Unilever Heads for Weakest Sales Gain Since 2005 as Markets Slow

Unilever, 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 yesterday that markets have weakened further.

Analysts at Oriel Securities and Nomura cut their estimates for 2014 underlying sales growth to 3.3 percent, a full percentage point below the average analyst estimate of two months ago. That would be the slowest rise since the 3.1 percent 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 today. “The extent of the slowdown across categories was a little more severe than expected.”

The London- and Rotterdam-based company said yesterday that market growth has slowed to less than 2 percent, from 2.5 percent in the first half of the year and 4 percent 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 percent last year, slowed to about 2.5 percent in the first half of this year,” Unilever Chief Financial Officer Jean-Marc Huet said at an investor conference in London yesterday. “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 Sept. 9 that the beauty category will expand at a slower rate that previously expected. They also came on the day that U.S. 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 euros at 12:13 p.m. in Amsterdam, leaving them 6.7 percent higher for the year to date. L’Oreal eased 0.1 percent in Paris.

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