Consumer goods giant Unilever beat forecasts with an 8.4%- rise in first-quarter sales on Thursday, helped by price hikes and emerging market growth
The Anglo-Dutch maker of brands like Dove and Knorr is battling high input costs from rising commodity prices such as crude and vegetable oils, and slow growth in developed nations. It also cautioned that emerging market growth has started to slow especially in eastern Europe and Russia.
"The competition is intense, we have seen some moderation in emerging market growth while developed markets remain muted, but we have had a good start to the year and we are becoming more competitive," finance director Jean-Marc Huet told a briefing.
Unilever, the world's No. 3 consumer goods group, is holding to its forecast for modest profit margin expansion this year, albeit weighted towards the second half of the year when some of its commodity costs are expected to ease as expensive forward hedges fall away.
"Despite the one-off tailwinds, this reads as a still-strong quarter to us," said analyst Martin Deboo at brokers Investec.
Unilever Plc shares were up 3.1% at 2,143 pence by 0826 GMT, in a firmer FTSE 100. The stock has underperformed European food and beverage stocks by almost 10% so far this year.
The company, with annual sales of 46.5 billion euros, reported that first-quarter underlying sales rose 8.4% beating a company-compiled forecast of 6.4 percent, and compared to growth of 6.5% in 2011.
Emerging markets, which make up 56% of Unilever's business, grew 11.9%.
Within categories personal care led the field with growth of 10.4%. The group's Clear anti-dandruff shampoo, recently launched in the US, was the fastest growing overall brand.
Unilever's 8.4% growth was ahead of the world's No. 1 food group Nestle
Unilever saw its commodity cost bill rise 15% last year. It expects around a 5%- increase this year but that is showing signs of starting to creep higher again.
The competitive environment is also getting more intense: plans by P&G to cut costs by USD 10 billion are fuelling concerns about heightened competition in home and personal care products.
"The external macro-environment remains difficult and high input cost headwinds persist," said chief executive Paul Polman in a statement.
Unilever, which also sells Lipton tea, Ragu sauces and Blue Band margarine, reported overall three-month turnover rose 11.9% to 12.1 billion euros, and it paid a quarterly dividend of 0.243 euros a share, up 8% from the previous year.
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