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Unilever Earnings Drop 19 Percent

Restructuring costs, higher tax rate pressure bottom line.

LONDON — Unilever said Thursday its second-quarter profits slumped 19 percent to 978 million euros, or $1.53 billion at average exchange for the period.

The Anglo-Dutch consumer goods giant attributed the downturn to higher restructuring costs and a tough comparison with the year-ago period’s low tax rate as well as to the strength of the euro.

For the first half, net income, bolstered by profits from disposals, rose 5 percent to 2.39 billion euros, or $3.65 billion. Commodity costs — particularly related to mineral and edible oils — increased by 600 million euros, or $938 million, in the second quarter and by 1 billion euros, or $1.53 billion, in the half.

Sales in both the quarter and the half dipped 1 percent at current exchange and increased 6 percent at constant exchange to 10.37 billion euros and 19.95 billion euros, respectively, or $16.22 billion and $30.53 billion.
Underlying sales growth came in at 6.8 percent in the quarter and 7 percent in the half. Price increases — 7.4 percent in the quarter and 6.1 percent in the half — buoyed softer sales, particularly in developed markets.

“Pricing has continued to rise steadily as we have taken steps to recover commodity cost increases,” said Jim Lawrence, Unilever’s chief financial officer, during a meeting for analysts Thursday. “There has been some volume impact in some markets, but particularly in North America and Europe.”

“Our performance in the first half year has been good in what has been a challenging environment,” stated Patrick Cescau, group chief executive. “We have delivered 7 percent underlying sales growth and an underlying improvement in profitability while maintaining competitiveness.” Unilever’s personal care division, which includes brands such as Dove and Sunsilk, reported underlying revenues gains of 5.7 percent in the first half.

Cescau affirmed the company’s expectation of yearend revenue growth in excess of its target of 3 to 5 percent with an improved operating margin.

During the meeting, Cescau, who was born in 1948, addressed reports that he will step down as ceo next year and that Unilever has begun a search for his successor.

“It’s very appropriate, it’s very normal for Unilever to start the process for succession,” he said, quoting Mark Twain, “The news of my death [has been] greatly exaggerated.”