Shares in Unilever were up more than 5% this afternoon (4 November) after City analysts praised the consumer goods giant’s third-quarter performance.

Industry watchers reacted positively to Unilever’s latest quarterly numbers, which showed a 21% increase in net profit and in operating profit during the three months to the end of September.

Jeremy Batstone-Carr, an analyst at stockbrokers Charles Stanley, described Unilever’s results as “strong” and pointed to a better-than expected increase in underlying operating margin, which rose 20 basis points.

Batsone-Carr said Unilever’s organic sales performance in the Americas and in Western Europe was ahead of consensus expectations. Unilever’s sales rose by 3.9% on an organic basis in the Americas and, despite a 0.3% fall in Western Europe, the consensus was for the company’s sales in the region to have fallen 2.5%.

Investec analyst Martin Deboo said the improvement in margin was boosted by “technical phasing factors on indirect costs” but added: “We think these results will go some way to restoring confidence in the company’s turnaround. We remain happy buyers this morning.”

Speaking to analysts after Unilever published its third-quarter results, CEO Paul Polman said the results demonstrated “very solid progress”.

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He said: “We are delivering what we say we will deliver. We are one step closer to our model of the virtuous circle that we keep talking about – growing ahead of the market while steadily improving the underlying operating margin. We are fit to compete and are increasingly setting our own agenda.”

Unilever’s underlying sales, which exclude exchange rates and M&A, grew by 3.6% during the quarter. Volumes were up 4.8%, although sales were dampened by a 1.2% fall in prices.

Polman said he expected Unilever’s pricing to become positive during the last quarter and stay positive as the company moved into 2011 due to the impact of rising commodity costs. CFO Jean-Marc Huet said Unilever’s commodity costs rose by EUR200m in the third quarter. In the first half of the year, Unilever’s commodity bill was down EUR200m on the year.

Polman said: “Pricing will become positive during quarter four and I’m still confident that we will deliver on that. I expect next year to see positive pricing throughout the year, not least because it will be driven by input cost increases. We are putting price increases out in the market – some of them working, some of them are a function of what we see competition following or not.”

He added: “I’ve always said input cost pressure is the best thing to reduce promotional intensity. You will see in quarter four that, as we move prices up, promotional intensity will decrease a little bit. We will be spending less on promotion because that’s the easiest thing to do than the full pricing effect.”