Unilever has unveiled stronger than expected first half sales figures, but warned that key markets in Europe and North America continue to be challenging. Paul Polman, chief executive of the group, is “moderately” more optimistic about the world economy than a year ago and predicted further sales growth at Unilever in the second half of the year.
Core operating profits rose by 16% and underlying sales growth worldwide was up by 2.9%, although pre-tax profits fell by 14% to £3.6bn over the six-month period, due mainly to gains from disposals last year. The market tanked in Greece due to the economic crisis, but prices also fell across Europe, which offset a growth in the company’s sales. Polman said his programme of cost-cutting and increased innovation would keep the company ahead.
Talking about the prospects for the European economy, Polman said: “This is nothing to get panicky about … the light at the end of the tunnel is still there, but the tunnel keeps getting longer,” he explained.
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Unilever, the maker of products including Lipton tea and Dove soap, obtains 40% of its sales in Europe and North America, but 60% comes from developing countries such as China, Brazil and Indonesia, where sales volumes have risen at 6.5% over the last three months. The consumer group has been through a turbulent time in China after removing all its stock to make way for new brands. This had paid off, according to Polman, who felt “moderately positive” about that market, helped by a deal with internet retailer Alibaba.com to help reach rural consumers.
Unilever said there were signs of a squeeze on products in the middle of the global market compared with premium and discount sectors. This was one of the reasons why the company was pushing strongly into more upmarket brands, including an expansion of Ben & Jerry ice creams, opening the posh T2 tea shops, and the recent purchase of four key skin brands including Dermalogica and REN.
Shares in Unilever moved up 1.6% as the underlying first-half sales growth was welcomed in the City. Polman noted that the stock value was up very strongly this year, a fact that was, he said, underappreciated in the media. He added tartly: “Some of you are not reporting properly.”