By Yadarisa Shabong and Richa Naidu
LONDON, Oct 28 (Reuters) - Unilever raised its annual volume growth forecast on Wednesday after its beauty, personal and home care units helped it beat third-quarter sales forecasts, despite a lagging food sector and the impact of the war with Iran on costs.
The maker of Dove soap, Cif cleaning products and Hellmann's mayonnaise has been simplifying its portfolio under CEO Fernando Fernandez to focus on beauty and personal care.
It has managed to pass some of its
increased costs onto shoppers without hurting sales volumes, although growth in developed markets was challenging.
Shares fell 3.4% in early trade. Analysts were largely positive about the results, however.
"Given the mix we saw between pricing and volumes, increases in pricing do not concern me," Jack Martin, a portfolio manager at Unilever shareholder Oberon Investments, said.
"The ability to pass inflationary costs through to customers without unduly affecting volumes is what you hope to see from a well-run consumer company selling staple goods."
Major consumer goods and food companies, including Coca-Cola, Procter & Gamble, Nestle and Reckitt, have flagged the risk of further price hikes next year to offset the impact of the US-Israeli war with Iran, which began at the end of February.
EMERGING MARKET GROWTH LED BY INDIA
Unilever reported underlying sales growth of 5.2% for the quarter, ahead of the 4.8% expected by analysts in a company-compiled consensus.
It also maintained its 2026 sales and profit margin guidance and said it expected underlying sales growth of around 5% in the second half of 2026. It anticipates full-year underlying volume growth of at least 3%, up from previous guidance of around 3%, after posting volume growth of 2.9% in the third quarter and price growth of 2.3%.
"Emerging markets were again a key driver, with broad-based growth across markets, led by India and continued strength in Latin America and Southeast Asia," CEO Fernandez, who was appointed last year, said in a statement.
Performance in developed markets was weaker, reflecting tougher comparisons with a year earlier and softer results in the Food business, he said.
Third-quarter sales volumes were higher than last year, but have slowed since the second quarter of this year, weighed down by Food.
"The reality is that Unilever (and by extension its shareholders) still own a food business that is dragging down group performance," RBC analyst James Edwardes Jones said. "That said, this was another good quarter for Unilever, with volume growth continuing to drive performance."
Unilever joined a growing list of consumer goods companies that beat quarterly sales expectations on stronger-than-expected volume growth.
Procter & Gamble and Swiss food group Nestle last week both reported quarterly sales ahead of estimates, helped by higher volumes. French cosmetics group L'Oreal also reported sales that comfortably exceeded expectations.
Procter & Gamble, however, warned that rising raw material, energy and freight costs would weigh on annual profit.
(Reporting by Yadarisa Shabong in Bengaluru and Richa Naidu in London Editing by Harikrishnan Nair, Mark Potter, Adam Jourdan and Barbara Lewis)
