2nd UPDATE:Unilever Profit Up On Strong Emerging Market Volumes
04 November 2010 - 1:12PM
Dow Jones News
Unilever PLC (UN, UL), the world's third-largest maker of
branded household products, posted a jump in net profit on rising
sales driven by volume gains in its emerging markets, but cautioned
that Europe and the U.S. remain tough consumer trading
environments.
The Anglo-Dutch maker of Ben & Jerry's ice cream, Knorr soup
and Bertolli olive oil and household products such as Dove, Lynx
and Cif is facing rising commodity costs and a challenging consumer
outlook in its mature economies with discretionary income under
pressure from austerity measures such as tax hikes and public
spending cuts as governments rein in borrowing.
Still, the company said it is growing European market share in
multiple categories. "Our market share is up in (many) areas, such
as tea, ice cream, soups and bouillons, but macroeconomic
conditions are not easy. The consumer environment in Europe is not
well," Chief Financial Officer Jean-Marc Huet said.
Huet said the group is stepping up its investment to build its
brands in Asia, Africa and the Middle East in the face of
intensified competition. "We need to expand our platform in the
emerging markets. That is where we are seeing most of the
competition."
Unilever--which sells goods in 170 countries and competes with
U.S.-based market leader Procter & Gamble Co. (PG) and
Switzerland's Nestle SA (NESN.VX)--said its third-quarter net
profit rose 21% to EUR1.3 billion from EUR1.05 billion and
operating margin was up 20 basis points, lifted by year-on-year
pricing gains, cost-cutting and the weak euro which more than
offset raw material price pressures.
The market welcomed the strong figures and at 1140 GMT
Unilever's shares were trading up 103 pence, or 5.7%, at 1913
pence.
Chief Executive Paul Polman reiterated that he expects
underlying price growth to turn positive towards the end of the
year. Quarterly pricing was flat for the third successive quarter
but improved on a yearly basis.
The consumer goods giant posted encouraging profit trends, but
Collins Stewart analyst Rob Mann cautioned that margins will be
squeezed by higher administration costs in the fourth quarter
according to the company's savings plan, which includes staffing
and building overheads. "The encouraging element of these numbers
is the more even delivery, both between volume and price, and also
on a geographic basis. (However), the phasing of indirect costs
will represent some pressure."
Underlying sales--which strip out acquisitions, disposals and
currency movements--grew 3.6% in the third quarter, below analysts'
expectations of 3.7%. This measure of sales, which compares with
3.4% growth in the same period a year earlier and a 3.6% rise in
the previous three months, is closely watched as a directly
comparable measure of how the company's products are selling.
By region, underlying sales fell 0.3% in Western Europe, with
Greece, Spain and Ireland remaining "difficult" markets. Boosted by
an 8.8% rise in underlying volumes, sales grew 6.7% in Asia, Africa
and developing markets, but down from 7.9% growth in the
first-half. Sales in the Americas rose 3.9%, driven by a strong
performance in Latin America.
Group underlying volumes rose 4.8% and total sales rose 13.2% to
EUR11.5 billion from EUR10.2 billion.
Last week, rival P&G's fiscal first-quarter earnings fell on
the sale of its pharmaceuticals business last year, and the
company's margins took a hit from higher commodity costs.
By Simon Zekaria, Dow Jones Newswires; +44 207 842-9410;
simon.zekaria@dowjones.com
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