Unilever's pounds 121m hit from Asia and pound

UNILEVER, the Persil-to-Vaseline conglomerate, yesterday became the latest multinational to warn that Asia's economic woes will constrain profit growth in the next few years. The company also confirmed press reports that it would spend pounds 300m on year 2000 computer compliance.

The Anglo-Dutch consumer goods group said its businesses in the Asian region had felt the pinch of a slump in consumer spending caused by the recent financial turmoil. Its Indonesian and Thai operations had been the worst hit during the first part of the year. The maker of PG Tips tea and Wall's ice-creams said Asia's problems were starting to spill over to other emerging economies.

Niall FitzGerald, the chairman of Unilever, said: "The difficulties in East Asian economies remain a concern in the medium term and we have also seen signs of economic slowdown in a number of countries in other developing and emerging markets. Our results ... will continue to be influenced by the economic difficulties in East Asia."

Mr FitzGerald's comments came as Unilever posted a 79 per cent drop in pre-tax profits in the second quarter to pounds 722m. In the first half, Unilever profits fell 62 per cent to pounds 1.48bn compared with pounds 3.8bn a year ago. City analysts said the comparison with 1997 was misleading as last year's figures included a pounds 2bn-plus gain from the sale of Unilever's speciality chemicals business to ICI. Stripping out the ICI deal, profits in the second quarter fell 3 per cent.

This was still below the Square Mile's expectations and triggered a slide in the share price. The stock lost as much as 7.5 per cent soon after the announcement before rallying to close down 4.5p at 585.5p.

The company said that the Asian crisis had cut profits by pounds 52m, while the strong pound sliced a further pounds 69m from the the figures.

But the biggest impact came from a pounds 110m jump in marketing spending to launch Persil detergent tablets in Europe and North America and Thermasilk shampoo in the US.

Analysts said that underlying growth, stripped of the Asian and sterling effects, remained solid.