Jakarta. Shares of consumer goods company Unilever Indonesia (UNVR) took a steep dive in early trading on Thursday, dropping 6 percent to Rp 2,190, following disappointing third-quarter results, partly attributed to unstable pricing and an ongoing boycott related to the Palestine-Israel conflict.

The company reported a significant drop in net profit for the third quarter of 2024, which fell to Rp 543 billion ($34.83 million), a decrease of 62 percent year-on-year (y-o-y) and 47 percent quarter-on-quarter (q-o-q).

Unilever’s cumulative net profit for the first nine months of 2024  totaled Rp 3 trillion, marking a 28 percent y-o-y decline. According to Stockbit Sekuritas, the figure falls well below market expectations, achieving only 65 percent of the full-year 2024 consensus estimate.

Stockbit Sekuritas attributed the weak Q3 performance to declining revenue and compressed margins. "Given these weak financial results, we expect the consensus to further cut its earnings estimates for UNVR," Stockbit noted, adding that 2024 net profit estimates have already been downgraded by 9 percent over the past three months.

Unilever Indonesia’s Q3 2024 revenue reached Rp 8.4 trillion, an 18 percent y-o-y decline and a 7 percent q-o-q drop, driven primarily by a significant decline in sales volume. Domestic sales volume fell by 16 percent y-o-y, resulting in a 10 percent revenue decline to Rp 27.4 trillion for the first nine months.

During an earnings call, Unilever's management attributed the revenue drop to three key factors: stock reduction across major channels, disrupted distributor sales due to unstable pricing, and the ongoing impact of the boycott related to the Palestine-Israel conflict.

The company’s net profit also faced pressure from rising costs, as the operating profit margin fell sharply to 8.7 percent in Q3 2024, compared to 17.9 percent in Q3 2023 and 14.6 percent in Q2 2024.

Stockbit Sekuritas highlighted three factors behind the margin contraction: diseconomies of scale caused by declining volume, higher short-term production costs due to restructuring initiatives, and a slower reduction in operating expenses relative to revenue declines, particularly in advertising, research, and promotion costs.

Looking ahead, Unilever’s management expects the company's various initiatives, including stock adjustments, pricing harmonization, and transformation efforts, to begin showing results in the second half of 2025.