Unilever reported better than expected growth in the first three months of the year despite a slide in margarine sales — the business it intends to sell or demerge this year as part of a business overhaul following Kraft Heinz’s aborted $143bn takeover attempt.

The Anglo-Dutch producer of Dove soap and Hellmann’s mayonnaise on Thursday reported underlying sales growth of 2.9 per cent to €13.3bn — which was well above analysts’ expectations of 2 per cent. 

The increase was higher than the 2.3 per cent organic sales growth reported by Nestlé, Europe’s largest food group, also on Thursday. 

However, Unilever’s growth was driven entirely by a 3 per cent rise in prices rather than selling more goods. Underlying volumes fell by 0.1 per cent, while at Nestlé they by 1.3 per cent.

It was the third successive quarter of volume decline at Unilever which, for the first time, disclosed the extent to which the spreads and margarine business has weighed on sales.

Revenues in that business — which includes Flora, Rama and I can’t believe it’s not Butter — slid by 5.1 per cent in the quarter. Excluding spreads, group sales were 3.4 per cent higher with volumes up 0.3 per cent.

Unilever said in its review that it would sell or demerge the margarine business, which analysts value at about €7bn. The company confirmed other aspects of the plan unveiled earlier this month, including raising the dividend by 12 per cent and improving operating profit margins — of 16.4 per cent last year — by at least 0.8 of a percentage point. 

Paul Polman, chief executive, said the group would hit its target this year for underlying sales growth of between 3-5 per cent. “The first quarter shows growth once more ahead of our markets,” he said.

Andrew Wood, analyst at Bernstein, said: “After the diversion from the Kraft Heinz Company bid and management’s ‘review’, this was back to business for Unilever, with a decent set of results.”

Unilever makes 58 per cent of its sales in emerging markets, where they grew by 6.1 per cent in the quarter, compared with 6.5 per cent last year. It said India was beginning to recover from the government’s drive to take certain banknotes out of circulation but that sales in Brazil continued to be hit by the weak economy. 

India and Brazil — respectively, Unilever's second and third-biggest markets — account for 14 per cent of group revenues. 

Europe and North America continued to be tough. Sales in developed markets fell by 1.5 per cent, though some of this was because of lower food sales thanks to the late Easter.

Commenting on the 3 per cent rise in prices during the quarter, Cedric Besnard, analyst at Citigroup, said: “We agree that it is always better to see volume growth rather than just emerging markets pricing, but this ability to push the pricing button in regions where its scale remains a competitive advantage to mitigate price elasticity, remains pretty unique.”

Shares in Unilever rose by 1.4 per cent in early London trading to £39.92.

Underlying sales exclude M&A and currency fluctuations. On a reported basis, sales increased by 6.1 per cent, of which 2.4 per cent was because of favourable exchange rates and the rest from acquisitions.



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