Unilever Q2 falls short on back of emerging market slowdown

28-Jul-2014 - Last updated on 29-Jul-2014 at 12:07 GMT

Unilever's Q2 results were not as strong as expected ass the firm sees an emerging market slowdown.

Global food and consumer products giant Unilever missed second-quarter expectations as a slowdown in emerging markets and declining prices in developed ones hit sales.

The Anglo-Dutch brand owner said underlying sales rose 3.8% - below analysts' expectations of 4.3%, while turnover decreased by 5.5% to €24.1 billion.

The fast-moving consumer goods (FMCG) firm delivered organic sales growth of 3.8% (in local currency) in Q2, which was driven by organic volume and pricing gains of 1.9% and 1.9%, respectively, it said. This growth is improved from Q1 figures of 3.6%, but was lower than last year's growth of 5%.

“The first half again shows consistent top and bottom line progress despite significant headwinds,” said CEO Paul Polman in a statement. “Our markets have been challenging and we have experienced a further slow-down in the emerging countries whilst developed markets are not yet picking up.”

Unilever said the pace of sales growth has continued to slow down since Q4 of 2013, mainly due to its operations in emerging markets, which account for two-third of its revenues. It said organic sales growth of 6.6% in emerging markets was flat in the quarter as a result of economic uncertainty - particularly in Asia. It’s 6.6% organic sales growth in Q2 this year is compared to 10.3% in the same period last year.

Meanwhile developed markets grew by 0.3%, as positive volume growth partially offset declining prices, said the firm. However, Unilever added that developed markets continued to remain weak with little sign of recovery in North America or Europe.

Food business update

Unilever saw organic sales growth of 0.7% (in local currency) in its food business – based on a 0.1% organic volume growth and pricing gains of 0.5%.

Overall, the segment benefited due to a late Easter in 2014 and improved market share in both Europe and North America, said the firm.

Dressings grew on the back of improved performances from Hellmann’s brand, however the performance of its spreads business continues to remain weak despite improvement in market share of margarine.

The extension of a new packaging in Brazil Savory made good progress in the emerging markets.

Refreshment update

In refreshment, Unilever saw organic sales growth of 4.5% which was driven by organic volume and pricing gains of 3.1% and 1.4%, respectively.

Sales improved in the quarter thanks to solid performance in the ice-cream category with brands like Magnum, Ben & Jerry's and Cornetto, said Unilever.

Tea continued to grow driven by Lipton K-cups and new liquid concentrate. However, tea sales in Russia and Saudi Arabia were soft.