Unilever grows sales in spite of EU slowdown
AMSTERDAM—Unilever PLC, the maker of Lipton tea, Ben & Jerry's ice cream, and Axe deodorants, said Thursday strength in developing markets and its personal care products lifted its first-half net profits.
Net profit was (EURO)2.435 billion ($2.955 billion), up 1.3 percent from (EURO)2.405 billion in the same period a year ago. The 2011 results benefited from a (EURO)144 million gain from the sale of Unilever's tomato business in Brazil.
First-half sales rose 11.5 percent to (EURO)25.4 billion, including a 1.9 percent rise due to the weaker euro and 2.2 percent due to acquisitions. Sales in Europe were down 2.2 percent in the second quarter, as consumers feel the pinch of the debt crisis.
"Despite deteriorating global economic conditions and a competitive environment which remains intense, we again delivered volume growth ahead of our markets and gained value share across the majority of our business," said Chief Executive Paul Polman.
"Looking forward we expect continued volatility, especially in commodity costs and economic conditions. We remain focused on profitable volume growth ahead of our markets, steady and sustainable core operating margin improvement."
Polman repeated the company's 2012 guidance that margins will improve modestly in the second half.
Analysts praised the company's performance, which contrasts well with rivals such as Procter & Gamble and Danone, which have issued profit warnings.
Polman's guidance was "reassuring...given recent raw material volatility," said SNS Securities analyst Richard Withagen in a note. He rates shares a hold. "Both the top and bottom line exceeded expectations," Withagen said, noting that sales gains were more due to price increases than higher volumes.
Shares in the company, which are listed in the U.K. and the Netherlands, rose 4.7 percent to (EURO)27.605, following gains of around 10 percent over the past month.
Unilever's personal care products division is its largest after acquisitions in the U.S. and Russia, and also the fastest-growing, with sales up 10.4 percent. Foods, the next largest category, grew the least: 3.2 percent, entirely due to price increases Polman said were necessary to keep up with commodity costs.
Unilever said Dove products now sell more than (EURO)3 billion annually, while Magnum ice cream is close to (EURO)1 billion.
The world's developing countries proved the most important for the company, accounting for more than 50 percent of sales.
Unilever discussed Europe, its most profitable market, in some depth. It said overall first half growth of 1.1 percent "is a creditable performance, given continued sluggish economies and fragile consumer confidence." But margins were down 0.8 percent "mainly due to the impact of higher commodity costs."
Unilever also gave European sales figures for the second quarter, which showed worsening conditions. Sales were down 2.2 percent, with volumes down 2.7 percent compensated only in part by 0.5 percent in price hikes.