Unilever gains defy expansion costs

Margins were down slightly to 13.7 per cent from 14.7 per cent over the same period the previous year, the company said. The decline was due in part to increased spending on restructuring the company's operations to increase its competitiveness against global rivals. Increased transportation and raw material costs has pushed Unilever to invest in restructuring operations designed to offset increased spending. As such, Unilever's chief executive, Patrick Cescau was optimistic that the performance was a strong start for the company in meeting its full year growth ambitions. "Looking forward, we face a significant headwind from rising agricultural commodity costs which may require further pricing action,"​ he stated. "I am confident, however, that the combined benefit of organic growth in our 3-5 per cent guidance range and improved efficiency leaves us well placed to achieve our margin objectives for 2007." ​ Of the group's three regional operations, the Asia Africa division came out tops in terms of sales growth for the company's food and personal care products. China's increasing economic prowess, coupled with the increasing markets in Indonesia highlighted the importance of Asia to the group's food division. In Australia, the company increased its sales of ice cream and tea over the quarter, while India bounced back to strong sales growth, following a disappointing final quarter last year. Unilever was also encouraged by the growth in sales of its range of vitality food products, such as high calcium ice cream ranges aimed at children. However, margins within the Asian region fell 0.5 of a percentage point to 11.9 per cent as the company increased spending on restructuring and advertising. Restructuring of the group's European operations drove sales gains of 3.2 per cent, though related costs as a result saw operating margins fall to 14.4 per cent Nonetheless the group believes it has drastically increase competitiveness within the region with cost savings offsetting increased commodity costs. The company's shift towards greater innovation for healthier products was felt even more profoundly in Europe, with multiple product launches designed at tapping concerning consumer awareness over well being. The period resulted in the launch of a number of products like the Flora/Becel​ spreads fortified with Omega 3 hit into new markets like the Netherlands. In the Americas region the company achieved steady underlying sales growth of 3.2 per cent. Unilever said sales of some food products held overall regional performance back. In the US, sales rose 3.7 per cent, aided by expanded ranges in its Bertolli frozen meals brand and teas. Latin America was another important market for sales growth in the region. Sales in Mexico were down for the period, due in part to the strength of its operations during the first quarter last year, the company said. The fall was compounded further by Brazil's economic problems. ​The performance in the Americas over the quarter was generally steady for Unilever though, with a 0.2 per cent dip in margins to 14.4 per cent.