Unilever says global markets tough but sales beat expectations

By Martinne Geller

LONDON (Reuters) - Consumer goods maker Unilever (ULVR.L) said it expects sluggish global markets will continue to weigh on performance with no let-up in sight, though a series of one-off benefits lifted third-quarter sales way past expectations.

The Anglo-Dutch maker of Knorr soup, Lipton tea and Dove soap, which generates a large part of its sales from emerging markets, said on Thursday that taken as a whole, it has seen no improvement in its markets.

"In fact, in a number of countries, the economic environment is getting worse, with the situation on the ground dominated by the effects of currency depreciation," said Graeme Pitkethly, two weeks into the job as chief financial officer.

CEO Paul Polman said in a statement there was "no immediate sign of getting help from an improving global economy."

Still, Unilever slightly brightened its sales outlook for the year after third-quarter sales flew past estimates, due to soft comparisons in China, a strong summer ice cream season and a shift in the timing of sales in Latin America.

In 2014, Unilever's China sales were dramatically hit when retailers and wholesalers reduced stock levels to reflect slowing consumer demand, while in Latin America some customers pulled orders forward ahead of price increases, lifting third-quarter sales at the likely expense of the fourth quarter.

Its London-listed shares were up 4.2 percent at 1000 GMT.

Underlying sales rose 5.7 percent in the third quarter, while analysts on average were expecting a rise of 3.9 percent, according to a consensus compiled by the company. But excluding the one-off benefits, Pitkethly said sales growth would have been in the 3.5 to 4 percent range.

For the rest of the year, Unilever said it expected underlying sales to come in toward the upper end of the 2 to 4 percent range. It also expects steady improvement in core operating margin and strong cash flow.

"The implication from guidance is that the fourth quarter will be off the steroids," said Jefferies analysts in a note.

For the full year, Unilever expects foreign exchange rates to lift revenue by 5 percentage points at current spot rates. That's down from its previous forecast of a 6 to 8 percentage point lift. On the bottom line, currency should have a 2 percent benefit, it said.

(Reporting by Martinne Geller; editing by Jane Merriman and Adrian Croft)