Shares of Hindustan Unilever (HUL), the country’s FMCG (fast-moving consumer goods) market leader, ended down 1.3% on Tuesday in Mumbai after tanking more than 3% intraday, after parent Unilever’s CEO, Paul Polman (pictured), said that economic growth in the emerging markets (EM) has slowed further and, as a result, he expects the multinational corporation (MNC)’s sales growth to taper to 3-3.5% in the July-September quarter from 5% the previous quarter. EM – Brazil, India, Indonesia, Turkey, South Africa, China, Mexico and Russia – now account for about 60% of Unilever’s global turnover. In 2012, more than half of Unilever’s annual turnover of €51.3 billion came from EM.
Not surprisingly, shares of parent Unilever dropped 4% intraday on the London Stock Exchange on Tuesday.
“The emerging market slowdown has accelerated as a result of significant currency weakening. Developed markets remain flat to down,” said Polman.
In India, HUL recorded sales turnover of Rs 27,000 crore (around €4 billion) and net profit of Rs 3,829 crore last fiscal.
Analysts expect HUL volumes to be under pressure for the July-September quarter. Latika Chopra of JP Morgan said in a report, “Our discussions with (HUL) management indicate that the FMCG market growth rates remain tepid, more so for discretionary categories (personal care and some packaged foods).
Further pace of premiumisation has come off and we believe downtrading risks could weigh on mix.”
For the July-September quarter, analysts expect a volume growth of anywhere between 4% and 5%. For the April-June quarter, HUL’s volume growth at 4% was the lowest in the last 14 quarters.
Polman’s observations and guidance came on the day when HUL got a new CEO in Sanjiv Mehta who was earlier heading the MNC’s North Africa and West Asia operations.
FMCG segment observers believe that Mehta, who is credited with bringing about a turnaround in several businesses of Unilever, has a tough job ahead, given that HUL has been struggling with slowing volume growth and declining sales in several categories.
Slowdown blues
Unilever’s volume growth expected to slip to 3-3.5% in Q2 from 5% in Q1
Accelerating slowdown in emerging markets (EM), including India, a worry for Unilever.
EM contribute close to 60% of Unilever’s global turnover.
With volumes under pressure, new HUL CEO Sanjiv Mehta may find last fiscal’s sales of Rs 27,000 crore a tough target to exceed.
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
)
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
)
){kind=small}
){kind=small}
)
)
)
)
)
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}