UNILEVER: NO AD CUTS PLANNED TO HELP EARNINGS OUTLOOK

Packaged-Goods Giant Improves Full-Year Forecast

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CINCINNATI (AdAge.com) -- Depsite a 25% drop in net income for the second quarter, London-based Unilever today said it's forecasting improved per-share earnings growth for the year that won't come from cuts to advertising and promotions.

For the quarter, Unilver reported net earnings of $645 million, or 65 cents a share, while earnings before restructuring charges up 31% to $1.06 billion.

Unilever raised its outlook for full-year per-share earnings growth, excluding restructuring charges, to the "mid-teens" from a previous forecast in the low teens. But Chief Financial Officer Rudy Markham said in a conference call that accelerated earnings growth won't come from cutting advertising and promotion expenses but from other better-than-expected savings and sales growth.

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Sales companywide were flat at $13.1 billion, though organic sales, excluding the impact of divested businesses were up 3.3% from a year ago. Unilever said sales of its 400 leading brands were up 4.4%. Those 400 make up about half of Unilever's 800 brands but 88% of sales.

North American sales fell 4% and were flat, aside from divestitures of businesses such as Mazola corn oil. The company also blamed heavy promotion in its food business and a tough comparison to year-ago sales because of the "later phasing of innovation this year." North American sales rose 1.4% in foods but fell 2.6% in home and personal care.

Unilever also said it plans to absorb future restructuring costs, once its current "Path to Growth" restructuring concludes in 2004, within its long-term operating margin target of 16% and said it expects long-term restructuring costs to be in the range of 0.5% to 1%.

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