'Rest of world' fuels advance by Unilever: British and US results reflect increasing competition

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The Independent Online
INCREASED competition for tea drinkers, pasta eaters and detergent users failed to dent the performance of Unilever, the international consumer products group, which yesterday announced a 7 per cent rise in pre-tax profits to pounds 984m in the first half.

The advance reflected a strong performance from South America, Japan and Indonesia - all classified as the rest of the world - where operating profits rose 30 per cent to pounds 311m. That was partly due to the acquisition of the Cica food group in Brazil and the fact that its Indian business is now a full subsidiary, but Unilever has also managed virtually to eradicate losses in its Japanese company.

The results for Europe and the US, however, underline increased competitive pressures. In Europe profits fell from pounds 638m to pounds 632m on sales 2 per cent ahead at pounds 7.3bn. That was mainly due to the disposal of its agribusiness operation last year, which contributed pounds 7m to profits.

Michael Perry, chairman, said that the group had held or improved its share in most of its markets. But in Britain the performance was marred by fierce competition in the tea market. The group is spending pounds 25m on marketing support for PG Tips.

In the US, pasta sauce manufacturers are still cutting prices, but the group says its Ragu range reached the low point in February. In detergents, its main rival, Procter & Gamble, has been cutting prices in response to Unilever's launch of a super-concentrated range. That, and an extra pounds 10m provision for retirement benefits, meant that profits dropped from pounds 90m to pounds 85m.

Spending on marketing and product support increased across the group, although the total was not revealed. Despite the increase, margins were held at 8.1 per cent, although an improvement in the rest of the world masked declines in the US and Europe. Margins in the rest of the world, at 10 per cent, are more than twice the 3.8 per cent achieved in the US.

Unilever shares have underperformed the rest of the market by 25 per cent this year as investors worry that consumers are becoming more price-conscious. But Mr Perry said the results 'illustrate the resilience of our brands in those markets affected by recession and their role as vehicles for growth elsewhere'.

Earnings per share were 36.38p (30.07p). The shares rose 10p to 986p.

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