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
News
ebookA unique anthology of reporting and analysis of a crucial period of history
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

Neil Pavier: Management Accountant

£45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...

Sheridan Maine: Commercial Accountant

£45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...

Laura Norton: Project Accountant

£50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...

Laura Norton: Project Accountant

£50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...

Day In a Page

Is a quiet crusade to reform executive pay bearing fruit?

Is a quiet crusade to reform executive pay bearing fruit?

Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
The King David Hotel gives precious work to Palestinians - unless peace talks are on

King David Hotel: Palestinians not included

The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
More people moving from Australia to New Zealand than in the other direction for first time in 24 years

End of the Aussie brain drain

More people moving from Australia to New Zealand than in the other direction for first time in 24 years
Meditation is touted as a cure for mental instability but can it actually be bad for you?

Can meditation be bad for you?

Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

Australia's first-ever Eurovision entrant

Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine
Letterman's final Late Show: Laughter, but no tears, as David takes his bow after 33 years

Laughter, but no tears, as Letterman takes his bow after 33 years

Veteran talkshow host steps down to plaudits from four presidents
Ivor Novello Awards 2015: Hozier wins with anti-Catholic song 'Take Me To Church' as John Whittingdale leads praise for Black Sabbath

Hozier's 'blasphemous' song takes Novello award

Singer joins Ed Sheeran and Clean Bandit in celebration of the best in British and Irish music
Tequila gold rush: The spirit has gone from a cheap shot to a multi-billion pound product

Join the tequila gold rush

The spirit has gone from a cheap shot to a multi-billion pound product
12 best statement wallpapers

12 best statement wallpapers

Make an impact and transform a room with a conversation-starting pattern
Paul Scholes column: Does David De Gea really want to leave Manchester United to fight it out for the No 1 spot at Real Madrid?

Paul Scholes column

Does David De Gea really want to leave Manchester United to fight it out for the No 1 spot at Real Madrid?
Season's finale brings the end of an era for top coaches and players across the continent

The end of an era across the continent

It's time to say farewell to Klopp, Clement, Casillas and Xavi this weekend as they move on to pastures new, reports Pete Jenson
Bin Laden documents released: Papers reveal his obsession with attacking the US and how his failure to keep up with modern jihad led to Isis

'Focus on killing American people'

Released Bin Laden documents reveal obsession with attacking United States
Life hacks: The innovations of volunteers and medical workers are helping Medécins Sans Frontières save people around the world

Medécins Sans Frontières's life hacks

The innovations of volunteers and medical workers around the world are helping the charity save people
Ireland's same-sex marriage vote: As date looms, the Irish ask - how would God vote?

Same-sex marriage

As date looms, the Irish ask - how would God vote?
The underworld is going freelance: Why The Godfather's Mafia model is no longer viable

The Mafia is going freelance

Why the underworld model depicted in The Godfather is no longer viable