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Unilever continues to book slower growth
Consumer goods giant Unilever Indonesia continued to book slow growth in profits in the third quarter and impacts of the economic slowdown are expected to continue to squeeze the publicly listed companyâs performance next year
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onsumer goods giant Unilever Indonesia continued to book slow growth in profits in the third quarter and impacts of the economic slowdown are expected to continue to squeeze the publicly listed company's performance next year.
Unilever Indonesia, the local arm of Anglo-Dutch consumer goods giant Unilever NV and Plc., released its Jan-Sept. consolidated financial report, which showed a 3.2 percent growth in profits to Rp 4.18 trillion this year from Rp 4.05 trillion last year.
The company also booked slowing year-on-year (yoy) profit growth from around 8 percent in the first three months and 6 percent in the first half.
Its net sales rose by 5.6 percent on a yearly basis to Rp 27.55 trillion, according to the report, with its quarterly trends also showing slower annual growth, compared with 8 percent and 7 percent in the first quarter and first half, respectively.
'The result is only normal given the current economic slowdown. The consumer goods sector is always the first to feel the impact [of slowdown],' William Surya Wijaya from Asjaya Indosurya Securities said.
A number of consumer surveys, including ones carried out by MasterCard Inc. and Nielsen Global Survey, showed an alarming decrease in confidence and rising concerns regarding the Indonesian economy, which is growing at its slowest pace since 2009.
The slowdown was not only a domestic issue, William said, as the company's lower exports indicated that global conditions were not good enough for the company to increase shipments.
The company's exports declined by around 3 percent from Rp 1.45 trillion in the first nine months of last year to Rp 1.41 trillion in the corresponding period this year.
'At the same time, the rupiah has been constantly depreciating against the US dollar throughout the year, and the company is exposed to foreign exchange risks from its imported materials,' he added.
The rupiah hit its lowest level in 17 years when it touched 14,800 per US dollar in late September, dropping from around 12,500 early this year.
In its financial report, Unilever said that it was exposed to foreign exchange risk arising from
various currency exposures, especially the US dollar, stemming
from 'committed future transactions and realization of monetary assets and liabilities in foreign currencies'.
William also attributed the continuing drops in the company's bottom line to higher royalties demanded by its parent company, which he said could easily be compensated by higher selling prices if the economy improved.
Unilever Indonesia's royalty payments ' an obligatory fee to utilize trademarks, technologies and services owned by the parent ' have gradually increased over the last two years, from a maximum of 5 percent in 2013 to a maximum of 8 percent from 2015.
William predicted that the brand holder of Dove personal care, Blue Band margarine and Sariwangi tea would continue booking slower growth up to next year as global slowdown was expected to linger, unless the rupiah appreciated, which might slightly ease the pressure on the company.
Bahana Securities, meanwhile, trimmed its net profit forecast for the company earlier this year, to 12.1 percent for 2015 and 10.6 percent for 2016. Bahana now predicts the company will take Rp 6.2 trillion and 7.03 trillion of net profits in 2015 and 2016, respectively, in comparison with Rp 5.74 trillion in 2014.
