Unilever Q3 profits up 19 percent as sales rise

[November 04, 2010]  AMSTERDAM (AP) -- Unilever NV, one of the world's largest makers of consumer products with brands such as Dove soaps, Lipton teas and Ben & Jerry's ice creams, Thursday reported third-quarter earnings rose 19 percent on sales growth, cost-cutting, and the weak euro, which more than offset higher raw materials costs.

Net profit was euro1.25 billion ($1.75 billion), up from euro1.05 billion. Sales rose 13.2 percent to euro11.5 billion, with growth strongest in emerging markets. The company said stripping out the effects of the euro, profits were up 11 percent and sales were 3.1 percent higher.

The results "reflect solid progress, particularly given the combined headwinds of slow economic growth, weak consumer confidence in many markets and higher commodity costs," CEO Paul Polman said.

He said he was proud of the company's sales volume growth of 4.8 percent, the highest rate in years.

Unilever also makes Slim-Fast diet products, Axe and Rexona deodorants, Magnum ice cream, Hellmann's mayonnaise, Bertolli oils, Knorr soups, Surf laundry products and Cif cleaning products.

"I actually like it when the circumstances are tougher, because it requires the best of us but it also changes the organization at a faster pace," Polman said on a conference call.

Analysts said the company's margins were surprisingly strong.

"Unilever's third quarter operating profit margin came in at up 0.2 percent versus a consensus of a 0.2 percent decline," said Warren Ackerman of Evolution Securities, who rates shares a Buy, in a note on the earnings. "We think the whisper number on margins was down nearer 0.5 percent, so this is a 0.7 percent 'real' beat."

Shares rose 4.7 percent to euro22.31 in Amsterdam.

However, Richard Withagen of SNS Securities said that while "third-quarter earnings appear solid at first sight," they are "slightly disappointing" in some details.

He warned that the margins may slip after all in the fourth quarter due to a lag in the impact from commodities costs rises, which have continued. "Secondly, Unilever reports a slowdown in the emerging markets in the quarter," he wrote. He still rates shares Accumulate.

Selling prices fell a combined 1.2 percent, with declines in all regions, which the company made up for with higher volumes, also in all regions. Margins shrank in both the Americas and Asia, but grew strongly in Europe and overall due to the heavy cost-cutting in Europe. The company's spending on advertising was flat.

"Volume growth in North America was over 2 percent, a solid performance given the difficult market conditions. In the U.S., our performance in deodorants, hair, ice cream and frozen ready markets was particularly encouraging," the company said in a statement.

Unilever said emerging markets "continue to grow strongly albeit more slowly than the levels seen earlier in the year." Volumes were up 8.8 percent.

In Europe, where volumes were up just 0.6 percent and prices fell almost 1 percent, Unilever said it was winning market share. The company says it expects selling prices to begin rising again in the fourth quarter.

The company also said it expects to close a euro1.3 billion purchase of Sara Lee's personal care products division, which is being examined closely by European regulators, later this month. It has been more than a year since the deal was announced in September 2009.

Polman said the regulatory "process in Europe is very tedious...and I personally don't believe it helps Europe become more competitive."

In September of this year, Unilever agreed to buy Alberto Culver, the U.S. maker of Noxzema, TRESemme and V05, for $3.7 billion.

Together with Unilever's other personal care brands -- which include Vaseline, and Suave shampoos among others -- the two buys would put Unilever past rival Procter & Gamble Co. as the biggest maker of personal care products.

[Associated Press; By TOBY STERLING]

Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.