Unilever battling input costs but beats forecasts

The Anglo-Dutch maker of brands like Dove and Knorr is battling high input costs from rising commodity prices such as crude and vegetable oils, and slow growth in developed nations. It also cautioned that emerging market growth has started to slow especially in eastern Europe and Russia.

“The competition is intense, we have seen some moderation in emerging market growth while developed markets remain muted, but we have had a good start to the year and we are becoming more competitive,” finance director Jean-Marc Huet said.

Unilever, the world’s number three consumer goods group, is holding to its forecast for modest profit margin expansion this year, albeit weighted towards the second half of the year when some of its commodity costs are expected to ease as expensive forward hedges fall away.

“Despite the one-off tailwinds, this reads as a still-strong quarter to us,” said analyst Martin Deboo at brokers Investec.

The company, with annual sales of 46.5 billion euros, reported that first-quarter underlying sales rose 8.4 per cent beating a company-compiled forecast of 6.4 per cent, and compared to growth of 6.5 per cent in 2011.

Emerging markets, which make up 56 per cent of Unilever’s business, grew 11.9 per cent.

Within categories, personal care led the field with growth of 10.4 per cent. The group’s Clear anti-dandruff shampoo, recently launched in the US, was the fastest growing overall brand.

Unilever’s 8.4 per cent growth was ahead of the world’s number one food group Nestle, which showed first-quarter sales growth of 7.2 per cent, and France’s Danone, at 6.9 per cent. US rival Procter & Gamble reports on the first three months of 2012 today.

Unilever saw its commodity cost bill rise 15 per cent last year. It expects around a 5 per cent increase this year but that is showing signs of starting to creep higher again.

The competitive environment is also getting more intense: plans by P&G to cut costs by $10bn are fuelling concerns about heightened competition in home and personal care products.

“The external macro-environment remains difficult and high input cost headwinds persist,” said chief executive Paul Polman.