Amsterdam: Unilever NV, one of the world’s largest makers of consumer products such as Dove soaps, Lipton teas and Ben & Jerry’s ice creams, Thursday reported third-quarter earnings rose 19% on sales growth, cost-cutting, and the weak euro, which more than offset higher raw materials costs.
Net profit was €1.25 billion ($1.75 billion), up from €1.05 billion. Sales rose 13.2% to €11.5 billion, with growth strongest in emerging markets. The company said stripping out the effects of the euro, profits were up 11% and sales were 3.1% higher.
The results “reflect solid progress, particularly given the combined headwinds of slow economic growth, weak consumer confidence in many markets and higher commodity costs,” CEO Paul Polman said in a statement.
Shares rose 4.4% to €22.20 in early Amsterdam trading, as analysts were positively surprised by the rise in profit margins, due mostly to cost-cutting in Europe.
However, Richard Withagen of SNS Securities said in a note to investors that while “third-quarter earnings appear solid at first sight,” they are “slightly disappointing” in some details.
He warned that the margins may slip after all in the fourth quarter due to a lag in the impact from commodities costs rises, which have continued. “Secondly, Unilever reports a slowdown in the emerging markets in the quarter,” he wrote. He still rates shares Accumulate.
Unilever also makes Slim-Fast diet products, Axe and Rexona deodorants, Magnum ice cream, Hellmann’s mayonnaise, Bertolli oils, Knorr soups, Surf laundry products and Cif cleaning products.
Selling prices fell a combined 1.2%, with declines in all regions, which the company made up for with higher volumes in all regions. Margins fell in both the Americas and Asia, but grew strongly in Europe and overall due to the heavy cost-cutting in Europe. The company’s spending on advertising was flat.
“Volume growth in North America was over 2%, a solid performance given the difficult market conditions. In the US, our performance in deodorants, hair, ice cream and frozen ready markets was particularly encouraging,” the company said in a statement.
Unilever said emerging markets “continue to grow strongly albeit more slowly than the levels seen earlier in the year.”
In Europe, where sales were up just 0.6%, Unilever said it was winning market share. The company says it expects selling prices to rise in the fourth quarter.
Unilever said it expects to close a €1.3 billion purchase of Sara Lee’s personal care products division, which is being examined closely by European regulators, in the fourth quarter. It has also agreed to buy Alberto Culver, the US maker of Noxzema, TRESemme and V05, for $3.7 billion.
Together with Unilever’s other personal care brands _ which include Vaseline, and Suave shampoos among others _ the two buys would put Unilever past rival Procter & Gamble Co. as the biggest maker of personal care products.