Unilever Optimistic on Back of Sales Growth

04/08/06 Consumer goods giant Unilever Plc/NV has reported an increase in sales growth to 3.9 percent in its second quarter and added it was now set to grow faster than its markets and improve profit margins. Anglo-Dutch Unilever posted its underlying sales growth of 3.9 percent in April-June after a disappointing 2.9 percent rise in the first quarter. The rise was ahead of forecasts for 3.5 to 3.7 percent and came as the world's third-biggest consumer goods group spent heavily on its sales-led recovery after a shock profits warning in 2004, and compared to the group's 2 to 4 percent medium-term target.

“The first half year results give me confidence that we have largely succeeded in restoring competitiveness. All regions and categories contributed to growth and we continue to maintain market share in aggregate. Investment in support of our priorities has been rewarded by sustained progress in personal care, developing and emerging markets and Vitality innovation. I am also particularly encouraged by the resumption of growth in Europe” commented Group Chief Executive Patrick Cescau.

Cescau added that he expects that Unilever will achieve its outlook for this year of sustained growth and an operating margin above last year. “This is in spite of a harsher than expected commodity cost environment which has impacted margins in the first half. We are accelerating our savings programmes and have an increasing contribution from price, while a strong innovation programme is driving improved mix” Cescau said.

He noted that Unilever’s focused strategy is enabling to grow ahead of its markets with sustainable margin improvement. “I am confident that this will lead to sustainable underlying sales growth of 3-5%, and an operating margin in excess of 15% by 2010”, he said.

Unilever’s turnover increased by 5.8% in the first half year, with 3.4% underlying sales growth including 0.7% from price. Favourable currency movements added 3.2%, while disposals account for the remainder of the change in turnover. In the second quarter underlying sales grew by 3.9% including pricing of 0.8%.

The operating margin for the first half year at 14.4% was 1.0 percentage point higher than a year ago, while the quarter at 14.0% was 2.0 percentage points higher. Before the impact of restructuring, disposals and impairment, the operating margin would have been 0.6 percentage points lower than a year ago for the first half and 1.0 percentage point lower in the second quarter.

Net profit from continuing operations increased by 22% in the first half year and by 37% in the quarter. Total net profit, including discontinued operations, increased by 19% in the first half year and by 33% in the quarter.

In Europe, underlying sales grew by 0.3% in the half year and by 1.0% in the second quarter, with volume growth partly offset by a small reduction in price. Conditions in Western Europe remain tough, but demand has picked up slightly and we are growing in line with our markets in aggregate.

In the Americas, underlying sales grew by 3.2% in the first half year and by 3.6% in the second quarter with a slight acceleration over the first quarter in both volume and price. Markets in the US continue to grow well and Unilevr says it is maintaining its share. In the rest of the region demand in Home and Personal Care markets remains solid, but there has been a further slowdown in market growth in Foods.

In Asia Africa, underlying sales grew by 8% in the first half year and by 9% in the second quarter. Volume continued to be the major driver, although price increases have been taken in some categories, particularly in laundry to mitigate the effects of higher input costs.