Consumer goods giant Unilever raised its prices sharply in the second quarter to offset higher commodity costs, helping it beat forecasts with a 7.1 per cent increase in quarterly sales growth.
The group suffered a fall in margins due to the time lag between the hike in costs and the rise in its own prices, but chief executive Paul Polman forecast an improvement in the second half as the higher prices and costs savings take effect.
Growth was driven by the group's big emerging market presence in Asia, Africa and Latin America and helped by hot weather in Europe for its ice cream and beverage business, as well as its decision to increase prices more than 5 per cent.
Unilever maintained its forecast that commodity costs would be 15 per cent higher this year and said cost savings would be "in excess" of its previous target of €1.3 billion.
"We have very good oversight for commodity costs for 2011 and we are around 90 per cent covered while most of our price rises have been made," said finance director Jean-Marc Huet in a conference call.
The group stuck to his 2011 goals of profitable sales volume growth ahead of its markets and higher profit margins despite cost inflation and tough trading in the mature markets of Western Europe and the United States.
The Anglo-Dutch firm posted second-quarter underlying sales growth of 7.1, beating a company compiled consensus of 5.5 per cent, but coming in below rival Danone which posted growth of 8.8 per cent last week.
All food groups are grappling with soaring costs but Unilever's heavy reliance on vegetable oils and chemicals for its spreads business and skin and laundry products is putting it at a disadvantage to rival groups like Danone and Nestle who see costs rising 10 percent or less.
Nestle reports next week.
Unilever, which counts Knorr, Dove, Lipton, and Sunsilk among its biggest brands, reported half-year earnings up 10 per cent to 0.77 euro a share beating a consensus of 0.71 euros while the six-month operating margin fell 0.2 percentage points compared a forecast for a 0.5 point fall.
It paid a quarterly dividend of 0.225 euros a share, up 8 per cent.
Unilever warned in April its commodity costs were spiralling higher and would rise 15 per cent this year to put an extra €2.4 billion on its annual commodity and packaging annual bill, bringing it to around €15 billion.
German Nivea-maker Beiersdorf reported a return to growth at its core consumer division in the second quarter driven by its Nivea skincare brand .
US-based rivals Kraft reports second quarter results later today and Procter and Gamble its fourth quarter results tomorrow.
Reuters