Unilever hit by UK washing powder wars

Unilever admitted yesterday it had lost market share in the UK, casting doubt over this year's quest to regain momentum in Europe, its biggest market.

The Anglo-Dutch group behind brands such as Dove soap and Hellmann's mayonnaise said underlying sales across Europe had fallen by 2 per cent during its first quarter, excluding the boost from five extra trading days. Its problems centred on the UK, where its arch rival Procter & Gamble has taken a big chunk out of its sales of laundry detergent.

But Unilever, which shook up its board after issuing a profits warning last autumn, offered hope that its fortunes had turned elsewhere by reporting its second consecutive quarter of group like-for-like sales growth. Its shares rose 3 per cent to 529p.

Patrick Cescau, who became the group's first chief executive in its 75-year history after it abolished its co-chairmanship structure in February, said he was "encouraged" but warned the backdrop would remain tough in Europe.

"We are making progress on the plans to improve top-line performance. The first stage was a step-up in market competitiveness," he said. "This year we expect market conditions to remain very challenging in Europe, and margins to continue to be under pressure from increased input costs."

Although the group said underlying sales rose 6 per cent during its first quarter, it admitted that on a true like-for-like basis its performance was less impressive. Five extra trading days and an early Easter added an extra 400 basis points to top-line growth, it said.

Analysts said there was a similar lack of visibility over its operating margin, which appeared to rise by 80 basis points to 15.3 per cent but actually fell after profits from disposals and lower restructuring costs were stripped out. Pre-tax profits for the quarter rose 9 per cent at current exchange rates to €1.28bn (£870m), while net profits jumped 24 per cent to €934m.

Since taking over as chief executive, M. Cescau has shaken up the group's management and operating boards. He has made more than 100 senior appointments and axed 15 per cent of the group's senior management. The company refused to confirm how many jobs had been affected.

In the US, it saw a modest pick-up in market growth for most of its products with the exception of the diet drinks business SlimFast, sales of which fell sharply during the quarter.