Unilever heads for weakest sales gain since 2005 as markets slow

London: Unilever NV, the maker of Dove soaps, may post its slowest annual sales growth in nine years, according to the first analyst estimates published since the company said on Wednesday that markets have weakened further.

Analysts at Oriel Securities and Nomura cut their estimates for 2014 underlying sales growth to 3.3%, a full percentage point below the average analyst estimate of two months ago. That would be the slowest rise since the 3.1% uptick of 2005.

“Growing evidence of weaker sales performance in the second quarter has continued into the third quarter,” Nomura’s David Hayes, who recommends selling the shares, said in a note on Thursday. “The extent of the slowdown across categories was a little more severe than expected.”

The London- and Rotterdam-based company said on Wednesday that market growth has slowed to less than 2%, from 2.5% in the first half of the year and 4% in 2013. Along with other consumer-product companies, Unilever has struggled to boost sales over the past 18 months as emerging markets such as Brazil and China decelerate while mature regions like Western Europe remain sluggish.

“Our markets, which had been growing at around 4% last year, slowed to about 2.5% in the first half of this year,” Unilever chief financial officer Jean-Marc Huet said at an investor conference in London on Wednesday. “They have slowed further since then, with no sign that we will see improvement any time soon.”

L’Oreal slowdown

Huet’s comments echoed those of Jean-Paul Agon, head of French cosmetics maker L’Oreal SA, who said on 9 September that the beauty category will expand at a slower rate that previously expected. They also came on the day that US food maker General Mills Inc. missed analysts’ sales and profit estimates.

A year ago, Unilever ratcheted down expectations for its third-quarter underlying sales growth—which excludes the impact of acquisitions, divestments and currency fluctuations—due to deteriorating emerging markets. This time, Huet said both developing and developed markets are getting worse, yet declined to provide any forecast for the company’s sales growth.

Huet’s comments referred only to Unilever’s markets and not the company’s performance, a spokeswoman said.

Unilever shares were little changed at €31.23 at 12.13pm in Amsterdam, leaving them 6.7% higher for the year to date. L’Oreal eased 0.1% in Paris. Bloomberg