Unilever PLC (UN, UL), the world's third-largest maker of branded household products, Thursday posted a rise in fourth-quarter sales driven by volume gains in emerging markets, but warned mature economies remain sluggish and commodity prices are putting pressure on its margins.

The Anglo-Dutch maker of Ben & Jerry's ice cream, Knorr soup and Bertolli olive oil spreads and household products such as Dove, Lynx and Cif is stepping up its investment to build its brands in Asia, Africa and the Middle East in the face of intensified competition.

Still, the company--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)--is facing rising commodity costs and a challenging consumer outlook in its developed markets, where discretionary income is under pressure from austerity measures such as tax hikes and public spending cuts as governments rein in borrowing.

Unilever said fourth-quarter underlying sales growth--which strip out acquisitions, disposals and currency movements--accelerated to 5.1% year-on-year. This measure of sales, which compares with a rise of 1.8% in the same period last year and a 3.6% increase in the previous three months, is closely watched as a directly comparable measure of how the company's products are selling.

However, the company's underlying operating margin in the quarter was down 20 basis points, hit by increased costs as prices for commodities such as palm oil, soy beans and corn are continuing to rise. Fourth-quarter pricing rose as the consumer good giant tried to pass on higher costs to customers.

"It is a fact that commodity costs have gone up and they will have an impact in 2011. (The second half of the year) becomes less clear (than the first six months). The markets are more volatile today," Chief Financial Officer Jean-Marc Huet said.

Last week, U.S. rival P&G stuck by its financial targets, but said its commodities bill will cost $1 billion for the fiscal year that ends in June, more than double what it had expected.

Unilever's total sales in the quarter rose 12% to EUR10.82 billion compared with a year earlier, while net profit increased 15% to EUR1.04 billion. In the full-year, net profit increased 26% to EUR4.6 billion.

Group underlying volumes in the quarter rose 5.1%, up from 5% growth recorded in the same period last year and a 4.8% increase in the third quarter.

At 0801 GMT, Unilever shares rose 37 pence, or 2%, at 1894 pence, in a lower London market. Underlying sales in Western Europe rose 1.1%, affected by the tough economic climate with markets in Southern Europe remaining difficult.

By contrast, sales rose 8.5% in Asia, Africa and Central and Eastern Europe on 8.8% volume growth, while the top line in the Americas rose 4.6%, driven by a strong performance in Latin America.

"Emerging markets really is the motor of growth and this will be the same going forward. (However), developed markets remain sluggish. We do not expect a rapid recovery in either the U.S. or Western Europe in the short term," Huet said.

The group reiterated its guidance of profitable volume growth, steady and sustainable underlying operating margin improvement and strong cash flow.

By Simon Zekaria, Dow Jones Newswires; +44 207 842-9410; simon.zekaria@dowjones.com
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