
CEO Paul Polman emphasizes that Unilever's underlying 3.2 % growth over the past 9 months is better than what its competitors have achieved. The company has therefore stuck by its forecast of being able to achieve profitable growth in 2014, despite "difficult marketing conditions for the remainder of the year, to say the least", Polman said.