Unilever shrugs off consumer demand concern

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The Independent Online
UNILEVER, the Persil detergent and Flora margarine consumer goods group, shrugged off consumer spending concerns yesterday with a robust set of third-quarter figures that pushed the shares 3 per cent higher.

Unilever said economic uncertainties had no significant impact on its businesses in Europe and North America. However, consumer demand had slowed in developing markets, particularly in South-east Asia and Latin America

Pre-tax profits in the third quarter rose by 37 per cent to pounds 1.1bn. This was due mainly to the pounds 260m profit on disposal of its Plant Breeding International business to Monsanto in July. Stripping out exceptionals, profits edged up 3 per cent to pounds 972m.

Unilever said sales in Europe had dipped by 6 per cent as a result of lower ice cream sales caused by the poor summer. Ice cream sales were pounds 100m lower. But home care products, such as the new Persil detergent tablets, showed strong gains.

North American profits were hit by higher marketing investments.

In Asia and the Pacific Unilever saw sales increase by 13 per cent and profits rise by 24 per cent.

This reflected price increases in South-east Asia, which were implemented to recover higher costs due to currency devaluations.

Although the meltdown in Asian markets has affected demand in countries such as Thailand and Indonesia, Unilever has prospered in India, Vietnam, the Philippines and Australia.

In India, for example, it has adapted to consumer requirements for lower prices by producing products in smaller package sizes. These include individual sachets of shampoo and "mini" tubes of toothpaste.

Unilever has re-classified Russia as a "hyper-inflation country" which will affect the way it calculates sales.

Russian sales ground to a virtual halt in September but the company said it remains committed. "We are in Russia for the long term," it said.

In Latin America the company has increased marketing spending and incurred reorganisation costs due to weakening consumer demand. Sales in the region rose 4 per cent.

Niall FitzGerald, Unilever chairman, said the company would continue its policy of "pruning" its portfolio to concentrate on its best brands that have the most potential. It recently sold the Harmony hairspray brand which was sold mainly in the UK and Ireland.

Group sales in the third quarter rose just 1 per cent to pounds 7.4bn. This equates to a 3 per cent fall over the nine months to pounds 21.9bn. Unilever shares closed 19p higher at 609p.

Unilever said its plans to cope with the millennium bug were on track and that the next phase, to make supply chain partners and infrastructure services millennium compliant, would be completed by next June. It said the total cost of preparing for 2000 remained at pounds 300m.

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