Profit Warning Leads to Decline in Unilever Shares

UnileverThe first profit warning of the Unilever in a decade led its shares to slide on Tuesday. Company behind Persil, PG Tips and Dove warned on Monday that a slowdown in emerging markets has accelerated in the third quarter. The company makes 60% of the revenue from emerging markets. The shares slid to 4% as a result of the warning to 2,345p on Tuesday morning.

Unilever said that it was hoping underlying sales growth of between 3% and 3.5% in the period. There was a weaker 5% rise in the second quarter; the company was expecting higher than that.

Paul Polman, Unilever's chief executive, said not to worry about the recent downturn in emerging markets. He alleviated the fears by saying that sales growth would improve in the final quarter regardless of the downturn. He blamed the downturn on `significant currency weakening'.

Analysts at Oriel Securities downgraded the stock from `hold' to `sell' after acceleration in a slowdown was heard. He reduced the price target from 2,800p to 2170p.

Analyst Chris Wickham said shares will be under pressure because of Unilever's reliance on emerging market along with continued decline in emerging market currencies.

He added, "Unilever's currency headwinds tend to confirm the danger of being a company with asymmetric growth between emerging and mature market".