Unilever sounds fresh warning as Atkins bites into sales

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The Independent Online

Unilever, the consumer products group, yesterday shocked the City by slashing its crucial full-year sales target for the second time in four months, again blaming the Atkins diet.

The warning sent shares in the Anglo-Dutch group 7 per cent lower to 487p as the market ignored Unilever's reaffirmation that full-year profit target remained on track.

Unilever said poor trading from three divisions had forced it to cut its growth target for its key 400 brands to less than 3 per cent. The Atkins diet has hit demand for the group's SlimFast diets brand. Unilever had in June scaled back its expectations to 4 per cent growth from between 5 and 6 per cent.

Analysts said the latest disappointment - the third this year - had cast fresh doubt over the future of the company's perfumes, frozen foods and home and personal care arms.

Niall FitzGerald, the co-chairman, flagged the possibility of selling the three divisions, which account for around 10 per cent of group sales, three months ago when he put them on notice to improve their performance.

Alex Molloy, at Lehman Brothers, said: "Clearly those businesses have continued to disappoint. The problems were fundamental enough to mean they will take longer than six months to solve."

The sales setback raises further questions about whether the company can achieve the sales and profit goals in its five-year "Path to Growth" restructuring.

Under the plan, dreamt up by Mr FitzGerald in 1999 to counter years of underperformance, Unilever is aiming for sales growth of its leading brands of 5 to 6 per cent by next year.

Yesterday Mr FitzGerald pledged: "With over a year to go until we reach the end of Path to Growth, the under-performing parts of the business will be progressively improved."

The group still expected to low double-digit percentage growth in earnings per share, on the back of cost-cutting, including 33,000 job losses.

The company said leading brands, which include Dove soap and Bertolli olive oil, grew by 3.2 per cent in its third quarter. Its food arm fell well short of its target, growing just 1.8 per cent. Its home and personal care division expanded by 5.1 per cent, boosted by heavy demand for its laundry products from consumers in countries such as India and Nigeria.

Unilever said persisting problems with SlimFast, which saw sales slide by almost 30 per cent in the third quarter against a 17 per cent fall in the first half, had knocked 90 basis points off its leading brands sales growth. Weak sales of perfumes, household care and frozen food products accounted for a further 90 basis point shortfall, it added.