Unilever buoyed by price hikes

City A.M. Reporter
Consumer goods giant Unilever warned of a tough economic environment and higher inputs costs as its price hikes and emerging market growth helped first-quarter sales beat forecasts with a 8.4 per cent rise.

The Anglo-Dutch maker of brands like Dove and Knorr is facing slower growth in developed nations while competition from key rivals is being stepped up and commodity input prices such as crude and vegetable oils are moving higher.

The world's No. 3 consumer goods group did gain from its own price rises pushed through last year but has cautioned that emerging market growth has started to slow especially in regions such as eastern Europe and Russia.

"The external macro-economic environment remains difficult and high input cost headwinds persist," the group said in a first-quarter trading statement.

The company, with annual sales of 46.5bn euros (£38bn), reported that first-quarter underlying sales rose 8.4 per cent beating a company-compiled forecast of 6.4 per cent, led by growth in emerging markets of 11.9 per cent with developed markets 4.2 per cent ahead.

This compared with world No 1 food group Nestle which showed first-quarter growth of 7.2 per cent and France's Danone at 6.9 per cent, while US rival Procter & Gamble reports on the first three months of 2012 on April 27.

Unilever added its long-term priorities remained profitable volume growth ahead of its markets, steady and sustained core operating margin improvement and strong cash flow.

For 2012 it expects to deliver a modest rise in margins weighted towards the second half of the year.

Unilever saw its commodity cost bill rise 15 per cent last year. It had expected a five per cent increase this year but that is starting to creep higher.

P&G plans to cut costs by $10bn, fuelling concerns about heightened competition.