Unilever issues profit warning over collapsing currencies in 'emerging markets'

 

Unilever, the Magnum ice cream to Dove soap giant, issued a profit warning last night, blaming the collapsing currencies in so-called “emerging markets” such as Brazil and India.

Meanwhile, despite warm words from Western political leaders on improving economic data, it said developed markets remained “flat to down”. As a result, it warned of a €500m (£417m) shortfall in sales this quarter.

Emerging market currencies have plummeted over the past few months in anticipation of the US Federal Reserve tapering off its quantitative easing programme. Those with big budget and current account deficits have been worst hit.

Unilever said it now expected the current quarter’s underlying sales growth to come in at 3 to 3.5 per cent. Investors had previously expected growth of 5 per cent.

The currencies of Brazil and India, which have been particularly badly smashed by concerns about their economies, have hurt Unilever especially badly as they are two of its biggest global markets. Indonesia is another major economy that has performed badly for the company.

Unilever has suffered from the foreign exchange moves largely because its emerging markets regions buy raw materials in dollars with their local currencies .

Unilever anticipates that the emerging market economies’ GDP growth, an annualised 9 per cent in the first half of the year, has now fallen to 6 per cent.

Although Unilever is the first in its sector of fast-moving consumer goods to warn on its growth rates, sports group Adidas rapped out a similar alert in the middle of September, citing the same reasons.

Markets were shocked by the announcement, largely because it was not issued until after the stock market had closed for the evening.

Sources at the company said the numbers had only just come to light from collating all of September’s monthly sales statistics from its various divisions.

On the positive side, Unilever said the fourth quarter should be better due to a number of one-off factors like the launch of several new products that would be boosted by extra marketing investment. Unilever chief executive Paul Polman, pictured left, still anticipates meeting his woolier target of beating the market’s sales volumes.

Graham Jones, an analyst at Panmure Gordon, said: “Unilever is skilled at handling volatility in emerging markets. Until now the strength of the emerging markets had masked its disappointing developed markets business. This update flags that in developed markets it needs to work harder. We had predicted emerging markets will have weakened but we had also expected some growth in the developed markets but this wasn’t the case.”

The shares were expected to open sharply down this morning.

Jim Armitage: This is how it begins

This is how it begins. If you had any doubt Britain would be affected by the bursting of the emerging markets bubbles pumped up by QE in recent years, here is the proof. The Fed drove speculators to lend ridiculous amounts of money, at ridiculously low interest rates, to badly run countries that could ill afford to borrow. Now that QE’s taps are set to turn off, Western money is running home and those economies are left to suffer. Our biggest and best firms are feeling the blowback, without real growth in developed markets to compensate. Dividends, and with them, our savings, will be damaged. Brace yourselves.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Sales Assistant / Buyer

£15000 - £17000 per annum: Recruitment Genius: This company offers a range of ...

Recruitment Genius: Customer Service Advisor

£15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....

Recruitment Genius: Compliance Manager

£40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

Day In a Page

Greece says 'No': A night of huge celebrations in Athens as voters decisively back Tsipras and his anti-austerity stance in historic referendum

Greece referendum

Greeks say 'No' to austerity and plunge Europe into crisis
Ten years after the 7/7 terror attacks, is Britain an altered state?

7/7 bombings anniversary

Ten years after the terror attacks, is Britain an altered state?
Beautiful evening dresses are some of the loveliest Donatella has created

Versace haute couture review

Beautiful evening dresses are some of the loveliest Donatella has ever created
No hope and no jobs, so Gaza's young risk their lives, climb the fence and run for it

No hope and no jobs in Gaza

So the young risk their lives and run for it
Fashion apps: Retailers roll together shopping and social networking for mobile customers

Fashion apps

Retailers roll together shopping and social networking for mobile customers
The Greek referendum exposes a gaping hole at the heart of the European Union – its distinct lack of any genuine popular legitimacy

Gaping hole at the heart of the European Union

Treatment of Greece has shown up a lack of genuine legitimacy
Number of young homeless in Britain 'more than three times the official figures'

'Everything changed when I went to the hostel'

Number of young homeless people in Britain is 'more than three times the official figures'
Compton Cricket Club

Compton Cricket Club

Portraits of LA cricketers from notorious suburb to be displayed in London
London now the global money-laundering centre for the drug trade, says crime expert

Wlecome to London, drug money-laundering centre for the world

'Mexico is its heart and London is its head'
The Buddhist temple minutes from Centre Court that helps a winner keep on winning

The Buddhist temple minutes from Centre Court

It helps a winner keep on winning
Is this the future of flying: battery-powered planes made of plastic, and without flight decks?

Is this the future of flying?

Battery-powered planes made of plastic, and without flight decks
Isis are barbarians – but the Caliphate is a dream at the heart of all Muslim traditions

Isis are barbarians

but the Caliphate is an ancient Muslim ideal
The Brink's-Mat curse strikes again: three tons of stolen gold that brought only grief

Curse of Brink's Mat strikes again

Death of John 'Goldfinger' Palmer the latest killing related to 1983 heist
Greece debt crisis: 'The ministers talk to us about miracles' – why Greeks are cynical ahead of the bailout referendum

'The ministers talk to us about miracles'

Why Greeks are cynical ahead of the bailout referendum
Call of the wild: How science is learning to decode the way animals communicate

Call of the wild

How science is learning to decode the way animals communicate