Unilever Profit Falls, But Revenue Edges Up

Filed at 1:51 p.m. ET

AMSTERDAM, Netherlands (AP) Unilever NV, the maker of consumer products such as Dove soap, Ben & Jerrys ice cream and Lipton tea, on Thursday reported a sharp decline in its fourth-quarter profit compared with results a year ago fattened by a gain from selling a business. Its sales edged up.

Chief Executive Patrick Cescau said rising commodity costs would be an issue again in 2008, but expects sales growth.

Were clearly facing a more challenging business environment in 2008, Cescau said at a news conference in London. Theres no doubt that some kind of an economic slowdown in the U.S. is now under way.

Unilever, with dual headquarters in London and in Rotterdam, Netherlands, is the worlds second largest maker of consumer products after Procter & Gamble Co.

Net profit dropped to 721 million euros ($1.06 billion) in the last three months of 2007 from 2.03 billion euros a year earlier. Sales rose 1.7 percent to 9.89 billion euros ($14.6 billion) from 9.72 billion euros a year ago.

In the fourth quarter last year, Unilever booked a 1.2 billion euro gain on selling its frozen foods division in Europe.

Without the impact of that disposal and the weakening dollar, sales would have risen 6 percent, split evenly between volume growth and price increases, it said.

The company said it continued to see growth in the United States, despite fears of a slowdown.

In the U.S., overall consumer demand has held up well in our categories, the company said in a statement. Market growth in home care and personal care slowed somewhat in the second half-year, but this was compensated for by robust demand in foods.

But the company said U.S. margins slipped as it had not been able to fully pass on increasing costs to customers.

At his news conference, Cescau said forecast company wide sales growth at the upper end of a 3-5 percent range in 2008.

He said it was likely a U.S. economic slowdown would have some spillover into European markets, but expects overall growth of 4 percent to 5 percent in Unilevers markets globally.

He said there was no sign consumers were switching to cheaper products to save money, but noted that Unilevers less expensive brands, such as Suave shampoo in the U.S., would benefit if they did.

Shares fell 2.8 percent to 21.06 euros ($31.02) in Amsterdam.

Full year net profit fell to 3.89 billion euros ($5.73 billion) from 4.75 billion euros, while sales rose 1.5 percent to 40.2 billion euros ($59.2 billion).

Analysts were generally upbeat about Unilevers earnings.

Given the higher commodity costs ... we are impressed with Unilevers performance on margins, which was helped significantly by pricing and the benefits of ... restructuring, said Sanford Bernstein analyst Andrew Wood wrote in a note.

In Europe, Unilevers largest market, sales were up 3.4 percent to 3.74 billion euros in the quarter.

Rob Mann of Collins Stewart said that increase, albeit against a weak comparison, is the best that has been achieved for many years.

He said the companys underlying profit margins had improved less than the market was hoping for, but must be balanced against the delivery of ongoing top line performance, much the more important of the two.

Unilevers other brands include Knorr soups, Hellmanns mayonnaise and the diet products range Slimfast, among other products.

We have seen improving trends almost everywhere, the company said. All major countries grew in the year, including the UK, Germany, Italy and the Netherlands. In France sales were slightly up in a challenging market.

In the Americas, sales fell 3.3 percent to 3.33 billion euros ($5.51 billion) although the company said that underlying sales, which ignores discontinued operations and currency exchange movements, were up.

In August, the company announced plans to cut 20,000 jobs worldwide in the coming four years to reduce costs, around 11 percent of its 179,000-member work force.

Around half of those jobs are at businesses it plans to sell, including its U.S. laundry arm, with annual sales of around 2 billion euros ($2.9 billion).

Unilevers detergent brands, including All, Surf and Snuggles, face an uphill battle against Procter & Gambles U.S. brands such as Tide, Bold, Bounce and Downy.

In Asia and Africa, sales rose 5.7 percent to 2.82 billion euros ($4.15 billion).

India, Indonesia, the Philippines, South Africa and Turkey...all grew in double digits and (in) big categories such as laundry and personal wash, Unilever said.

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