Hong Kong Protests Affect Unilever Group as Sales Drop in China
The ongoing Hong Kong protests have significantly hit sales of Unilever group in China. As per reports, sales of the third quarter have slowed down in two of its biggest emerging markets – China and India. The organic sales growth of the firm in this quarter are 2.9 percent out of the total posted sales of €13.3bn.
As per a company compiled consensus, many analysts had estimated sales of €13.2bn and three percent growth in organic sales for the third quarter. But Unilever Group confirmed the aim for organic sales growth was to reach three to four percent this year. The firm plans to extend its operating margins to reach 20 percent by 2020. The investors of the firm are sceptical because of the sales drop.
Promising a better future, Chief Executive Alan Jope said that the company will work on improving its profitability to meet the already set 2020 target without sacrificing on expansion.
The Chief Executive Officer of Unilever Group, Graeme Pitkethly blamed the truckers’ strike of Brazil and the tough competition in summer 2018 for the sinking sales.
Speaking to Reuters, Finance Chief of Unilever Group, Graeme Pitkethly said, “There have definitely been signs of slowing markets in India and China … In India, we are going from very high rates of market growth to growth rates in the mid-single digits of growth.”
A tough competitor of Unilever Group, Nestle has also faced the repercussions of the Hong Kong protests as it announced its inability to raise prices in competitive markets all over the world.
Despite witnessing challenges, Nestle has shown significant improvement as compared to Unilever Group. The Swiss chocolate maker has gained growth of 3.7 percent in organic sales up till September 2019. It has outpaced Unilever’s 13 percent rise by gaining 21 percent for the MSCI Europe consumer staples index.
Due to this, Unilever is trading at nearly 15 percent discount than Nestle, based on their respective yearly price-to-earnings multiples.
The Hong Kong protesters have been disturbing the atmosphere of the country since several weeks now. Local shops and businesses received the first blows. But now even big companies like Unilever Group have come under the radar.
Aiming towards building a healthy business in future, Alan Jope said, “We are committed to delivering superior long-term financial performance and balanced, compound growth of the top and bottom line through our sustainable business model. We are taking action to remain relevant to the consumer of the future, such as setting stretching goals on plastic use which we recently announced.”
Even though the company officials are optimistic about future, it is yet to be seen how Unilever Group will overcome the losses it has been facing due to decreasing sales in India and China.
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