Global slowdown pressures Unilever

by Keith Nunes
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Unilever's sales in North America were mixed during the quarter.

 

LONDON — Jean-Marc Huet, chief financial officer for Unilever P.L.C., succinctly summed up the company’s third-quarter results on Oct. 23 when he said: “We anticipated a slowdown, but, I must admit, not quite to this extent.”

Mr. Huet noted that global market conditions are “very tough,” and the global slowdown has been “more pronounced, more prolonged than expected.”

“On a worldwide basis, our markets had been growing in value of between 3% to 4% last year in 2013, and today, they have now slowed to less than 2%,” he said.

He called the Eurozone economic recovery “faltering” with consumer spending power below historic levels; said emerging markets had “weakened further” during the quarter; identified the Brazilian economy as being in recession; and noted that China’s gross domestic product is at its lowest level since 2009.

On China, he added, “Domestic demand has slowed sharply; market value growth rates in our categories have slowed from around 7% to 8% last year, 2013, to less than 2% in the last couple of months or so. That is a fast deceleration.”

North America turned out to be one of Unilever’s few bright spots around the world.

“In North America, the economic picture is a bit better,” Mr. Huet said. “So far, most of the improvement has been in other sectors, but we are starting to see some improvement in demand in our categories. Market value growth in the last quarter improved to just over 1%, giving some cause for optimism here but, again, pretty modest levels.”

In the company’s food and beverage businesses performance was mixed at best. Unilever saw growth in its savory and dressings business unit, but it was not enough to offset the decline experienced in spreads. Its ice cream businesses were held back by poor summer weather in Europe, according to the company. The Lipton tea business grew in North America due to introduction of pods for the Keurig single-serve beverage system.

Revenues for the third quarter fell 2% to €12,244 million ($15,501 million) compared with the same period of the previous year. For the first nine months of fiscal 2014, sales have fallen 4.3% to €36,342 million ($46,013 million).

The company said in a statement it does not expect improvement in its markets for the remainder of the year.
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