Sales at Unilever Jump After Strong Start to 2007

Consumer goods giant Unilever reported first-quarter underlying sales rose a higher-than-expected 5.7% on Thursday and added it was confident of meeting its 2007 sales and margin targets.

Shares in the Anglo-Dutch Unilever were expected to open higher after reporting a good start to 2007 with sales and profit margins rising despite the group cautioning it was seeing a big rise in agricultural commodity prices, analysts said.

The jump in underlying sales in the first three months of 2007 by the world's third-largest consumer goods group which makes Sunsilk shampoo, Dove soap and Knorr soups, was well above analyst forecasts for a 3.4 to 4.2% rise.

"We have had a good start to 2007, with broad-based sales growth across regions and categories and improved margin development driven by home and personal care," said Chief Executive Patrick Cescau in a results statement.

Unilever shares have rallied over the last 2 months to close Wednesday at 15.56 pounds compared to an early March low of 13.20 pounds on hopes of a better performance.

"This is encouraging progress for Unilever with sales and margins ahead, but it is still underperforming against its peers," said analyst Rob Mann at Collins Stewart.

Although Cescau warned of a rise in commodity costs which may prompt price rises he said its recovery was on track.

"I am confident, however, that the combined benefits of organic growth in our 3-5% guidance range and improved efficiency leaves us well placed to achieve our margin objectives for 2007," he said.

The group has set its 2007 target to see underlying sales to grow 3 to 5% with operating margins above 2006's 13.6%. First-quarter operating margins rose 0.4% points to 13.7%.

Quarterly earnings per NV share rose 2% to 0.35 euros ($0.48) against analysts' forecasts of 0.27 to 0.36 euros.

Unilever has been on a steady recovery path since its shock profits warning in September 2004 as it increases spending behind its top brands which includes Hellmann's mayonnaise, Lipton tea and Omo detergents, and cuts cost around the world.

But the 5.7% underlying sales rise still pales beside growth at European rivals with Danone showing 10.1% growth, Reckitt Benckiser's 10% and Nestle's 7.2% in the first three months of 2007.

Shares in Unilever, the world's No 3 food group and major detergents and soaps maker, trade at a discount to its bigger rivals on 17.1 times consensus 2007 earnings, reflecting its slower growth, compared with Procter & Gamble Co. on 21.3 and Nestle on 18.1, according to Reuters Estimates.