UN Unilever NV

Anglo-Dutch consumer goods group Unilever PLC (UN, UL) Thursday posted a 1.8% rise in fourth-quarter sales, driven by strong volume growth, but said it expects competition to intensify in 2010.

The maker of Ben & Jerry's ice cream, Dove soap and Lynx deodorant said underlying sales--which strip out acquisitions, disposals and currency movements--grew 1.8% in the fourth quarter, compared with a 3.4% rise in the previous three months and in line with analysts forecasts.

This measure of sales is closely watched because it's a directly comparable measure of how the company's products are selling.

The sales rise was wholly a result of a 5% increase in volumes, which followed a 3.6% volume rise in the previous three months. Prices in the fourth quarter actually fell 3.1%.

"We expect continued pressure on consumer spending power and heightened levels of competitive activity in 2010," said Chief Executive Paul Polman. "We will continue to focus on volume growth as the main driver of long-term value creation, whilst delivering steady and sustainable year-on-year improvement in operating margin and strong cash flow."

Polman took the helm of the group in January last year, pledging to make volume growth his key priority. Prior to his arrival, Unilever had been criticized for allowing volumes to slip as it aggressively raised prices.

The company increased prices by over 9% in the fourth quarter of 2008, partly to offset higher commodity costs. Still, it was criticized by some analysts and industry experts for raising prices too much just as many of its markets were tipping into recession.

Unilever's operating margin was up one percentage point in the period, compared with expectations of a 1.1 percentage point rise. Margins are benefiting from a sharp drop in commodity prices in the past year.

Unilever named Jean-Marc Huet as its chief financial officer in December, replacing Jim Lawrence. Lawrence was believed to be in the running for the top job at Unilever until Paul Polman was appointed chief executive officer from rival Nestle SA (NESN.VX).

The company's shares have risen almost 30% in the past year, as Polman's strategy generated quick results. The shares closed Wednesday at 1934 pence.

-By Michael Carolan, Dow Jones Newswires; 44-20-7842-9278; michael.carolan@dowjones.com

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