Unilever Revenue Up but Margins Decline

04/05/06 Anglo-Dutch giant Unilever has said that first-quarter profit gained 6 percent as sales growth accelerated in the U.S.

Turnover increased by 8.6%. Underlying sales grew by 2.9%, including an increasing contribution from pricing, which was up 0.5% in the quarter. Favourable currency movements added 6.3%, with disposals accounting for the remainder of the change in turnover.

Advertising and promotions as a percentage of turnover increased by 0.3 points. Pricing actions and a substantial level of savings from our cost improvement programmes compensated for higher commodity costs and general inflation.

Operating margin at 14.8% was 0.2 percentage points lower than a year ago. The margin this quarter included a favourable 0.6 percentage points from disposal profits less restructuring costs, slightly higher than the level in the same quarter last year. Before the impact of these items, and on a comparable basis, the operating margin would have been 0.3 percentage points lower than a year ago.

Unilever reconfirmed its outlook for the year, notwithstanding the restatement of frozen foods businesses planned for sale as discontinued operations. The company said that its priorities are to sustain top line growth and improve our margins. It said it continues to expect to increase operating margin to above 13.4%. This takes into account the impact of the change in discontinued operations, which lowers the 2005 operating margin to 13.2%, offset by the benefit of disposal profits in the first quarter of this year. Unilever said that it continues to expect gross restructuring costs of around one percentage point of sales. Given the low tax rate achieved in the first quarter, the rate for the year is now expected to be around 26%.