Anglo-Dutch consumer goods giant Unilever today (28 April) booked a 7% jump in first-quarter sales but warned that higher costs will dent profit margins this year.
The maker of Ben & Jerry’s ice cream said that sales rose to EUR10.9bn (US$16.1bn) during the first three months of 2011, up from EUR10.1bn in the comparable period of last year.
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Sales gains were driven by the group’s operations in emerging markets, which helped to offset declining volumes in Western Europe.
Underlying sales, which strip out the impact of acquisitions and currency exchange, rose 8.9% in Asia and Africa and 4.1% in the Americas. They fell 2.7% in Western Europe, where volumes fell 2.8% but prices rose 0.1%.
CEO Paul Polman said this “good performance” was achieved despite rising commodity costs, which Unilever has tried to pass on to customers through price hikes, and weak consumer confidence.
“We have continued to deliver volume growth, albeit at a lower rate than in recent quarters, reflecting the pricing action taken, and the sluggishness of the developed markets,” Polman commented.
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By GlobalDataThe company issued a warning on the impact that higher input costs are expected to have during the year. Input costs are now expected to rise by at least 5% during fiscal 2011, up from an earlier forecast of 4%, Unilever said. As a consequence, Unilever suggested that margins would be hit in the first half, but added that it expected some recovery in the back half of the year.
In an attempt to offset higher costs, Unilever signalled that it is stepping up its cost-reduction efforts. The company said it hopes to cut EUR1.3bn in costs this year, up from an earlier target of EUR1bn.
Unilever did not report quarterly earnings, instead intending to update the market on the group’s general performance. This change in practice aims to make investors focus more on long-term goals, the group said.
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