Unilever profits slump in tough third quarter

By James Knowles

- Last updated on GMT

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Food manufacturer Unilever has reported a 20 per cent decrease in
third quarter pre-tax profit of 1.12bn, despite bucking the trend
in the European market.

Underlying sales growth of 4.8 per cent in the third quarter and 3.9 per cent in the first nine months were offset against heavy spending on advertising and through recovery plan 'One Unilever' which is attempting to streamline its frozen foods, ice creams and food lines.

"We continue to see good progress with another quarter of broad-based growth. Stronger innovation and additional investment behind our priorities are driving the growth of our brands,"​ said Patrick Cescau, group chief executive of Unilever.

European markets improved with growth of 3.5 per cent. The key driver was the impact of vitality-led innovation in savoury, spreads and leaf tea. Ice cream sales grew by 1.4 per cent, making up for lower ice-cream sales at the beginning of the year.

During the quarter Unilever, which owns brands such as Ben and Jerry's ice cream, experienced improvements in the UK, French and German markets. The Netherlands and Russia also enjoyed steady growth.

Improvement in these markets was put down to a concentration on a new 'vitality' health theme. Unilever launched its AdeZ soya fruit drinks in the UK market after success in Latin America. Other new launches in this vein included a range of Knorr's bullion cubes using natural ingredients and Vie 'one shot' fruit and vegetable drinks, now available in ten countries.

Despite this the operating margin for the first nine months at 15 per cent was down by 1.8 per cent on the previous year. This was due to the impact of input cost increases, competitive pricing, higher net costs for restructuring and disposals, and higher investment in branding.

Despite improvements in the European market, it still lagged behind both the American and Asian African markets. In the Americas growth accelerated progressively throughout the year to 4.1 per cent in the third quarter. In Asia and Africa underlying sales grew by 8 per cent in the first nine months and 7.5 per cent in the third quarter.

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