Unilever profits wane in third quarter, EM currency fall blamed

LONDON/ MUMBAI: Unilever announced a surprise profit warning for the July-September quarter and blamed it on weakening currencies in emerging markets such as India, triggering a slump in its stock and pointing to concerns over the performance of local unit Hindustan Unilever.


The company “has seen weakening in the market growth of many emerging countries in quarter three and now expects underlying sales growth of 3-3.5% in the quarter”, Unilever said in a release posted on its website. “The emerging market slowdown has accelerated as a result of significant currency weakening. Developed markets remain flat to down.”

While the expectation compares with 5% growth in the first two quarters, Unilever has previously said that business in emerging markets will be hit by worldwide economic weakness.

Local subsidiary Hindustan Unilever ( HUL), India’s biggest consumer goods company, had posted earnings that were below expectations in the June quarter with discounts and high-profile promotional campaigns not lifting sales by any appreciable degree.

“There is a general slowdown across categories. We are witnessing a significant slowdown from early 2013 to the middle of 2013,” Nitin Paranjpe, managing director and CEO of HUL said at the time. Chief Financial Officer R Sridhar saw challenges persisting over “the next two-three quarters”.

Knock for Indian FMCG companies

Unilever’s warning has stunned the Indian FMCG sector, which has been doddering along of late, after a decent run on Dalal Street, reports Rajesh Mascarenhas.