Unilever shares shrug off news of slower sales growth to rise 3%

Unilever, the Anglo-Dutch maker of Dove soap and Hellmann's mayonnaise, yesterday surprised the market with sharply higher first-quarter profits despite slower sales growth and said it would meet full-year earnings targets.

The group, which is mid-way through a five-year programme to boost turnover and profits, said underlying sales growth halved to 1.8 per cent from 4.4 per cent a year earlier because it delayed a number of new product launches and increased prices in emerging markets.

Analysts said that while Unilever had impressed by improving its profit margin and cutting costs, it had more work to do to drive sales. Sylvain Massot, at Morgan Stanley, said: "There is still a big question over how much top-line growth this company can deliver."

The group, which is paring down the rump of its portfolio, said sales of its top 400 brands such as Magnum ice cream and Lipton tea grew by 3 per cent in the three months from January to March. Under its "Path to Growth" plan, it is chasing annual underlying sale growth of 5 to 6 per cent and profit margins of more than 16 per cent by 2004.

"We have made a sound start to the year," Niall FitzGerald, the chairman, said. "Continuing expansion in underlying operating margin reflects our determination to grow our business profitably. We are confident of delivering our innovation and marketplace activities for the year, which support this target."

Pre-tax profits for the quarter rose by 62 per cent to €962m (£587m) and total turnover fell 1 per cent to €12.3bn, reflecting disposals. The results, which beat expectations for the fifth quarter in a row, sent Unilever's shares 3 per cent higher to 596.5p.

Unilever denied that its tendency to be over-conservative in its quarterly pre-close trading updates sent conflicting messages to the market.

"It's just one of the hazards of wanting to be as open and transparent as possible," the company said.