Unilever Reports 4.8% Growth in Underlying Sales

02/11/06 Unilever has reported an increase in turnover of 4.4% in the first nine months, with 3.9% underlying sales growth. Favourable currency movements added 1.4% with disposals accounting for the remainder of the change in turnover. In the third quarter underlying sales grew by 4.8%. Pricing has made an increasing contribution with 0.9% in the first nine months and 1.2% in the quarter. All regions and categories grew in both the year to date and the quarter. A strong third quarter for European ice cream added 0.4% to overall third quarter growth and made up for a relatively weak start to the ice cream season.

The operating margin for the first nine months at 14.5% was 0.3 percentage points higher than a year ago, while the quarter at 14.8% was 0.8 percentage points lower. Before the impact of restructuring, disposals and impairments, the operating margin would have been 0.7 percentage points lower for both the first nine months and the quarter.

Investment behind Unilever brands has been stepped up in priority categories and regions. Advertising and promotions as a percentage of turnover increased by 0.6 points in the first nine months and by 0.8 points in the third quarter.

Gross margins were in line with last year in the first nine months. Higher commodity costs were fully offset by savings programmes, the benefits of volume growth and mix, and a positive contribution from pricing.

Net profit from continuing operations increased by 5% in the first nine months and decreased by 22% in the quarter, following the preference shares provision. Net profit, including discontinued operations, was down by 45% in the quarter, additionally reflecting the profit on disposal of UCI in the third quarter of last year. EPS from continuing operations increased by 5% in the first nine months.

Net cash flow from operating activities was EUR0.3 billion higher than last year in the first nine months. Lower tax payments more than offset higher cash payments to pension schemes in the period. The seasonal outflow of working capital was in line with last year. Capital expenditure has been increased behind our innovation programme. Net debt has been reduced by EUR1.3 billion since the start of the
year.

The Euro strengthened against a number of currencies, most significantly the US dollar, reducing balance sheet values.

Underlying sales grew by 1.4% in the first nine months in Europe, and by 3.5% in the third quarter. Growth is mainly volume driven and in aggregate across categories we are growing in line with our markets. A key driver of the overall improvement has been the impact of Vitality-led innovation in savoury, spreads and leaf tea. Ice cream grew for the season overall, with a strong third quarter adding 1.4% to European growth in the quarter. This made up for lower ice cream sales in the first half year. There were improvements in a number of key countries in the third quarter. The UK has returned to growth and France and Germany also performed better. The Netherlands continues to move ahead strongly and Russia is growing well.

Underlying sales growth has accelerated progressively through the year, with 3.5% in the first nine months and 4.1% in the third quarter. This is mainly driven by volume gains with price increases adding 1.4% in the first nine months. Markets in the US continue to grow solidly. In the rest of the region Home and Personal Care markets are buoyant, with Foods somewhat slower.

Sales in the US have grown by around 3% in both the quarter and the year to date. Unilever said it had gained market share in Foods, including further gains in ice cream and the continued success of Bertolli frozen meals and Country Crock side dishes.

In Asia/Africa underlying sales grew by 8.0% in the first nine months and by 7.5% in the third quarter. While growth remains mainly volume driven, there was a further step up in price in the third quarter, to 2.3%, as Unilever took action to mitigate the effects of higher input costs. China has been very strong this year with another quarter of excellent growth.

Unilever said that the sale of European frozen foods businesses is now expected to complete very shortly and for a price at the top end of our expectations. We have not invested any significant amounts in acquisitions. We have therefore decided to return an additional EUR250 million to shareholders this year over and above the originally planned EUR500 million share buy-back. The simplest way of achieving this is through a one-off dividend of EUR750 million to be paid at the same time as the  normal interim dividend. Looking forward, we plan a share buy-back programme of EUR1.5 billion, commencing in 2007.

“We continue to see good progress with another quarter of broad-based growth”, commented Patrick Cescau, Group Chief Executive. All categories and regions grew, with a notable contribution from Europe. Stronger innovation and additional investment behind our priorities are driving the growth of our brands”, he added.