Unilever warns of tougher markets and high volatility in 2016

The consumer goods giant warned it is preparing for “tougher market conditions and high volatility” in 2016, despite reporting a strong trading performance for its 2015 financial year.

Unilever chief executive Paul Polman said the group would need to be agile and maintain cost discipline across the business for the coming year in the face of continued volatility in the world economy.

For its 2015 financial year, the consumer goods giant with brands like Hellman’s, Knorr and HB Ice Cream, reported a 10% increase in sales to €53.3bn. Underlying sales growth was a healthy 4.1%, with a further 5.9% contributed from favourable currency tailwinds. Unilever’s operating profit grew by 12% to €7.9bn. However, excluding profits from disposals during the year, underlying operating profit was down 6% to €7.5bn.

Emerging markets struggling

Unilever said its 2015 results are set against the context of challenging market conditions and fragile consumer demand. It added that emerging markets continue to be weak, particularly those dependent on oil and other commodity exports. Currency devaluations and volatility are also negatively impacting emerging markets.

Unilever’s forecast for a difficult and volatile trading environment in 2016 comes just a matter of weeks into the new year, with global financial markets still reeling over fears for the health of the world economy and an oil supply glut that is only intensifying.

The price of Brent crude oil, the global benchmark, is already back more than 20% since the beginning of this year and down almost 70% from this time two years ago. Emerging markets that have driven global economic growth in recent years are now floundering like the Brazilian economy which is in recession, a slowdown in the rate of growth in China, while the Russian economy continues to struggle under the weight of western economic sanctions.