Anglo-Dutch consumer goods giant Unilever today (3 August) reported a 35% rise in profits, but shares declined by 5.2% in morning trade because margins came under pressure from higher ingredients and marketing costs.

Net income rose to EUR986m (US$1.26bn) from EUR731m reported last year. Sales were up by 3.3%, reaching EUR10.26bn. The consumer goods group said that it lost market share in hair care and laundry detergents while sales of ready-to-drink teas fell.

Margins fell to 14.6% from 15.6% due to heavy spending on marketing key brands such as Knorr Soup.

Nonetheless, chief executive Patrick Cescau said he still anticipates meeting the group’s outlook for “sustained growth” and an operating margin higher than last year’s 13.4%. “This in spite of a harsher-than-expected commodity cost environment which has impacted margins in the first half,” Cescau said in a statement.

Unilever forecast comparable sales growth of between 3% and 5%, targeting operating margin above 15% by 2010. The company said that it hopes to achieve such growth with the introduction of new products and innovations.