It’s getting ugly out there for multinational companies.
On Tuesday, Unilever reported a 6.8% rise in full-year net profits, but a 2.7% fall in revenue from the previous period.
The consumer goods giant said its revenues are getting slammed because of weakness in emerging markets.
Here’s what CEO Paul Polman said in the company’s earnings statement: “Despite a very challenging year for our industry with significant headwinds and weak markets we have delivered another year of competitive underlying sales growth and margin expansion. This consistency, now established over the last six years, has been achieved during a period of unprecedented volatility as we have built a more resilient company.”
In short, it’s getting tougher to produce great results.
The divergence of growth between the US and other developed and emerging markets is one of the key economic themes to watch in 2015. In emerging markets, Unilever saw weak market growth because of soft consumer demand, while growth in developed markets was flat.
“We do not foresee a significant improvement in market conditions in 2015,” Polman said. “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.”
Take for example what the statement says about one of its products: “We gained market share in margarine but this was insufficient to offset the decline of the category which also saw price deflation in a benign commodity cost environment.”
Sales fell 20% in China, the most among all the markets Unilever operates in, due to trade de-stocking, or a reduction of its inventories.
Unilever is also joining a list of multinational companies whose sales were impacted by foreign currency moves last year. Its turnover fell by 2.7% to €48.4 billion ($US5.56 billion), including a 4.6% drop due to changes in foreign exchange rates.
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