Associated Press

AMSTERDAM (AP) -- Unilever NV, maker of Dove soaps and Ben & Jerry's ice cream, reported Thursday that third-quarter net profit fell 36 percent, mostly because year-ago earnings benefited from the sale of a unit, but said margins improved.

The consumer goods company made ¤1.05 billion ($1.56 billion), down from ¤1.64 billion in the same period last year, when it booked a ¤487 million gain on the sale of its seasonings businesses.

Revenues were down 1.9 percent to ¤10.2 billion.

During the global recession the company was forced to cut prices and sacrifice margin to keep customers. However, Unilever said sales volumes grew and margins improved in the third quarter from the second quarter.

On a conference call, new Chief Executive Paul Polman said that in the long term the company would seek to increase sales volumes by keeping prices low for consumers and to maintain margins by introducing new products.

That, however, requires investment, which means sales and margins could suffer in the short run.

"I have no problem telling you that quarter four will be less in overall turnover, but the volume component will be healthy," he said, indicating the company will cut prices further in the fourth quarter.

"There might be quarters like we've seen in the first and second (quarters of 2009) where we compromise our margins -- but we run the business on a 12-month basis."

Polman, a former executive at rival Nestle SA who took the helm in January, said Unilever was launching more new products than it had in a decade, and warned analysts not to become "euphoric" about the company's short-term prospects.

Shares, which had increased by 35 percent over the past half-year, fell 3.1 percent to ¤20.155 in Amsterdam on Thursday.

Unilever said sales grew 3.4 percent from a year ago on an "underlying" basis -- a nonstandard measure that compares only operations owned in both years and strips out currency effects. Underlying volumes were up 3.6 percent while prices were down 0.2 percent.

Analysts said the results, particularly the sales, were better than expected.

"Sales have again surprised on the upside, whilst the profit margin has also improved," said Keith Bowman, Equity Analyst at Hargreaves Lansdown Stockbrokers.

He said that Unilever's increased spending on advertising -- up 14 percent from a year ago -- was a major reason for the sales growth.

Warren Ackerman of Evolution Securities said Polman was "sensibly managing expectations."

"The shares were due to pause for breath given the run the stock has had," he said in a note on earnings.

Investec analyst Martin Deboo said he was "mystified" by the stock's decline Thursday.

"We view the results as a material beat to the consensus, of genuine quality and evidence that a sustainable turnaround is under way."

By region, Unilever's underlying Asian sales grew 5.7 percent, American sales grew 3.9 percent and European sales grew 0.2 percent.

Unilever discussed performance of major product lines only on a 9-month basis, saying it saw 4.8 percent underlying sales growth in personal care products, where it owns brands such as Axe deodorants, Dove soaps and Vaseline skin care. The company credited new product launches.

Ice creams and beverages, including brands such as Ben & Jerry's, Magnum and Lipton, grew 4.3 percent, with "diet" teas performing well.

Dressings such as Knorr soups, Hellmann's mayonnaise and Bertolli sauces grew 0.9 percent.

Copyright 2009 The Associated Press.

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