Unilever sales ahead of expectations

The world’s third largest consumer goods group Unilever has today announced it has beat forecasts with a 7.2% increase in first-quarter underlying sales and said annual sales will exceed its target.

The company, whose brands include Knorr soups, Hellmann’s mayonnaise, Magnum ice cream and Dove soap, also exceeded quarterly earnings forecasts, boosted by profits from disposals, as it raised prices to offset the rise in raw material costs.

Chief Executive Patrick Cescau said while it is early in the year, we now expect underlying sales growth in 2008 to exceed our 3% to 5% target range.

Mr Cescau also commented that the group saw a good start to the year with strong growth across all categories and regions, and emerging markets being particularly strong, while it posted a higher than expected rise in operating margins of 0.3%.

In trading this morning, shares in the company rose 5% to £17.45, making it one of the biggest blue chip risers.

Mr Cescau added the group continues to invest behind our brands, while taking the necessary pricing action to recover a sharp increase in commodity costs.

Unilever said it has a strong innovation programme for 2008 and is continuing to implement its productivity and value improvement initiatives, he added.

Furthermore, Unilever confirmed that it is pressing ahead with the disposal process for its North American laundry business and interest has been expressed by a number of parties.

Those believed to be interested are US private label business, Huish, owned by private equity firm Vestar, consumer goods group Church & Dwight, and private equity group Phoenix Brands.

Citigroup reiterated its ‘hold’ recommendation and said there had been considerable nervousness in the market ahead of today’s release and expects a strong share price reaction today given the undoubtedly strong first-quarter results and a relatively weak share performance in the year to date.

Analyst Rob Mann at brokers, Collins Stewart, said a fifth consecutive quarter of underlying sales growth in excess of 5% begins to look like a trend.