UNILEVER yesterday revealed that underlying sales rose 7.2 per cent in the first three months of this year after the company acted to recover sharply higher costs.
The consumer products firm, whose brands range from Hellmann's mayonnaise and Dove soap, said more than half of the first-quarter increase – 4.8 per cent – was a result from price increases.
In a reflection of the continued strength of the compan
y, yesterday's figures were the fifth quarter in a row that Unilever had posted sales growth of more than 5 per cent.
As well as strong trading in emerging markets and Russia, Unilever said demand held up well across most of western Europe, including the UK.
It is now looking for group-wide underlying sales growth in 2008 to exceed its previous target range of 3 per cent to 5 per cent.
Shares in the British-Dutch firm responded yesterday with a gain of 5 per cent. Unilever shares closed up 90p at 1,752p.
Chief executive Patrick Cescau said it had been a strong start to the year, with growth of above 5 per cent in all the company's trading categories. Tea, ice-cream, spreads and laundry were particularly strong.
He added: "We continue to invest behind our brands, while taking the necessary pricing action to recover a sharp increase in commodity costs."
Unilever said commodity cost increases accelerated further in the quarter, rising by 400 million (£315m).
As well as price increases, Unilever said it had managed the situation through savings programmes and "innovation-led growth".
Unilever announced job cuts in its European operation last year, with more than 300 jobs set to go at three of its UK factories – at Burton, Warrington and Port Sunlight on the Wirral – during this year.
Before the latest round of job cuts, Unilever employed about 8,000 people in the UK.
Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers, said yesterday's update showed Unilever heading in the right direction.
He added: "This is an extremely encouraging start to 2008 with sales continuing to outpace expectations, profit margins still improving and management remaining optimistic for the outlook."
Panmure Gordon said it expected to revise its forecast on Unilever's like-for-like sales from 4.9 per cent to about 6 per cent for this year.
The broker added: "The industry is clearly managing to raise prices without impacting volumes, and maintain its earnings margin on the higher sales base.
"With growth still heavily reliant on emerging markets a key issue is whether food and fuel inflation will start to dampen buoyant demand as the year goes on."
