Unilever volume growth drive brings Q1 payoff

Unilever volume growth drive brings Q1 payoff

London: Consumer goods giant Unilever’s drive to increase volume growth paid off for the fourth quarter in a row as it beat forecasts with a rise in underlying sales, with a boost from strong emerging market growth.

Chief executive Paul Polman has been cutting prices and increasing marketing, and despite a sluggish recovery and tough competition he is still looking to continue pushing up volumes and increasing profit margins this year.

Emerging markets shone, with Asia/Africa/Eastern Europe sales growing 7.6% and Latin America up more than 10%. Anglo Dutch company Unilever has the largest exposure to these markets amongst its rivals as they account for half of its sales and profits.

“We see some early signs of economic recovery but economies remain sluggish and competition remains intensive, and we face a tougher environment for the rest of the year," Finance Director Jean Marc Huet told a conference call on the results.

He warned of rising commodity costs in the second half of 2010 with tea, milk and crude oil all increasing, but said Unilever was still sticking to its forecast for commodity price inflation of 2 to 3% this year.

The world’s third-biggest food and consumer goods group and maker of Ben & Jerry’s ice cream, Knorr soup and Dove soap reported an underlying first-quarter sales rise of 4.1%, beating a consensus of 3.2% in a Reuters poll of 10 analysts and 3.5% growth in 2009.

“Unilever has come in with a strong set of figures which demonstrates that recovery is on track," said analyst Sara Welford at brokers Citi.

Volumes Up

Unilever shares were up 2.9% to £19.71 by 0740 GMT. It has underperformed the FTSE 100 index and the DJ European Food and Beverage index by 6% this year.

Unilever said quarterly volumes rose 7.6%, after price cuts of 3.3%, beating 5.2% consensus in the Reuters poll and reflecting the strong growth seen from rivals Nestle and Danone.

Unilever’s 4.1% increase in sales was behind Nestle’s 6.5% rise and Danone’s 7%, but Unilever’s volume growth of 7.6% beat Nestle’s 4.8% after Unilever cut prices last year to become more competitive.

The group’s western Europe business had sluggish growth of just 0.2%, held back by tough trading in southern Europe, but volumes grew 4% helped by new products like Dove for Men, Magnum Gold ice-creams and Knorr stockpot.

Unilever’s underlying quarterly earnings rose 32% to €0.34 per share, beating a consensus forecast of €0.32 collated by ThomsonReuters I/B/E/S, while operating margins rose 60 percentage basis points to 15.2% helped by on-going cost cutting and lower commodity costs.

It proposed a quarterly dividend of €0.208 per share.

US rivals Procter & Gamble and Colgate-Palmolive will report quarterly results later on Thursday, and European rival Henkel reports next week.