UN Unilever NV

By Saabira Chaudhuri 
 

LONDON -- Unilever PLC on Thursday reported stronger third-quarter revenue growth as the maker of Breyers ice cream and Dove shampoo sold more products at higher prices.

Unilever's sales for the third quarter climbed 3.8% on an underlying basis to 12.5 billion euros ($14.4 billion). That's an improvement from a year ago when Unilever reported growth of 2.8% excluding its spreads business.

The results come as Nestle SA on Thursday also reported slightly stronger prices, saying its organic sales growth for the first nine month of the year was 2.8%, helped by pricing of 0.5%.

Unilever has in recent quarters struggled to raise prices, relying largely on volumes to grow sales, but on Thursday said rising commodity costs in local currencies, particularly in emerging markets, had helped results. The results exclude pricing in Argentina, which is going through a period of hyperinflation: Unilever raised prices there by 34% in the third quarter while volumes dropped 10%.

"The combination of underlying commodity increases but also the stronger U.S. dollar is really putting a lot of inflation into our market," said Chief Financial Officer Graeme Pitkethly in an interview. "I see pricing being a key feature of the entire sector through balance of year and in 2019."

Unilever--which owns brands like Axe deodorant and Lipton tea--has been working to streamline and speed up its operations following a hostile takeover approach last year from Kraft Heinz Co., which caught executives off guard. But a monthslong plan to axe Unilever's London headquarters and instead consolidate the company's base in Rotterdam displeased many of its biggest shareholders, forcing Chief Executive Paul Polman to pull a vote on the issue scheduled for next week.

The episode has raised questions about Unilever's engagement with shareholders since it comes after more than a third of shareholders in May rejected its executive pay policy. While Mr. Polman was originally expected to step down next year, some analysts say his replacement will likely be announced sooner than expected.

In an interview Mr. Pitkethly defended Unilever's proposal to scrap its London headquarters, saying the principles behind wanting to achieve a simpler structure still stand.

"I think it's important to bring a sense of humility here but we certainly don't regret bringing forward the proposals," he said. Unilever will now look to see whether there are other routes through which it can achieve a similar goal, Mr. Pitkethly said, although he acknowledged that this would be tough.

RBC analyst James Edwardes Jones described Unilever's sales report as "solid" and "unexciting," saying the consumer-goods giant is likely to be pleased with the results after recent drama.

In developed markets, Unilever said underlying third-quarter sales climbed by 1.3%, driven mostly by volume gains. Emerging-market sales jumped 5.6% as Unilever was able to raise prices by 2.1%.

Mr. Pitkethly said investing in brands is key in an inflationary environment to ensure volumes continue to grow even as the company raises prices.

"We've got to get the price moving but keep volume first," he said. "The true test of the strength of a brand is the ability to price and give a degree of inflation protection."

Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com

(END) Dow Jones Newswires

October 18, 2018 03:25 ET (07:25 GMT)

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