UPDATE: Unilever Expects Growth To Slow And Prices To Rise
05 August 2010 - 10:55AM
Dow Jones News
Unilever, one of the world's biggest consumer goods companies,
said Thursday it expects economic growth to remain slow in its
Western markets, and tough competition to hamper price increases
although it does expect to raise prices towards the end of the
year.
The maker of Ben & Jerry's ice cream, Dove soap and Cif
household cleaner spent heavily on marketing in the second quarter
as it battled to protect its market share in a competitive market,
at the expense of margins which grew less than expected.
Chief Financial Officer Jean Marc Huet said that while operating
margin, which grew 0.1 percentage point in the quarter, was
important, right now the priority was to invest to remain
competitive.
Sales growth slowed in the second quarter largely due to a
disappointing drop in prices. Volumes rose 5.7% but prices fell 2%.
Huet said the lower prices reflected cuts made last year rather
than any recent price drops but analysts remained concerned the
company was carrying negative pricing momentum into the second half
when Unilever will need to raise prices to offset higher commodity
costs.
Huet said commodity costs would rise around 2% for the full-year
in line with earlier guidance. There had been fears that the recent
rises in the cost of wheat, oil and palm oil could put this target
at risk, but Huet said Unilever buys most of its commodities on
forward contracts "so we've got a pretty good view of where we're
going to be."
Still, at 0813 GMT Unilever's shares were trading down 2.3%, or
42 pence, at 1789 pence in a flat London market.
Unilever posted a net profit of EUR1.06 billion for the second
quarter, up from EUR758 million a year ago and in line with market
expectations.
Sales rose 12.4% to EUR11.75 billion. Stripping out
acquisitions, disposals and currency movements, second-quarter
sales grew 3.6%, also in line with analysts' estimates. The 3.6%
growth compares with 4.1% in the first three months of the year and
1.8% in the previous quarter.
By Michael Carolan, Dow Jones Newswires; 44-20-7842-9278;
michael.carolan@dowjones.com
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