Emerging markets slowdown hurts Unilever

Unilever, the consumer goods group, reported a bigger than expected drop in first-half sales after a continued slowdown in emerging markets, where weakening currencies wiped €413m off operating profits at the Anglo-Dutch company.

The maker of Lipton tea and Dove soap is the first of the large multinational consumer groups to report and Paul Polman, chief executive, set the tone on Thursday, saying: "We have experienced a further slowdown in the emerging countries whilst developed markets are not yet picking up."

Mr Polman said the economic backdrop in the first half had been "as tough as we've faced in the last five years." He indicated there would be no improvement this year, saying it would take: "a few more quarters before we see the first signs of recovery."

He said the group would continue to tilt its portfolio towards higher-growth personal and home care and away from food.

This week, Dave Lewis, its president of personal care, was named as the new chief executive of Tesco replacing Philip Clarke, and will take up his post in October. Leaving Unilever after a 27-year stint, he had been regarded as a potential future successor to Mr Polman. Mr Polman congratulated Tesco on hiring Mr Lewis, describing him as "an outstanding talent".

Unilever's foods business - mainly mayonnaise and spreads - grew by 0.7 per cent against a 6.2 per cent rise in home care and 4.5 per cent expansion in personal care.

In the last five years, Unilever has sold off €2.5bn in sales of mainly food businesses and acquired €3.5bn of sales from personal care acquisitions.

Earlier this month it sold Slim-Fast, having also disposed of its North American pasta sauce brands, Ragu and Bertolli, for $2.2bn in cash to Japan's Mizkan group in May.

Analysts had expected sales growth of 4.3 per cent in the second quarter, from 3.6 per cent in the first three months of the year, but the pick-up was modest at 3.8 per cent.

Pre-tax profits were up 15 per cent at current exchange rates to €4.2bn in the six months to the end of June, boosted by disposals while sales fell 5.5 per cent to €24.1bn.

Andrew Wood, analyst at Bernstein Research, called the results "mixed". While sales were lower than expected in all regions and across all its main businesses, operating profit margins and earnings per share had surprised to the upside.

"Given that one of the biggest issues investors have had with Unilever has been its inability to convert good operating momentum into good EPS growth, the 5 per cent beat to consensus on EPS could be well received," he said in a note.

Sales in emerging markets - which account for 57 per cent of the total - grew by 6.6 per cent in the first half, trailing the 10 pert cent expansion in the same period last year. In Europe sales were down 0.4 per cent and grew by 4.3 per cent in the Americas.

In early trading in London, shares had fallen 21p to £26.62, a fall of just over 2 per cent.

Additional reporting by Claer Barrett

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