Slow recovery hampers Unilever

BY JOHN SHEPHERD

The recovery in consumer spending on the Continent has been slower than expected and has resulted in disappointing first-quarter results from Unilever, the detergents, personal products and ice-cream company. Shares in the group, which makes a diverse range of consumer products, eased 24p to £12.12.

Growth in profits before tax, which rose 3 per cent to £464m, was also restrained by increases in edible oil and packaging prices, and some backwash from last year's Persil Power detergent fiasco.

Sir Michael Perry, chairman of the giant Anglo-Dutch group, said operating profit margins in Europe declined from 8.5 per cent to 6.7 per cent on sales ahead from £3.45bn to £3.56bn. This, he said, reflected the "disappointing performances from the consumer businesses".

Germany remains tough, largely because of increases in personal taxation to pay for the costs of reunification. Italy is still a difficult market, with retailers continuing to destock as customers trade down in the hunt for value-for-money goods.

Despite the overall results being at the bottom of analysts' forecasts, Unilever tried to dispel the gloom in Europe with several positive notes on trading elsewhere in the world.

A spokesman also said that the "Persil Power business will fall further behind us", edible oil prices were falling, the benefits of the restructuring in 1993/94 should start coming through, and there would be the seasonal uplift from ice-cream sales. The company owns the Walls ice-cream brand.

He did not envisage more write-offs for Persil Power, or its Continental equivalent Omo Power, which discoloured and even rotted holes in some types of clothing. "Last year's £57m write-off drew a thick double line under the affair, and we have completed the sell-in to the trade of the new generation Persil," he added.

North American operations increased profits more than five-fold, from £10m to £55m. This reflected general economic recovery, and higher sales of ice-cream and fragrances, in particular CK One.

Sir Michael added that sales and profits growth "remained strong" outside Europe and North America, notably in personal products and detergents.

Profits from the rest of the world climbed from £171m to £214m, with sales rising from £1.91bn to £2.2bn. "There were good performances in India, South Africa, Brazil and several countries in South-east Asia," Sir Michael said.

Unilever has also been active this year making acquisitions and disposals. So far this year, five business have been sold and 13 have been bought, the highlight being last week's £250m purchase of Colman's of Norwich, the maker of mustard and Jif lemon juice, from Reckitt & Colman.

Acquisitions in the period boosted turnover by £50m and operating profit by £3m. Net debt at the end of March was £1.8bn, a figure some £400m less than at the same time last year. This was due to the strength of sterling and the guilder in relation to the predominantly dollar-denominated debt. Gearing at the end of the March was 24 per cent.

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