Unilever profits rise but pricing proving tough in Europe

UNILEVER, the consumer goods giant behind brands such as PG Tips and Persil, yesterday showed the UK and western Europe trailing behind emerging markets as the sluggish economic climate hits sales.

The group, whose ranges include Magnum ice-creams, Dove soap and Domestos bleach, said underlying sales volumes in western Europe edged up 0.2 per cent in the first half of the year compared with 5 per cent in Asia and Africa.

The group said its margins were down 0.2 per cent as it battled to offset increasing raw material costs with pricing and savings. Prices in western Europe were up by 1.1 per cent, compared with 5 per cent in its Americas region.

The British-Dutch firm reported a 9 per cent increase in pre-tax profits in the six months to June to 3.2 billion as turnover increased 4 per cent to 22.8bn.

It posted second-quarter underlying sales growth of 7.1 per cent, beating a company compiled consensus of 5.5 per cent, and announced a quarterly dividend of €0.225 a share, up 8 per cent. The results came in ahead of City expectations.

Paul Polman, Unilever chief executive, said: "In a tough and volatile environment we have again delivered strong growth. Volumes were robust and in line with the market, despite having taken price increases."

Unilever said western Europe remained challenging, but there were strong performances in Germany and France.

Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers, said good weather would have driven sales of products such as ice-cream and deodorants.

He added: "Raw material prices have outpaced product price increases and cost saving initiatives, while the ability to recoup such costs in the growth arenas of the emerging markets may prove challenging, with food and consumer goods still accounting for a sizeable proportion of earned income."