Brands clean up for Unilever

UNILEVER today smashed analysts' forecasts for quarterly profits as the third year of chairman Niall FitzGerald's Path for Growth restructuring started delivering strong sales in its core brands.

Sales of leading products such as Dove soap and Hellmann's mayonnaise jumped 3% in the first quarter and profit margins were boosted from 12.4% to 14.9% thanks to the group's focus on heavily pushing fewer products. Strong synergy benefits were also seen in most parts of the world from the acquisition of US rival Bestfoods.

In what had been a 'sound start to the year', FitzGerald said: 'Through the quarter we have seen an increase in sales momentum, which is in line with our target for the year of sustaining the growth of our leading brands.'

European sales growth of 2.4% was led by a 60% boost in sales of Dove products, helped by launches of shampoos and conditioners springing out under the famous soap brand. Those haircare products are now available in 12 European markets. Spreads and cooking products, including Becel, advanced 5% while strong performances from Knorr and Hellmann's saw its savoury and dressings products sell 4% more than a year earlier.

Overall pre-tax profits were up 62% in the first three months of the year, from e595m (£366m) a year earlier to e962m on turnover reduced by the effect of disposals from e12.5bn to e12.29bn. Underlying operating profits advanced 18%. Lower interest repayments helped flatter the bottom line. Net interest tumbled 26% to e320m, also due to strong cashflow and the proceeds of a host of disposals.

Sales of its soaps, deodorants and other home and personal care products showed a marked decline in the US, due to the comparison with a strong first quarter a year earlier with new launches under the Dove, Suave and Caresse brands. A focus on driving up profit margins in its washing powder and toothpaste divisions also reduced sales.

The shares rose 21p to 599p as analysts warmed to the forecast-beating profit figures and margin growth achieved in all product divisions.

Unilever has sold off a host of its smaller brands since the Path for Growth strategy was launched. Only last week it disposed of the American Mazola corn cooking oil division for £248m to Associated British Foods.