Unilever Records 31% Profit Rise

Unilever announced Thursday its first-quarter profits spiked 31 percent to 1.41 billion euros, or $2.1 billion at average exchange...

LONDON — Unilever announced Thursday its first-quarter profits spiked 31 percent to 1.41 billion euros, or $2.1 billion at average exchange, thanks in part to profits from divested businesses, and said it expects its full-year underlying sales growth to exceed its initial 3 to 5 percent projection.

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The Anglo-Dutch consumer goods giant, which owns personal care brands, including Dove and Sunsilk, as well as a plethora of home care and food businesses, reported flat sales at 9.57 billion euros, or $14.34 billion. At constant exchange, sales grew 6 percent in the quarter, while underlying sales growth was up 7.2 percent. Unilever’s operating margin, meanwhile, was 5.3 percentage points higher than the prior-year period at 19 percent.

“We have had a good start to the year, with strong organic growth across our categories and an underlying improvement in operating margin,” stated Patrick Cescau, group chief executive. “We continue to invest behind our brands while taking the necessary pricing action to recover a sharp increase in commodity costs. We have a strong innovation program for 2008 with many important initiatives already in the market. We expect our productivity and value improvement initiatives to continue to deliver excellent results.”

Of the 7.2 percent underlying sales growth uptick, pricing was responsible for 4.8 percent and volume 2.3 percent. “The pricing action we are taking to recover commodity cost increases is essential to protect margins and to ensure that we can continue to invest behind our brands for long-term growth,” said Jim Lawrence, Unilever’s chief financial officer, during a conference call Thursday, adding the on-cost of commodity price inflation was about 400 million euros, or $599.1 million, in the quarter. “In the short term, higher prices are impacting on volume growth across many of our consumer markets — and not just for Unilever.

Market volumes are flat across the developed economies. In developing and emerging markets, volume growth rates remain healthy but have eased slightly from the highs of the last two years.”

By geographic region in the first quarter, Unilever’s sales were down 1.4 percent in Europe to 3.49 billion euros, or $5.23 billion; down 2.8 percent in the Americas at 3.14 billion euros, or $4.7 billion, and up 6.7 percent in Asia-Africa at 2.94 billion euros, or $4.4 billion. Underlying sales growth for the regions was up 2.3 percent, 6.4 percent and 14.2 percent, respectively.

Unilever said its personal care division reported underlying sales growth up 5.8 percent in the quarter. Unilever completed the sale of its Boursin cheese business and extended a joint venture between its Lipton tea brand and Pepsi in the first quarter.