Innovative personal care launches drive Unilever results

By Guy Montague-Jones and Neil Merrett

- Last updated on GMT

Related tags: Cent, Personal care, Percentage point

Personal care sales outstripped Unilever's other product categories
as the global giant posted a 16 per cent increase in net profit for
the second quarter.

The increase in operating profit was significantly lower over the same period at only 1 per cent. Accounting for much of the discrepancy was the fact that Unilever's tax burden fell from €344m to €259m as corporation tax in the Netherlands was slashed. Total sales for the quarter stood at €10.5bn and operating profit was €2.75bn. Second quarter operating margins fell 0.2 per cent to 13.7 per cent compared to 2006 because of higher restructuring costs and lower profits from disposals. The results were better than market expectations, leading shares to rise 6.8 percent to €23.11 in early trading in Amsterdam. Second quarter sales of personal care products, which accounted for 27 per cent of total sales, rose by 3.5 per cent to €2.86bn, compared to 2.6 per cent across all categories. Exchange rates took the gloss off these figures, as the underlying sales growth for personal care was 7.5 per cent. Sales growth in the personal care segment was fed by innovative product launches including a clear anti-dandruff shampoo in Russia, China, Arabia, Egypt and Pakistan. The Anglo-Dutch firm also brought out the Dove pro age​ range of personal care products aimed at the over 50's. Likewise, Asia was also a focus for new launches, with Axe deodorant released on the Japanese market and Pond's anti-aging face care products launched across a variety of markets in the region. Company chief executive Patrick Cescau said that the results reflected the beginnings of a turnaround in the group's operations, resulting from its drive for greater cost efficiency and brand expansion. "We set out this year to sustain our growth momentum and deliver an underlying improvement in operating margin,"​ he stated. "Despite rising commodity costs, we have started to see the benefits of growth coming through in the bottom line."​ The company said it had also increased prices for its brands to combat rising commodity costs and further lift profitability during the current restructuring campaign. Unilever anticipates high restructuring costs over the next two years, 2.5 per cent of sales, and is looking to make growth its number one priority. Its outlook for underlying sales growth in 2007 is at the upper end of the 3-5 per cent range. Asia Africa posted an 10.8 per cent increase in underlying sales over the quarter to €3bn, with margins dipping slightly by 0.1 percentage points to 12.2 per cent, again on the back of higher restructuring and disposal costs. Highlights for the region, which the group estimates now represents 30 per cent of its entire income, were continued strong sales in emerging markets like India and China and product innovation. China proved a particularly important market for the company, with sales up by 20 per cent in the first half of the year spurred on by the popularity of its tea, ice cream and personal care ranges. The group's operations in Indonesia and the Philippines were also a significant factor in growth. In Europe, underlying sales for the quarter rose by 1.7 per cent, though increased restructuring and disposal costs resulted in a 0.4 percentage point decline in margins to 13.8 per cent. Strong sales of its brands in the Netherlands, Italy, Russia and Poland contributed significantly to the sales growth, while mixed results for its operations in France, Germany and the UK led to a generally improved performance in the region. Through its America's division underlying sales rose by 6.5 per cent over the quarter. The reduced sales and continued investment in restructuring resulted in margin declines of 0.7 percentage points to 14.9 per cent for the period. Over the first half a 4.9 per cent increase in US sales helped growth in the region, while modest improvements in Mexico and Brazil belied a strong six months for the division.

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