Unilever 4th-quarter profit rose 15 percent

[February 03, 2011]  AMSTERDAM (AP) -- Unilever NV, maker of consumer products such as Dove soaps, Lipton teas and Ben & Jerry's ice cream, said Thursday its fourth quarter earnings rose 15 percent on strong sales growth in emerging markets -- though margins suffered slightly from rising commodity costs.

Net profit was euro955 million ($1.32 billion), up from euro831 million. Sales rose 12 percent to euro10.8 billion.

The world's third-largest consumer products maker said underlying margins slipped by 0.2 percent, as it was unable to fully pass on rising commodities costs to consumers. With sales prices flat, increased raw materials costs outweighed savings from restructuring and cuts on advertising.

The company's earnings gains came "despite the intense competition and the return of commodity cost volatility," said Chief Executive Paul Polman. He noted consumer confidence remains low in "many markets."

Shares rose 0.7 percent to euro22.255 in early Amsterdam trading.

"Unilever's Q4 results saw sales growth come in above the top of the range of expectations," said analyst Graham Jones at Panmure Gordon & Co. in a note on the earnings.

He said the fall in margins "will be an issue for skeptics" but the most important thing was Polman's statement that the company can win market share and improve its margins in the medium term.

"While the trading environment is undoubtedly tough...we believe Unilever is well placed to withstand the pressures, and as such believe the shares present an excellent buying opportunity," he said.

In a less upbeat comment, Britain's Investec Bank said it will likely adjust its forecasts for the company's shares performance downward.

"With Unilever struggling for margin in the face of what we think are only the foothills of input cost inflation, we expect even bigger challenges when it faces the peaks to come" later this year, the bank's analysts said in a post-earnings note.

Unilever said sales volumes increased in all regions, though prices were, on balance, flat. Profit margins increased in Europe due to cost cutting, but that was not enough to outweigh margin falls in North and South America, Asia and Africa.

Price falls continued in Europe, "reflecting the high levels of promotional intensity in many of our markets," the company said.

Unilever's acquisition of the personal care business of Sara Lee boosted the company's net sales, but "underlying" sales -- a measure that strips out the impact of such fluctuations -- still rose 5.1 percent, the company said.

Ice creams and beverages were the company's strongest growing category. The company cited the introduction of the Magnum brand in Indonesia and growth of Klondike in the U.S.

In personal care, its second-best growth category, Unilever said Axe shower gels did well in the U.S., while Vaseline skin care products also grew strongly.

Unilever also makes Hellmann's mayonnaise, Knorr soups, and an array of laundry products. Unilever is the world's third-largest consumer product maker after giant Procter & Gamble Co. and Switzerland's Nestle SA.

[Associated Press; By TOBY STERLING]

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