Unilever PLC (UN, UL) Thursday posted a rise in first-half profit on higher sales driven by volume and pricing gains in emerging markets, but the world's third-largest maker of branded household products warned that Western Europe remains challenging.

"In a tough and volatile environment we have again delivered strong growth," Chief Executive Paul Polman said.

Consumer purchases in Asia, Africa, Latin America, the Middle East and Eastern Europe more than offset weakness in Western Europe and North America as the globalized industry gradually shifts growth eastwards.

Still, it faces a challenging outlook in mature markets from cut-throat industry competition and government-backed austerity measures, which is squeezing discretionary spending.

The Anglo-Dutch maker of Ben & Jerry's ice cream, Knorr soup and Bertolli olive oil spreads as well as household products such as Dove, Lynx and Cif said first half net profit rose 10% to EUR2.24 billion from EUR2.04 billion last year.

Stripping out acquisitions, disposals and currency movements, second quarter sales grew 7.1%. This measure of sales, which compares with a rise of 3.6% in the same period last year and a 4.3% 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 second quarter rose to EUR11.93 billion compared with EUR11.75 billion a year earlier.

Group underlying volumes in the quarter rose 1.9%, down from 5.7% growth recorded in the same period last year and a 2.5% increase in the first quarter. Second quarter pricing rose 5.1% as the consumer goods giant tried to pass on higher costs to customers.

The underlying operating margin was down 20 basis points, as price increases lagged costs, but the company expects it to improve in the second half.

Unilever has warned that commodity markets remain volatile, 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 vegetable oil, palm oil, wheat, soy beans, corn, plastics and petrochemicals.

It declared a quarterly dividend of EUR0.225 per share.

Unilever shares closed Wednesday at 1905 pence, valuing the company at GBP24.45 billion.

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

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