* Q1 sales up 2.9 pct vs expected 2.0 pct
* Led by higher prices and emerging markets
* Shares up 1.5 percent
(Adds comments, share activity, background, bullet points)
By Martinne Geller
LONDON, April 20 Unilever
reported a surprise pick up in quarterly sales growth on
Thursday, boosting its argument that it can improve performance
on its own after spurning a $143 billion takeover offer from
Kraft Heinz in February.
The maker of Knorr soups and Dove soap, which earlier this
month announced a business revamp in response to the takeover
interest, said improving economies and rising commodity costs
helped it to lift prices in the first quarter.
That offset a small dip in the volume of goods sold.
Chief Financial Officer Graeme Pitkethly said there was
always a delay between economic improvements and a pick up in
household spending and so Unilever expected a better performance
in the second half of the year, helped also by its own easier
"We are seeing positive signs in the economy overall," he
told Reuters, talking about a "bottoming out" of currency
devaluations in places such as India, Indonesia and Brazil.
Unilever's underlying sales growth of 2.9 percent topped
analysts' expectations of 2.0 percent and 2.2 percent growth in
the fourth quarter of 2016.
Growth was led by emerging markets, while pricing added 3
percent and the dip in volumes took off 0.1 percent.
The results, which outshone those of rival Nestle,
sent Unilever's shares up 1.5 percent to 39.94 pounds, leaving
them more than 19 percent higher than before Kraft's
unsolicited, and swiftly rejected, offer.
Nestle, the world's largest packaged food company, posted
sales growth of only 2.3 percent. Compared with Unilever, Nestle
has much more exposure to the shrinking North American packaged
food market, where a late Easter and one less trading day in the
quarter compounded weakness due to changing consumer tastes and
Even at Unilever, food was the weakest division, coming in
flat, whereas the ice cream and tea business rose 5.4 percent
and home and personal care products rose 3.4 percent.
Excluding the margarine and spreads business, which is to be
sold, Unilever's group underlying sales would have risen 3.4
percent. Pitkethly said it was "a bit of a relief" to be able to
finally "engage wholeheartedly" with private equity suitors
which have been circling the unit for some time.
In a statement, Chief Executive Paul Polman said the results
reconfirmed the strength of Unilever's business model.
To appease investors, some of which were disappointed by the
company's refusal to engage in takeover talks, Unilever
announced plans this month aimed at lifting shareholder returns.
It said it aimed to cut more costs, boost margins, buy back
shares, increase the dividend, sell or spin off its margarine
business, combine its remaining food businesses into one unit
and review its dual Anglo-Dutch structure.
"For Unilever, the future starts here," said Steve Clayton,
fund manager of the Hargreaves Lansdown Select equity funds.
"Their commitment to stronger capital and income returns to
shareholders from a reinvigorated portfolio is hugely welcome."
With portfolio weightings nearing 5 percent, Unilever is the
largest position in the two funds Clayton manages, which
together account for 505 million pounds.
Unilever's turnover rose 6.1 percent to 13.3 billion euros
($14 billion) in the first quarter, including a foreign exchange
boost of 2.4 percent.
The company reiterated this month's forecast for 2017 sales
growth of 3-5 percent, with margins growing at least 80 basis
points and a dividend increase of 12 percent.
($1 = 0.9312 euros)
(Reporting by Martinne Geller; Editing by Susan Fenton and Mark