UN Unilever NV

The commodity markets remain "volatile", the group cautioned, led by the soaring cost of crude oil which has doubled in price over the last year. It is also feeling the effect of rising prices of

The company said its underlying operating margin is set to fall in the first half, as price increases lag costs, before improving in the second half.

Unilever said first-quarter underlying sales growth, which strips out acquisitions, disposals and currency movements, rose to 4.3% year-on-year. This measure of sales, which compares with a rise of 4.1% in the same period last year and a 5.1% increase in the previous three months, is closely watched as a directly comparable measure of how the company's products are selling. Unilever's total sales in the quarter rose 7% to EUR10.9 billion compared with a year earlier.

Group underlying volumes in the quarter rose 2.5%, down from 7.6% growth recorded in the same period last year and a 5.1% increase in the fourth quarter. First-quarter pricing rose 1.8% as the consumer goods giant tried to pass on higher costs to customers.

"We have continued to deliver volume growth, albeit at a lower rate than in recent quarters reflecting the pricing action taken and the sluggishness of the developed markets," Chief Executive Paul Polman said.

The company said it has accelerated its cost reduction programmes and expects full-year savings to be around EUR1.3 billion.

It reiterated its guidance of profitable volume growth ahead of its markets, steady and sustainable underlying operating margin improvement and strong cash flow. It declared a dividend up 8.2% year-on-year to EUR0.23

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

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