UK: Unilever overcomes cost pressures

Unilever today said underlying sales rose 7.2% at the start of this year after the company acted to recover sharply higher costs.

The consumer products firm, which makes Hellmann’s mayonnaise and Dove soap, said more than half of the first quarter increase – 4.8% – came from price hikes. It is the fifth quarter in a row that Unilever has posted sales growth in excess of 5%.

As well as strong trading in emerging markets and Russia, Unilever said demand held up well across most of Western Europe, including the UK. It is now looking for group-wide underlying sales growth in 2008 to exceed its previous target range of 3% to 5%.

Shares in the Anglo-Dutch firm responded today with a gain of almost 5%.

Chief executive Patrick Cescau said it had been a strong start to the year with growth of above 5% in all its trading categories. Tea, ice cream, spreads and laundry were particularly strong.

He added: “We continue to invest behind our brands, while taking the necessary pricing action to recover a sharp increase in commodity costs.”

Unilever said commodity cost increases accelerated further in the quarter, rising by €400m or 4.2 percentage point of sales.

As well as price increases, Unilever said it had managed the situation through savings programmes and innovation-led growth.

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