Unilever says Europe still 'very challenging'

Anglo-Dutch consumer group Unilever has reported an 8% rise in first quarter operating profit, but warned conditions remained tough in key European outlets.

The maker of Ben and Jerry's ice cream, Lipton ice tea and Dove soap said operating profit rose to €1.416 billion in the first three months of the year from €1.316 billion euros in the first quarter of 2004.

Net profit jumped 22% from a year earlier to €981m. Sales rose 2% to €9.266 billion, aided by an extra five days in the quarter and as the company, which is trying to win back market share from rivals such as US giant Procter and Gamble, spent more on marketing and promoting its products.

'I am encouraged that we have had two consecutive quarters of growth and that aggregate market shares are now stabilising,' CEO Patrick Cescau said in a statement.

But he went on to warn that market conditions were expected to remain 'very challenging' in Europe, where Unilever garners 40% of its sales, as supermarkets continue to pressure their suppliers to keep prices down. Margins in the region were further depressed by higher input costs.

But Cescau said outlook was more promising in emerging markets.

In February, Unilever has reported its first ever quarterly loss and said it would scrap its 75-year-old dual chairmanship structure in a bid to revive faltering sales growth.

In 2000, the company produced its 'path to growth' plan designed to boost sales and under which the number of its brands would be reduced to 400 from around 1,600. But the plan was effectively ditched in 2003 after Unilever admitted its aim to grow sales by up to 6% a year would not be met.

The company now merely says it hopes to outperform its market, which it expects to grow by between 2-4% between 2005 and 2010.