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Unilever Reports Highest Price Growth Since 2009


Unilever reported the highest price growth in more than two years as it introduced products such as Magnum ice cream and Knorr jelly bouillon in new markets and passed on surging input costs.

So-called underlying price growth at the world’s second-biggest maker of consumer goods rose 5.1 percent in the second quarter, the London- and Rotterdam-based company said today. That beat the median estimate of nine analysts surveyed by Bloomberg News for a 2.6 percent increase. Total underlying sales advanced 7.1 percent. Analysts had anticipated growth of 5.8 percent on that basis.

Under Chief Executive Officer Paul Polman, in the job since 2009, the company has pushed new products such as the jelly bouillon into countries including Germany and repackaged the item into sachets in China. He’s also lifted prices again after offering more promotions following the global financial crisis in a bid to combat surging costs for ingredients such as palm oil and sugar.

“Unilever’s first-half results are very strong,” said Harold Thompson, an analyst at Deutsche Bank in London, who recommends investors buy the stock. “In what is clearly a very difficult environment for consumer-goods businesses, this is likely to be a top quartile performance through the results season and represents easily the best performance since Paul Polman was appointed as CEO.”

Unilever shares rose as much as 5.2 percent in Amsterdam trading, the biggest intraday advance since November. The stock was up 4.6 percent, to 23.11 euros a share at 9:41 a.m. The stock has dropped less than 1 percent this year, bringing its market value to about 70 billion euros.

Competitors

 

Danone (BN), the world’s largest yogurt maker, last week reported first-half profit that missed analysts’ estimates as it wrestled with higher costs for milk and plastic and as volume in Europe declined. Nestle SA, the world’s largest maker of food, reports earnings next week.

Unilever Chief Financial Officer Jean-Marc Huet declined to say whether he felt commodity costs had peaked on a call today with journalists. “The markets themselves we cannot predict; that’s not our business,” he said, adding that the company has a “very good view on where we will land in 2011.”

Beautiful Growth

 

Underlying sales in Western Europe rose 4.8 percent in the second quarter, the biggest advance in at least two years, boosted by Germany and France.

“Western Europe as a market is a very difficult one,” Huet said. In the second half, volume will “not be growing at huge levels but what we need to do is make sure Europe doesn’t dilute the beautiful growth we have seen elsewhere.”

First-half net income rose 9.8 percent to 2.2 billion euros ($3.2 billion), higher than the 2.06 billion euros anticipated by the average estimate of analysts surveyed by Bloomberg. Total sales rose 4.1 percent to 22.8 billion euros.

Underlying Operating Margin

 

The underlying operating margin, a measure of profitability, fell by 20 basis points in the first half as the company raised prices and cut advertising and promotional spending compared with the same period last year. The median estimate of nine analysts was for a 50 basis-point decrease. The company said in April it expected commodity costs would amount to between 500 and 550 basis points of revenue this year, up from a February forecast of 400 basis points.

The volume of goods sold rose 1.9 percent, lower than a 3.2 percent estimate. Underlying sales growth excludes the effect of acquisitions, disposals and currency fluctuations.

by: Clementine Fletcher (Bloomberg)