Although the emerging markets in Asia Pacific and Latin America continue to be stronger economies, the slowdown in growth is likely to stay for the longer term, says Unilever CEO Paul Polman.
Speaking at a reception for the 2013 World Wildlife Fund Duke of Edinburgh Conservation Awards, in London, Polman’s insight points to increasingly tough times for multinationals, who continue to battle slow growth rates in developed markets.
“They are still relatively stronger economies, but still fragile,” Bloomberg reported Polman as saying during an acceptance speech for a conservation award Unilever has received for its efforts to reduce the carbon footprint of the business.
Future of emerging markets brings less optimism
Looking to the future, Polman’s forecast was less optimistic, spelling out that the tougher times in the emerging market looks set to soften the buffer effect the company’s exposure to those markets has provided in recent years.
“And you see that growth coming off now a little bit, obviously not being helped either by lower demand coming from Europe and the U.S. This will last a few years. And it will only be corrected if some of the reforms have been made in these places,” Polman added during his speech.
Polman also expressed his surprise that he has been one of the first executives of a fast moving consumer goods company to acknowledge the fact that all the pointers now suggest a prolonged slowdown in growth for the emerging markets.
Weak currency translations add to problems
Looking ahead to the company’s end of year quarter, executives have also stated that weak currency translations in markets such as India, Brazil and Indonesia, are likely to weigh heavily on margins.
The news, which was first announced at the end of last week, led to a dip in share prices for the Amsterdam-traded company, with share prices closing on Monday down 1.54% at close of business.
Back at the end of October, the company announced quarterly results that showed sales growth had slowed down due in part to currency translations, but also because of the slowdown in revenues from emerging markets.
Soap sales down, but personal care remains stronger overall
Demand for the company’s soaps declined around the world, although it appears to be the Food sector that took the bigger hit compared to the Personal Care business.
Underlying sales rose 3.2% in the third quarter compared with 5% growth in the first half; and this was also below analysts’ estimates of 3.3% growth.
However, the Dove soaps maker did warn that this would happen earlier in the year, and insists that sales growth will accelerate in the fourth quarter, driven by innovation.