Unilever profits inch ahead thanks to price increases

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MARMITE to Persil group Unilever reported a small rise in 2011 profits, but warned that 2012 will be a difficult year as growth in emerging markets slows down.

The group said price increases of brands such as Dove, Hellmann’s, and Knorr and cost savings have helped it to offset difficult markets.

Unilever’s prices rose 4.8 per cent across the year, rising to 6.5 per cent in the fourth quarter, reflecting increases in commodity prices.

Turnover rose five per cent to £38.6bn in 2011 and operating profits rose one per cent to £5.3bn.

Chief executive Paul Polman said the company faced “difficult markets and an unusual number of significant external challenges”.

Emerging markets, which account for more than half of its business, are slowing down and demand in Europe and North America is staying flat.

The results follow industrial action by UK workers at 12 sites, including the Leeds factory which employs 600 workers, in a row over the ending of the company’s final salary pension scheme.

Unilever called the action “disproportionate” but union officials said workers were “furious” at the plans to scrap the scheme, which they said would lead to pension cuts of between 20 per cent and 40 per cent.

The company, which also sells Pot Noodles and PG Tips, said it invested heavily in its brands, with spending on advertising and promotions up £125m.

Sales volumes in the personal care and home care categories rose by 4.2 per cent and 2.2 per cent respectively last year, but foods declined 1.2 per cent, with the fall accelerating to 3.9 per cent in the fourth quarter after a 7.8 per cent rise in prices.

Mr Polman said: “We expect the external macro-economic environment to remain difficult in 2012 and input cost headwinds will persist, although to a lesser extent than in 2011.”

He said the company’s priority is to focus on profitable volume growth.

Hargreaves Lansdown analyst Keith Bowman said: “While management clearly continues to sharpen performance, these results provide little reassurance.

“Europe is unsurprisingly tough, while the outlook for raw material costs remains difficult to forecast.”

Unilever’s finance director Jean-Marc Huet said growth in emerging markets such as Africa, Asia and Latin America stayed strong, but the company needs to do better in Russia and eastern Europe.

“We have seen a deceleration in some markets and one or two are now more difficult, so our focus is on Russia and eastern Europe where we need to improve,” he said.

Mr Huet said the global economy is in poor shape and so there will not be many price rises this year due to fragile consumer confidence.