Consumer goods giant Unilever (NYSE:UL) today posted second-quarter earnings results. And despite what management called "challenging conditions" around the world, revenue grew at a faster pace than Wall Street had forecast. Unilever improved underlying sales by 2.9%, verses analysts' 2.5% target.
A balanced split between pricing and volume growth comprised that 2.9% rise: The company posted 1.3% higher sales volume while boosting prices by 1.5%.
That overall performance "demonstrates again the progress we have made in the transformation of Unilever to deliver consistent, competitive, profitable and responsible growth, now in the seventh year," CEO Paul Polman said in a press release.
Each of Unilever's four main product categories (personal care, foods, refreshment, and home care) contributed sales and profit gains. But the personal care division logged the biggest improvement with underlying sales growth up 10% in the last six months. Innovations in soap, hair, and deodorant brands helped, and a strong pipeline for new products has management expecting even bigger growth in the second half of the year.
Meanwhile, popular fabric conditioners and specialized detergents lifted results in the home care division. Combined with cost cuts, that growth helped the unit book a 2-percentage-point improvement in profitability as operating profit doubled.
The refreshment division was the only one to suffer from lower volume this quarter, but it also benefited from the largest price gain as Unilever's premium ice cream brands, including Magnum and Ben & Jerry's, boosted profits.
Overall, Unilever's markets were characterized by weak consumer demand in the second quarter. Sales volumes were flat, and management described emerging markets as "subdued" while Europe and the United States saw "negligible" demand gains.
However, the company managed to return to growth in the critical Chinese market. And the Latin America region also solidly beat expectations. Underlying sales bounced higher there by 13% as the company was able to pass along higher costs through price increases. Importantly, sales volume in Latin America rose by a solid 3% despite 10% higher product prices.
Unilever's reported profits fell 11%. But that drop reflected an unusually strong earnings bounce in the year-ago period. Stripping that out, core profit rose a healthy 16% as operating margin improved from 14% to 14.5%. Unilever's per-share earnings were up 8% after accounting for currency swings.
While management doesn't expect big demand improvements for the second half of the year, lower costs, higher efficiencies, and new product introductions should power healthy operating improvements in line with what investors saw in the second quarter. "We plan for another year of volume growth ahead of our markets, steady improvement in core operating margin and strong cash flow," Polman added.
Demitrios Kalogeropoulos has no position in any stocks mentioned. The Motley Fool recommends Unilever. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.