Unilever Burdened by Expensive Euro and Growth Slowdown in Asia
British–Dutch multinational consumer goods company Unilever has to cope with slowing worldwide sales in the second quarter of 2014. Besides the negative impact of the strong euro (causing unfavorable exchange rates), underlying sales (which exclude exchange rate effects) of the company have slowed to 3.8 percent in the second quarter. In the first half of 2014, Unilever recorded a 5.5 percent (year-on-year) decline of revenue to €24.1 billion. However, net profit rose 12 percent to €3 billion, partly on gains derived from the sale of business units.
In the past six months, the company has been burdened - more than ever - by the strong euro currency, possibly causing the evaporation of 8.5 percent of Unilever’s turnover. For example, the company’s costs for research (paid in pound sterling) increase, while revenue decreases in countries of which the local currency depreciated against the euro. Turmoil in Ukraine, for example, where the local currency depreciated almost 50 percent against the euro, causes a steep decline in the value of local sales revenue.
Although growth has been slowing in the eastern continent, Asia continues to form the most important growth market for Unilever (emerging markets account for 57 percent of Unilever’s total turnover). Underlying sales growth in this region amounted to 6.6 percent in the first half of 2014, while the figure had been 10.3 percent in the same period last year. Paul Polman, chief executive of Unilever, said that slowing growth of sales in Asia is particularly caused by India. In India, the world’s third-largest country by purchasing power parity (PPP), growth has about ceased altogether. In Indonesia and China, the company’s sales growth has declined as well. Lastly, political tensions in Thailand and Vietnam also impact negatively on the company’s financial performance.
Unilever's First Half Results 2012-2014:
| 2012 | 2013 | 2014 | |
| Net Sales in billion euro |
25.4 | 25.5 | 24.1 |
| Net Income in billion euro |
2.44 | 2.68 | 2.99 |
| Earnings per Share in euro |
0.75 | 0.83 | 0.97 |
Sources: Unilever & De Telegraaf
However, despite the slowing growth, there is also a success story to mention. In the first half of 2014, sales of ice cream grew 7 percent. Unilever is the world’s market leader in ice cream sales, achieving an annual turnover almost twice as big compared to the turnover of its closest rival. With the Ben & Jerry’s and Magnum (which celebrates its 25th birthday this year) brands, Unilever leads the global ice cream market. The Magnum alone manages to reach an annual turnover of about USD $1.3 billion.
Unilever Indonesia
Unilever Indonesia, the local unit of Unilever in Southeast Asia's largest economy, recorded lower profit growth in the first half of 2014 on rising costs of goods (increasing 19 percent) and the stronger US dollar. The rupiah depreciated about 26 percent in 2013, causing financial costs, including interest expenses, to nearly double. Net profit only grew 0.7 percent (year-on-year) to IDR 2.84 trillion (USD $244.8 million), significantly down from a growth pace of 22 percent one year earlier. The company’s net sales increased 14 percent to IDR 17.6 trillion (USD $1.5 billion) in the first half of 2014.
Stock Quote Unilever Indonesia - UNVR:
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