Market Report: Unilever troubles hit consumer firms
Wednesday 02 October 2013
A slowdown in the once lucrative emerging markets business of Unilever dragged the rest of the consumer goods sector down with it yesterday as punters took fright.
Unilever, the Dove soap, Knorr soup, Wall's ice cream and Marmite maker, warned its emerging markets business, including sales in Brazil and India, are suffering a slowdown – management revised growth from 5.5 per cent to about 3 per cent for the third quarter of the year. Investors panicked and Unilever fell 3.36 per cent – down 82p to 2,358p on the news that came after the markets had closed on Monday.
Fears that the slowdown will hit other consumer goods giants pushed Cillit Bang to Vanish rival Reckitt Benckiser down 57p to 4,521p.
Others also hit by the fallout included drinks business SAB Miller – 88.5p weaker at 3,055p. Diageo also slipped 8.5p to 1,956.5p.
But some analysts decided the markets had overreacted.
Scribblers at Panmure Gordon said: "We don't think this constitutes a profit warning in the traditional sense, and while the statement is clearly disappointing, it is reassuring that Unilever continues to grow ahead of its markets, expects an improvement in sales growth in fourth quarter, and continues to see margin improvement for 2013."
As with any big share price collapse, some analysts issued calls to start buying the stock again. Deutsche Bank's experts did just that. They asked was it "a perfect buying opportunity?" and added: "Market growth of 9 per cent in the first half has slowed to 6 per cent. The slowdown is faster than prior predictions and largely attributed to the impact of currency devaluations on consumer behaviour." They advised that punters should use this "current turmoil" to "gain exposure in what we see as one of the best emerging market franchises."
More than 750,000 US public service workers are stuck at home on unpaid leave but the UK market took the US government partial shutdown in its stride.
The US failed to agree on a budget and government is temporarily suspended with non-essential services closed. But the stock marketpreempted the news and took a stumble on Monday. Joe Rundle, head of trading at spread better ETX Capital, said: "Investors take the view that a partial shutdown, if resolved quickly, will do little damage to the overall health of the US economy."
The FTSE 100 edged back 2.21 points to 6,460.01, although traders will start to focus on the looming breach of the US debt ceiling and what this will mean for equities globally.
Another fall in metal prices assisted Mexican precious metal digger Fresnillo's fall to the bottom of the benchmark index. It declined 48.5p to 924.5p – and has lost almost 30 per cent in the past month.
Top of the tree was easyJet as traders expected its results to be strong tomorrow. The airline, run by Carolyn McCall, soared 40p to 1,318p.
Credit checker and information services group Experian added 10p to 1,187p, after announcing a deal to buy US fraud detection specialist the 41st Parameter for $324m.
Scribblers at Panmure Gordon issued their quarterly top picks today. Interestingly, fashion star ASOS is off the list because "after a spectacular share price increase of more than 50 per cent" since Panmure included it in its second quarter top picks list, the analysts "decided to take profits". The AIM listed online fashion retailer stumbled 21p to 5,120p.
AIM listed miner Conroy Gold raised £1m via a share placing priced at 2.65p, a premium to last night's close of 1.95p. Today it was 0.175p brighter at 2.12p. It will use the proceeds for its gold project in Ireland.
Luxury wallpaper company Walker Greenbank saw its first half profits grow by 13 per cent. Investors took profit and it fell 5.5p to 148p.
ID cards software specialist Intercede issued a positive trading update and two contract wins. Directors at the group recently bought shares and it added 10.5p to 120p.
Vatukoula Gold Mines' partner Zhongrun has agreed to invest $40m and it advanced 0.835p to 8.66p.
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