Personal-care slowdown to hit Unilever margins

Unilever, the maker of Magnum ice cream and TRESemme shampoo, forecast weaker first-half profit margins and reported the slowest sales growth at its personal-care unit in more than three years, sending the shares lower.

Increased spending on advertising and restructuring in the first six months will weigh on profitability, the London- and Rotterdam-based company said on Thursday, predicting a rebound in the second half. A 4.5 per cent gain in underlying sales of personal care items such as Dove soap was the lowest since 2010, taking the gloss off estimate-beating sales for the wider group.

The margin outlook "is likely to upset consensus" estimates for a 20 basis-point increase in the first half, Celine Pannuti, an analyst at JPMorgan Chase, said in a note.

Unilever said its largest division, which includes Rexona shower gel and Pond's skin cream, still increased sales by more than the wider market, driven by product innovation that has included compressed versions of Lynx aerosol deodorants.

Underlying revenue in emerging markets rose 6.6 per cent in the quarter, slowing from 8.4 per cent in the previous three months. Growth in those economies continued to weaken, particularly in South and Southeast Asia, Unilever said. Russia and Thailand both showed "slight declines" in sales. Group underlying sales gained 3.6 per cent, beating the 3.3 per cent median estimate of 10 analysts surveyed by Bloomberg.

Europe provided the main positive news, with growth of 0.1 per cent, against the fourth quarter's 1.3 per cent drop. Ice-cream sales in the region were particularly strong, helped by a period of warm weather in March, Unilever said.

UNILEVER SLOWS IN Q1

| 3.6% gain in first quarter in underlying sales, down from the previous quarter's 4.1%, due mainly to weaker conditions in emerging markets
| 6.6% gain in underlying revenue in emerging markets, down from 8.4% in the previous quarter
| 1.9% gain in underlying volume, beating the 1.7% median estimate of nine Bloomberg analysts.
| 1.6% gain in prices, against a median estimate for a 1.5% gain

| 0.1% growth in Europe, against a decline of 1.3% in the previous quarter