Unilever profit rises but fails to impress

CONSUMER goods giant Unilever warned of rising pressure from rivals and higher commodity costs yesterday as it missed analysts’ forecasts with a 3.6 per cent rise in second-quarter sales despite strong emerging market growth.

Unilever’s caution reflects the message from competitors like Procter & Gamble who have to spend heavily on new products to attract value-seeking shoppers and see no sign of the tough times easing.

It reported a €3bn (£2.5bn) profit for the first half and operating profit of €1.6bn was up 23 per cent and boosted by cost savings. But Unilever chief executive Paul Polman warned of a tougher second half due to increased competition and the rising cost of raw material prices like tea, milk and crude oil with overall commodity prices expected to surge two per cent in 2010. He said: “We do not expect competitive pressures to ease and our ability to increase prices will remain constrained despite rising commodity costs in the second half.”

Unilever, whose brands include Ben & Jerry’s ice cream, Knorr soup and Dove soap, saw its shares close 5.2 per cent lower at £17.36 yesterday as sales and margins came in below analysts’ forecasts and due to its cautious words about the second half, analysts said.

Polman is assuming slow economic growth ahead, especially in developed markets where consumer confidence is fragile, but is sticking to his target of seeing profitable sales volume growth and increased margins for 2010 as a whole.

The Anglo-Dutch company said that second-quarter operating margins edged ahead only 0.1 per centage point to 14.7 per cent.