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FTSE 100 weekly: Unilever casts doubt on emerging markets

Published: 08:01 05 Oct 2013 BST

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A profit warning from Unilever (LON:ULVR) did not only affect its own shares this week, but also dragged other consumer goods stocks lower.

The Anglo-Dutch company, which is behind Ben & Jerry’s ice cream and Dove soap, sneaked out a press release after the market closed on Monday which revealed that it has seen a weakening in the market growth of many emerging countries in the third quarter of this year.

The emerging market slow-down has accelerated as a result of significant currency weakening, Unilever said.

Currencies in India, Brazil and Russia have all fallen this year on the back of fears over the Federal Reserve’s plans to taper quantitative easing.

As a result, Unilever, more than half of whose sales are generated in up-and-coming countries, has scaled back expectations for the third quarter, and now expects underlying sales growth of 3 to 3.5%, compared with 5% in the first and second quarters.

Paul Polman, Unilever’s chief executive, put a brave face on the situation, saying: “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.”

Unilever shares fell 3.6% this week.

Concerns about a slowdown saw investors dump shares in Peroni to Grolsch brewer SABMiller (LON:SAB), which is also a big player in emerging markets.

Other consumer goods shares such as Diageo (LON:DGE), the alcoholic drinks group that owns Guinness and Johnnie Walker, also fell, along with Cillit Bang owner Reckitt Benckiser (LON:RB.).

It was the return of the battle of the supermarkets this week, with Sainsbury’s (LON:SBRY) trumping Britain’s biggest grocer Tesco (LON:TSCO) in this week’s updates.

Both chains reflected on a tough period in the first half, but it was Sainsbury’s which manoeuvred its way through the challenging conditions more adroitly.

Sales in the sixteen weeks to 28 September rose by 5%, with like-for-like sales up 2.1% (2% excluding fuel), prompting chief executive Justin King to boast once again that Sainsbury’s is the only supermarket major currently growing market share.

All of the big four supermarket chains, a group that also includes Morrisons (LON:MRW) and Walmart-owned Asda, have been battling squeezed consumer incomes and inroads into their traditional markets from no-frill chains such as Aldi and Lidl.

“We have delivered strong sales over the quarter, continuing to outperform the market in what remains a tough retail environment,” said King, who hailed a strong performance from its own branded products.

Meanwhile, Tesco’s interim results revealed statutory profit before tax fell 24% to £1.39 billion on sales of £35.6bn – growth of 0.5%, or 0.9% excluding petrol.

The eye-catching figure was the 71% decline in profits to £55mln from the European business, which is still suffering from consumer belt-tightening.

More punters are using their smartphone to place a bet but, unfortunately for William Hill (LON:WMH), they are getting smarter at predicting results.

Using the phone to place a bet is increasingly becoming the preference of punters, bookie William Hill revealed in its third quarter update.

But despite revenues impressing, operating profits fell 31% from a year earlier and down 4% year-on-year so far in 2013.

The bookie said July was a quiet month in the betting shops, while performance over the quarter was affected by sporting results being a little too easy to predict for the bookmaker’s comfort.

“During this quarter, results were not as favourable as in the comparable period, with outcomes - particularly in football - going the punters' way,” said chief executive Ralph Topping.

“Consequently, gross win margins are below the prior year in both major channels, and below normalised expectations in Sportsbook. It is of course important in our business to look through the impact of short-term results on trading.”

Investors in plumbing and heating group Wolseley (LON:WOS) can look forward to a special dividend after the firm proposed a £300mln pay-out on the back of its strong cash position.

Reporting a year of solid progress in its final results, Ian Meakins said: "Wolseley continues to be highly cash generative and we have adequate resources to fund future investment in the business alongside growth in ordinary dividends."

The board is also recommending a final divi of 44p a share, bringing the total for the year to 66p.

Aviva (LON:AV.) shares rose the most this week as Britain’s biggest insurer completed the sale of its US life and pensions business for more than expected.

It sold the disastrous venture for £1.7bn, which was £500mln more than first expected.


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