Unilever has said it is operating in a fragile consumer environment with deflation weighing on its performance in Europe and slowing growth in emerging markets.
The consumer goods company behind well-known brands such as Persil, Marmite and PG Tips, said sales in Europe fell by 0.6% in the first quarter as the impact of eurozone deflation and aggressive price discounting took its toll.
“We expected tougher markets and we’re finding tougher markets,” said Graeme Pitkethly, Unilever’s chief financial officer.
Overall, underlying sales rose 4.7% in the first quarter, driven by an 8.3% jump in emerging markets.
The company, however, struck a gloomy note despite the increase in sales, with its chief executive, Paul Polman, saying that markets remained volatile.
Unilever said: “Consumer demand remained fragile. Volume growth slowed further in the markets in which we operate, with market growth weak in emerging markets, negligible in North America and negative in Europe.”
The Anglo-Dutch consumer giant said sales volume growth in Europe was more than offset by price deflation across its divisions. In the eurozone, inflation was -0.1% in March in the latest available data.
Consumers continue to seek out bargains before buying goods, a trend evident in Unilever’s first-quarter results, according to its trading statement on Thursday.
The maker of Flora and I Can’t Believe It’s Not Butter said a sustained fall in demand for margarines as consumers increasingly opt to buy butter weighed on its food performance in Germany and France.
Unilever shares initially fell by 1% but were roughly unchanged by mid-morning.
The company reassured the City that there was no material change to its financial position since it published full-year results for 2015 in January.
The quarterly dividend rose 6% to €0.3201 per share.
