Unilever trading statement

A manufacturer and supplier of fast moving consumer goods, with more than 400 brands focused on health and wellbeing, 14 of which generate sales in excess of €1 billion a year. I have a holding in my income portfolio (epic code: ULVR).

Unilever were next due to update the market on 24 October, when they announce 3rd quarter results, but have today issued a trading update, after the markets closed in Europe, ahead of an investor conference hosted by Sanford Bernstein and Bank of America Merrill Lynch this week.

They state that it has seen weakening in the market growth of many emerging countries in quarter three and now expects underlying sales growth of 3 to 3.5% in the quarter. The emerging market slow-down has accelerated as a result of significant currency weakening. Developed markets remain flat to down.

This statement is not as clear as it might be:

I am assuming that emerging countries include Latin America, that had underlying double digit growth in the 2nd quarter and Asia/AMET/RUB (AMET = Africa, Middle East & Turkey; RUB = Russia, Ukraine, Belarus) that had underlying sales growth of 9.2% and that the underlying sales growth of 3 to 3.5% mentioned in the statement refers to underlying "group" sales growth, although it does not specifically say this; underlying group sales growth for the first and second quarters was 5%.

The emerging market slow down they say has accelerated as a result of significant currency weakening, which I'm assuming relates to the cost of imported raw materials pushing up prices, since underlying sales measures exclude currency.

CEO Polman states:
"We continue to grow ahead of our markets and expect underlying sales growth to improve in quarter four. For 2013 we are still on course to deliver against our priorities of profitable volume growth ahead of our markets, steady and sustainable core operating margin improvement and strong cash flow".

Both Unilever and P&G are expecting global market growth of about 3.5%, so the fourth quarter would not need to improve by much over quarter three to achieve growth ahead of their markets, as they had such a strong first six months.

This announcement will undoubtedly hit the SP tomorrow, the shares are quoted on the NYSE and are currently down 2.56% at $38.65.  Since UV trades at 1:1 to ULVR that's equivalent to 2398p. 

This announcement and the budget stand-off in the US may produce some interesting opportunities for long-term income investors in ULVR, with the anticipated dividend approaching 4% for 2014 at 2398p.