Unilever kept the rising tide of commodity costs at bay last year with a strong boost to its sales and steady profit margins, despite signs of the beginning of a slowdown in the US market.
The Anglo-Dutch firm, which owns the Dove soap, Lipton tea and Magnum ice cream brands, said that underlying sales had risen by 5.5 per cent during 2007 with a 6.1 per cent gain in the fourth quarter.
Soaring commodity prices are being passed on to the consumer in price increases or compensated by cost-cutting and efficiency gains, said Unilever which launched a restructuring programme in August last year. A gain from the sale of Unilever’s frozen foods business at the end of 2006 depressed net profit by 18 per cent in the fourth quarter of 2007.
Excluding the extraordinary gain, Unilever’s net profit was up by 10 per cent to €4 billion (£2.98 billion) for the full year.
Unilever shares dipped this morning over disappointment that the company was not expecting a more aggressive share buyback programme in line with its optimistic outlook. The company said that it would buy back “at least €1.5 billion” worth of shares in 2008, the same amount it spent buying in shares in 2007.
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Sales growth was achieved in all markets including Europe where Unilever has struggled to make headway in recent years. Sales in Europe rose by 2.8 per cent in the year with a strong ending to 2007 of 5.5 per cent. US sales growth was 3.2 per cent while Asia and Africa gained 11.1 per cent.
The food and soap giant has been able to pass on some of the pressure from rising raw material costs with pricing gains, which account for 1.8 per cent of the 5.5 per cent turnover increase. In the fourth quarter pricing contributed 3 per cent to the 6.1 per cent sales increase.
Patrick Cescau, the chief executive, said that 2007 was the third successive year of accelerating sales growth. He said: “ In 2008 we expect underlying sales growth to be towards the upper end of our 3 per cent to 5 per cent target range and to see further underlying improvement in operating margin.”