UPDATE: Unilever Wary Of Economy, Costs As Sales Rise
26 April 2012 - 11:52AM
Dow Jones News
Unilever PLC (ULVR.LN) Thursday said economic weakness and high
costs remain challenging, even as the consumer goods giant posted a
consensus-beating rise in sales, driven by price increases and
volume growth in emerging markets.
Purchases of ice cream, tea, cleaning products, deodorants and
shampoo in the booming economies of Asia, Africa, Latin America,
the Middle East and Eastern Europe are fueling growth, in contrast
with softer performances in Western Europe and North America, as
the globalized industry shifts eastwards.
The company, like its peers, faces a challenging outlook in
mature markets from industry competition and pinched pockets as tax
increases, spending cuts, below-inflation pay rises and
unemployment squeeze shoppers' spending.
Unilever, which competes with U.S.-based Procter & Gamble
Co. (PG), Swiss food giant Nestle SA (NESN.VX) and French dairy
company Danone SA (BN.FR), is also raising prices in selected
markets to mitigate against sluggish volumes and the impact on
margins of higher costs of commodities like crude and vegetable
oil.
"The external macro-economic environment remains difficult and
higher input cost headwinds persist," Chief Executive Paul Polman
said.
The Anglo-Dutch maker of Ben & Jerry's ice cream and
household products such as Dove and Cif said first-quarter sales,
stripping out acquisitions, disposals and currency movements, rose
8.4% compared with a year earlier, ahead of a company-produced
analyst consensus forecast of 6.4%.
This measure of sales, which compares with a rise of 4.3% a year
earlier and a 6.6% increase in the previous three months, is a
closely watched, directly comparable measure of how the company's
products are selling.
On the same basis, emerging markets sales rose 12%, with those
in developed markets up 4.2%. North America sales increased 5%.
Europe sales nudged 5.1% higher, but on weak comparatives.
Unilever's recent performance echoes those of its rivals.
Earlier this month, Nestle posted a 7.2% increase in first-quarter
sales, while Danone recorded a 7.6% rise. P&G reports its
third-quarter results on Friday.
The company's total sales in the quarter rose 12% to EUR12.1
billion compared with a year earlier.
"Our performance is pleasing given struggling economies,
continued fragile consumer confidence and competitor activity,"
Chief Executive Paul Polman said in a statement.
Still, the group noted the quarter was also boosted by an early
Easter and an extra leap year trading day.
First-quarter volumes, stripping out acquisitions, disposals and
currency movements, rose 3.5%, compared with 2.5% growth recorded
in the same period last year.
First-quarter prices rose 4.7% as the consumer goods giant
passed on higher costs to consumers.
At 0832 GMT, Unilever's shares were up 65 pence, or 3.1%, at
2144 pence, the highest gainer on the FTSE 100 index.
Shore Capital analyst Darren Shirley said the update is
"excellent" and that strong trading momentum is boosting sentiment
on the stock.
The company recommended a dividend of EUR0.24, up 8% compared
with a year earlier.
It said it is on track to deliver a "modest improvement" in
full-year core operating margin, weighted toward the second half of
the year.
Unilever reiterated its guidance of profitable volume growth,
steady and sustainable core 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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