UN Unilever NV

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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