Unilever falls as slow start casts pall over consumer sector

Bloomberg

Unilever shares fell after saying it will get off to a slow start in 2017, casting gloom over the European consumer-staples industry as the sector’s earnings season kicks off.
Fourth-quarter underlying sales rose 2.2 percent, the maker of Dove soap said in a statement, the worst result in two years and below the 2.6 percent gain seen by analysts. Growth at the company’s personal-care business, its biggest unit, also hit a two-year low, as shipments declined for the second straight quarter. The shares lost as much as 4.3 percent in Amsterdam, the biggest drop in seven months.
Worsening conditions in three key markets — India, Brazil and China — made the year-end particularly challenging for Unilever, as consumers balked at paying higher prices for its Dove soaps, Lipton teas and Tresemme shampoos. Deflation across Europe also contributed to a falloff in sales there. The maker of Ben & Jerry’s ice cream said performance should improve as the year progresses, but the disappointing results don’t bode well for rivals such as Nestle SA, Danone and L’Oreal SA, whose stocks all declined in early trading Thursday.
“It’s a bit hard to put a positive spin on these numbers,” Martin Deboo, an analyst at Jefferies, said by phone. “There’s a malaise in Europe from a combination
of deflation and no volume growth, hyper-inflationary
pricing in Latin America that’s causing the consumer to wilt, and sophisticated online competitors in China.”
Emerging markets have gone from a boon to a burden for Unilever, which generates about 60 percent of its revenue in developing regions. Brazil is mired in its worst recession on record, while India has suffered from the removal of high-denomination notes from circulation, which caused “significant additional headwinds,” the company said. In China, fiercer competition from home-grown brands hurt sales of its laundry detergents.
“This is a world that is challenged in a broader sense,” Chief Executive Officer Paul Polman said in an interview with Bloomberg Television.