Unilever Sales, Margins Up Despite Higher Marketing Spend
29 April 2010 - 8:43AM
Dow Jones News
Consumer goods giant Unilever PLC (UN,UL) Thursday beat
expectations with its first-quarter sales growth, and once again
increased margins despite spending more on marketing.
The Anglo-Dutch company said sales before acquisitions,
disposals and currency movements grew 4.1% in the first three
months of the year, compared with expectations of a 3.5% rise and a
1.8% rise in the previous quarter.
This figure is closely watched because it's a directly
comparable measure of how the company's products are selling. Rival
Reckitt Benckiser PLC (RB.LN) posted a 5% rise earlier this
week.
"We show strong momentum across all geographies with continued
strengthening of our competitive position," said Chief Executive
Paul Polman. "Growth has been especially strong in emerging markets
despite the heightened competitive activity."
The maker of Ben & Jerry's ice cream, Dove soap and Lynx
deodorant said the sales increase was driven by a 7.6% rise in
volumes with prices down 3.3%. Volumes rose 5% in the previous
quarter, while prices fell 3.1%.
The company said the price reduction was a result of actions
taken in 2009, rather than in the current year.
Volume growth has been the top priority of Chief Executive Paul
Polman who took the helm in January 2009. Consumer goods companies
always have to strike a balance between volumes and prices when
driving sales and profits. Prior to Polman's arrival, Unilever was
criticized for allowing volumes to slip as it aggressively raised
prices.
Unilever's operating margin was up 0.6 percentage points in the
period, helped by a sharp drop in commodity prices in the past
year, which has allowed Unilever to increase investment in
marketing while still growing sales and margins. But this commodity
cost deflation is expected to come to an end in the second
quarter.
The margin growth came despite a 2.2 percentage point increase
in advertising and promotions spend.
"The improvement in underlying operating margin shows the impact
of extensive savings programs, lower commodity costs, and the
benefits of volume leverage," said Polman.
-By Michael Carolan, Dow Jones Newswires; 44-20-7842-9278;
michael.carolan@dowjones.com
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