Unilever sees no improvement after weak 2014

Unilever expects another sluggish year, after a slowdown in emerging markets and flagging developed economies curbed demand for everything from soup to soap in 2014.

The maker of Dove soap and Lipton tea posted lower-than-expected growth in underlying sales for the final quarter of 2014, the industry’s weakest year in recent memory. Its Chinese business was particularly hard hit, with quarterly sales down 20 percent as retailers cut inventories there.

Unilever makes more than half of its sales in emerging markets and so is particularly exposed to slowing demand in once fast-growing countries such as India and Brazil, as well as the sharp economic deterioration in Russia.

Sales – excluding currency moves, acquisitions and disposals – rose 2.1 percent in the fourth quarter, in line with the third quarter, which was its weakest in five years. Analysts on average were expecting a 2.6 percent rise.

“We do not plan on a significant improvement in market conditions in 2015,” chief executive, Paul Polman said, saying “against this background, we expect our full-year performance to be similar to 2014, with the first quarter being softer but growth improving during the year.”

The Anglo-Dutch group said underlying sales rose 2.9 percent in 2014 as a whole, versus analysts’ estimate for 3.1 percent.

Read also: Headwinds stunt Unilever growth prospects

Developed markets were flat, with a modest pick-up in North America partly offset by a shrinking market in Europe.

Sales should rise 2 percent to 4 percent this year, Polman said, with the first quarter at the low end of the range.

RBC Capital Markets analyst James Edwardes Jones said the consensus forecast was for 3.7 percent growth, “so it feels as though the risks are to the downside.”

Falling oil prices are giving companies such as Unilever breathing room, but finance Chief Jean-Marc Huet said the benefit depended on how long they stayed low, exchange rates and the need to cut prices to keep up with competition. “That’s the big question for 2015,” Huet told Reuters.

Last year, Unilever’s core operating profit was €7.02 billion, above a forecast of €6.9 billion, helped by cost cuts. Following the sale of several underperforming brands, Polman said there could be further portfolio pruning.

Last month, Unilever formed a separate unit for its struggling spreads business, but dismissed speculation it was a precursor to a sale or spin-off.