Consumer products giant Unilever 2Q profit down

[August 06, 2009]  AMSTERDAM (AP) -- Unilever NV PLC, the maker of Dove soap, Lipton tea and Ben & Jerry's ice cream, reported a 17 percent fall in profit in the second quarter as it cut prices in Europe to keep market share, but its ability to raise sales volumes during the recession helped the company's share price rally around 4 percent.

Net profit at the consumer products giant was euro758 million ($1.09 billion), down from euro909 million in the same period a year earlier, but sales rose 1 percent to euro10.5 billion.

Sales were up in Asia and the Americas, but fell 5.1 percent in Western Europe, where the company slashed prices. That translated to higher volumes, which pleased analysts, but hurt margins. Operating profit in the region was down 24 percent to euro377 million.

The company also spent more money on advertisements and was hit by euro77 million more in pension-related costs than a year earlier.

"Unilever is delivering on its promise of a return to volume growth, which comes much quicker than we anticipated," said analyst Richard Withagen of SNS Securities in a note on the earnings.

Though he said Unilever's first half performance was solid, he maintained his "reduce" recommendation on the stock as Unilever's share price has outperformed those of its larger competitors Procter & Gamble Co. and Nestle SA since January.

For now though, investors cheered the results, sending the share 4.3 percent higher to euro19.61 in Amsterdam.

Chief executive Paul Polman said he was satisfied that the company had increased volume in all regions, and he planned to focus more on margins in the second half, though he was downbeat about prospects for the world economy.

"We do not believe there are any signs of a fast recovery," he said. "In fact we believe that many parts of the world, such as Western Europe, Eastern Europe, will still suffer more before they bottom out."

Though Polman said grocery store spend could fall around 1 percent amid rising unemployment, he suggested that the company's products will be relatively less affected as customers may switch to bargain Unilever brands.

Among major product lines, at Unilever's savory and dressings arm, its largest, sales fell 5.8 percent and operating profits were down 18 percent.

Unilever said its Knorr soups brand had grown well in the Americas and Asia but that sales were down in Western Europe.

In the U.S., Unilever said it had capitalized on "the move to more in-home eating with successful campaigns behind Hellmann's mayonnaise, Ragu pasta sauces and Bertolli frozen meals."

Unilever's personal care arm grew sales by 8.5 percent and operating profit rose 6 percent. Unilever said new product launches had helped, such as a new Dove deodorant and an Axe "body spray." It also noted good growth for Suave, its value shampoo brand in the U.S.

Ice cream and drinks sales rose 3.8 percent but operating profits fell 8.4 percent due to price cuts.

Lipton sales benefited from pyramid-shaped tea bags, and ice cream sales were good in the early summer, thanks to warm weather. "Magnum, with the 'Temptation' variant, and Ben & Jerry's were particularly strong," it said.

[Associated Press; By TOBY STERLING]

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