Unilever shares punished after meltdown in ice cream sales

Unilever stunned investors yesterday when it revealed its first fall in sales for four years, putting pressure on its full-year targets. Its shares fell 4 per cent.

Unilever stunned investors yesterday when it revealed its first fall in sales for four years, putting pressure on its full-year targets. Its shares fell 4 per cent.

The company abandoned its 5 to 6 per cent growth target for sales of its top brands earlier this year and blamed poor weather in Europe for weak sales of ice cream and ready-to-drink tea.

Sales of its top 400 brands fell 0.2 per cent in the second quarter - confounding analysts' expectations of a 2.3 per cent rise - while underlying group sales fell 0.7 per cent. A price war with Proctor & Gamble across Europe and Asia hit sales of its laundry products such as Persil, it added.

The Anglo-Dutch group stuck to its full-year guidance of low double-digit growth in earnings per share, but analysts were sceptical. One said: "We fear the outlook for the company is extremely weak. The core brands are in a weak state and the fact is that these are what Unilever is all about."

Andrew Saunders, at Numis Securities, said Unilever had only achieved double-digit earnings growth because of lower interest and tax charges. Charlie Mills, at Credit Suisse First Boston, said: "Quality of EPS has taken a turn for the worse."

The group also reported lower-than-expected operating profits, while its pre-tax profit rose 5 per cent to €2.1bn (£1.4bn) during its first half. Its shares slid 21.5p to 485.5p.

Niall FitzGerald, the co-chairman, warned that consumer confidence remained weak. He said: "A number of our key markets are still growing at below their historical rates with a further slowdown this quarter." He insisted the group's trio of troubled businesses - its SlimFast diet brand, its Prestige fragrance unit and its frozen food arm - were set for a better second half.

Mr FitzGerald, who is stepping down in September to chair the news group Reuters, put the three units on a "yellow card" last year. Yesterday he said: "We're not going to draw the gun from the holster and shoot businesses by way of disposing of them if there is a better way to create shareholder value by just getting on with the tough job of fixing them."

Unilever said launching 17 new low-carbohydrate SlimFast products had helped the diet brand's market share to stabilise. Meanwhile, plans for a new fragrance, CK Eternity Moment, which the actress Scarlett Johansson will promote, should help its Prestige unit to growth in the second half, it added.

As part of the company's goal of reducing its annual cost base by €700m by 2006, Mr FitzGerald predicted a "significant reduction" in jobs at management levels. Since he launched Unilever's five-year growth plan in 1999, 50,000 jobs have been lost across the group.