Unilever’s 3Q Sales Flat from Frozen Foods, Slimfast and Fragrances

Anglo-Dutch consumer goods group Unilever, battling to reverse stagnating sales, posted an 11% rise in third quarter earnings as margins improved.

Unilever repeated its forecast of double-digit per-share earnings growth for the year, but did not give any firm outlook beyond that. Third quarter net profit before exceptional items and goodwill amortization rose to $1.46 billion. Sales were virtually unchanged at 12.29 billion euros.

Unilever disappointed markets last week as it reduced its 2003 sales growth target for its 400 top brands, for the second time this year, to below 3%. Describing market conditions as “street-fighterish,” Howard Green, head of the company’s investor relations department, said a weak performance from frozen foods, Slimfast slimmers’ aids and fragrances bore most of the blame for the downward sales trend.

The three product areas would cut sales growth by more than two percentage points for the full year, he said, noting that sales of Slimfast had fallen by almost 30% in the third quarter as alternative diets such as Atkins took their toll.

The company recently implemented the “Path to Growth” program, which has slashed costs and ditched hundreds of underperforming brands. It will leave a core of just 400 profitable product lines by next year.

Operating margin increased one percentage point in the quarter to 17%. Also on the upside, net borrowing costs fell 20% for the quarter and net debt dropped to 14.4 billion euros at the quarter’s end from 16.1 billion euros at the end of the first half, helped by strong cash flow and asset disposals.