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Unilever’s Volume Beats Estimates, Aided by Europe

Unilever CEO Paul Polman
Unilever Chief Executive Officer Paul Polman said in August that sales growth would be mostly generated from existing businesses. Photographer: Denis Doyle/Bloomberg

Nov. 4 (Bloomberg) -- Unilever, the world’s second-biggest consumer products maker, reported third-quarter volume growth that beat estimates as customers bought more deodorants and ice cream in western Europe.

So-called underlying volume grew 4.8 percent, the London-and Rotterdam-based company said today in a statement. That compares with the 4.4 percent median estimate of seven analysts surveyed by Bloomberg News. The shares rose as much as 5.1 percent in Amsterdam trading.

“Europe was very good on the top-line and margins,” Warren Ackerman, an analyst at Evolution Securities in London, wrote today in a note. “Emerging markets remain very robust in volume terms, although pricing was slightly worse. Given massive concerns going into the quarter, we’d expect the shares to have a decent bounce.”

Unilever repeated it anticipates pricing growth to return toward the end of the year and continue through 2011. The company increased prices in western Europe compared with the previous three months, even as it saw “difficult” conditions in Greece, Spain and Ireland.

While the company is winning market share in a number of areas in Europe, “the real aim for us is more consistent performance,” Chief Financial Officer Jean-Marc Huet said today on a conference call. “The consumer in Europe isn’t well, and that will continue for a while.”

The amount of products sold in western Europe rose 0.6 percent compared with a decline in the second quarter. Underlying sales dropped 0.3 percent in the region.

Doubling Sales

Unilever aims to double sales by expanding in higher-growth areas including personal care and increasing its presence in developing markets as weak consumer confidence in markets including Europe and the U.S. restricts growth. The company agreed to buy Alberto Culver Co. for $3.7 billion in September, its biggest purchase in 10 years, to add hair-care products including VO5 and Nexxus to its brands.

The company’s net income rose 19 percent to 1.25 billion euros ($1.77 billion), beating the 1.18 billion-euro average estimate. Underlying sales advanced 3.6 percent, trailing the 3.8 percent estimate of analysts surveyed by Bloomberg News.

Stock Surge

The stock rose as much as 1.10 euros to 22.40 euros in Amsterdam, the biggest gain since May 10. Shares traded up 5 percent at 22.38 euros at 11:10 a.m. local time. They’ve dropped 1.7 percent this year, giving the company a market value of 67.7 billion euros.

Consumer companies are struggling in Europe as government-spending cuts to reduce record budget deficits impact confidence. Beiersdorf AG, the German maker of Nivea skin creams, lowered its full-year forecast today as sales of its products slid in Europe.

Unilever’s growth “at the regional level is counterintuitive, with emerging markets below our estimates, but developed markets better,” Pablo Zuanic, an analyst at Liberum Capital Ltd., wrote. Sales rose 6.7 percent in Asia, Africa and central and eastern Europe, slowing from the second quarter.

Emerging Market Slowdown

“There has been a slight slowdown in emerging markets,” Huet said today, without giving more details. Unilever saw growth in markets including the Philippines, Vietnam and Chile, he said.

Sales growth in the Americas was 3.9 percent, aided by an expansion of about 7 percent in Latin America, especially Brazil, which “remains the key driver of volume growth in Latin America,” the company said.

The underlying operating margin increased 0.2 percentage point as saving programs in Europe offset increased costs for raw materials including food ingredients and commodities, and advertising and promotional spends in emerging markets.

“It looks like Unilever have done a good job bringing down indirect costs, but they do allude to some favorable phasing which will reverse in the fourth quarter,” Ackerman wrote today. “The market will be focused on how significant the phasing is.”

The maker of Knorr soup expects the cost of basic goods to rise about 2 percent this year, with most of the gains in the second half.

Pricing Returning

Underlying prices fell 1.2 percent in the third quarter, a sequential improvement compared with the second quarter, when they dropped 2 percent. The company is already increasing prices on some products including tea, Huet said on a call today.

Unilever agreed to buy Sara Lee’s shower gel and European detergents unit more than a year ago to increase its personal care offering. The European Commission extended its review of the acquisition to Nov. 25, it said in October. The company is “now in the latest stages of dialogue with Brussels” and hopes to “come to a conclusion that is satisfactory for everyone by year-end,” Huet said.

To contact the reporter on this story: Clementine Fletcher in London at

To contact the editor responsible for this story: Celeste Perri at

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