Unilever quarter disappoints City: Margins under pressure in North America

SHARES IN Unilever, the Persil washing powder and Walls ice-cream consumer goods group, slumped nearly 4 per cent yesterday as the company announced disappointing first-quarter results.

Profit before tax for the three months to 31 March was pounds 420m, compared with pounds 393m in the corresponding period. However, the stock market was disappointed as the figures were lower than expected.

Les Pugh, food analyst at the securities house Salomon Brothers, had predicted three-month profits of pounds 432m, and some forecasters were hoping for as much as pounds 445m.

The disappointment was due to Unilever's performance in North America. Its pasta sauce product, Ragou, was the subject of fierce price competition. The company also had to spend more than it had expected on marketing and promotion of its washing powders. Unilever said it had been obliged to step up promotional expenditure to maintain its market position.

Unilever made operating profits of just pounds 18m in North America in the first quarter, on sales of pounds 1.04bn. Last time it made pounds 17m on sales of pounds 1.03m. The profit margin improved, but at 1.7 per cent it is well below the group average of 7.3 per cent.

Results from North America were also blunted by a change in the way Unilever pays its liability for pensioners' healthcare costs. A spokesman for the company said the change depressed operating profits by pounds 4m.

He added that first-quarter figures were often less impressive than results for later segments of the year. Operating margins for North America for all of 1992 were 7.9 per cent.

However, there are worries that harsh conditions in the consumer products market on the other side of the Atlantic may persist, and continue to depress Unilever's profits during the whole year.

Operating profits in Europe were steady at pounds 269m. Margins were under pressure as well, but drifted to 7.7 per cent in the quarter compared with 8 per cent last time.

Margins in Unilever's business covering the rest of the world are even better, but the figures still fell compared with the first three months of 1992.

Sales grew strongly in the rest of the world, climbing 22 per cent to pounds 1.5bn. Beside more or less stagnant figures from North America and Europe, profits from the rest of the world rose to pounds 156m against pounds 132m.

It was the improved contribution from the rest of the world that fed the overall profits gain.

Natwest Securities was forecasting full-year profits for Unilever of pounds 2.49bn but yesterday revised this down to pounds 2.4bn. The shares fell 40p to close at 1,064p. In March they were trading at 1,248p.