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Unilever CEO Says Emerging Market Slowdown to Last for Years

Unilever Chief Executive Officer Paul Polman
Unilever Chief Executive Officer Paul Polman said, “I am always surprised that I am the one who sort of has to announce there’s a slowdown in emerging markets.” Photographer: Munshi Ahmed/Bloomberg

Unilever Chief Executive Officer Paul Polman said the economic slowdown in emerging markets is here to stay as many countries need to enact structural reforms to adjust to new conditions after the boom of recent years.

“They are still relatively stronger economies, but still fragile,” Polman said. “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.”

Unilever, the world’s second-largest consumer-goods maker, said Sept. 30 that slowing growth in emerging markets would weigh on second-half sales. The company gets more than half its revenue from such economies in countries such as India and China. So-called underlying sales rose 3.2 percent in the third quarter, the weakest increase in four years and a slowdown from the first-half’s 5 percent pace, the Anglo-Dutch maker of Lipton tea reported Oct. 24.

“I am always surprised that I am the one who sort of has to announce there’s a slowdown in emerging markets,” Polman said, speaking Nov. 29 at a reception where he was awarded the 2013 World Wildlife Fund Duke of Edinburgh Conservation Medal for Unilever’s efforts to reduce environmental damage.

Shares Fall

The Amsterdam-traded shares fell 1 percent to 28.71 euros. Weak currencies in India, Brazil and Indonesia have weighed on sales growth, the company has said.

“Emerging markets are clearly decelerating, but will always grow faster than the developed world,” said Jon Cox, an analyst at Kepler Cheuvreux in Zurich. “Unilever is the emerging market play -- given 60 percent of sales are there, what Polman says on them has a lot of weight.”

Investors have pumped money into emerging markets since 2008, spurred by the liquidity generated by central banks, Polman said. U.S. Federal Reserve Chairman Ben S. Bernanke’s statement on June 19 that the Fed may start tapering stimulus efforts this year put pressure on emerging markets, he said.

“People were thinking interest rates in the U.S. would go up again and then money came back to the U.S.,” the Dutch executive said. “You saw a lot of these emerging market currencies go down 10 to 15 percent. Fortunately these countries are stronger, so you don’t have another Asian crisis.”

Polman is the first CEO of a major multinational company to receive the Duke of Edinburgh conservation award since it began in 1970. He spoke in Geneva.

“It’s a great honor,” he said of the prize. “WWF clearly understood you have to take some risk by working with people, coalitions together to move things forward.”

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