Unilever profits take a dive as arch rival P&G mounts pressure

The retreat made Unilever by far the biggest loser in the FTSE 100 index, which ended up 0.4 per cent overall. Shares in the Dutch arm fell 10 per cent to 56.05 euros. The company, which makes Lever soap powders, Wall’s icecream and Dove soaps and deodorants, reported third quarter pre-tax profits of 868 million pounds ($1.43 billion) after 1.08 billion, on sales up two per cent at 7.07 billion pounds.

Analysts had expected profits of more than 900 million pounds. Unilever said most of a 75 million pound shortfall in its worldwide laundry Q3 profits was due to Latin America,as the group has had to raise promotional spend to counter P&G. "P&G is becoming more aggressive in laundry products in Chile, Argentina and Brazil, and Unilever has had to react to defend its position," said Andrew Saunders at HSBC Securities.

But Saunders said Unilever’s laundry businesses in Europe, North America and Asia were doing well, and he still had the shares as a buy, especially after the share price fall.

Unilever’s laundry problems were compounded by poor economic conditions in Argentina and Chile, and overall group Q3 regional profits slipped 34 per cent as sales rose just four per cent. "The competitive environment is getting worse for Unilever, and there is the feeling that its peer group including P&G, Colgate-Palmolive and Nestle are growing more strongly," said another analyst.

Shares hit 14-month low: The share price collapse brought the stock down to a 14-month low of 460 pence in what analysts describe as an unforgiving market as they looked to trim five per cent off 1999pre-tax profit forecasts, currently around three billion pounds.

Analysts said that Unilever had also suffered poor performances from its Calvin Klein and Elizabeth Arden cosmetics and continued difficulties in eastern Europe and Russia.

Unilever’s eastern Europe Q3 volumes were down 10 per cent and although it expects conditions to slowly improve, this contrasted markedly with western Europe where volumes rose three per cent led by ice cream, tea and home and personal products.

Unilever said that its European region overall, where the group makes around half its profits, saw profits up three per cent on generally flat sales.Unilever said recent products such as Calvin Klein’s Contradiction had been disappointing and CK had become "becalmed" with no big launches this year.

This cut into Unilever’s North America performance, where profits rose just five per cent, led by home and personal care categories, but these were offset also by lower profits from margarines and packaged ice cream and well ascosmetics.

However, Unilever said its underlying Q3 operating profits rose three per cent to 934 million pounds, helped by a strong rebound in Asia-Pacific, which saw profits up 27 per cent. Unilever global volumes rose two per cent in Q3 and it was comfortable with predictions of a volume rise of three per cent in the second half and a continued rise in margins.

The half-year dividend at Unilever Plc was set at 3.93 pencea share, up 33 per cent from the previous payout. Unilever NV is to pay out 0.88 guilders per share.

The group said the pre-tax figure declined due to comparison with the Q3 of 1998 which included exceptional profits on the disposal of its Plant Breeding International Cambridge, while its net profits declined three per cent as a result of lower interest income following the payment of its five billion pound special dividend in June 1999.