UPDATE 4-Unilever recovery continues as beats forecasts
* Unilever says momentum to continue into Q4 and 2010
* Unilever Q3 sales volumes up 3.6 pct, consensus 2.8 pct
* Says well on track to restore volume growth
* Shares dip after strong run up to results
(Adds further analyst comment and detail, updates shares)
By David Jones
LONDON, Nov 5 (Reuters) - Consumer goods giant Unilever beat forecasts with a 3.6 percent rise in third-quarter underlying volume sales and pledged its turnaround under Chief Executive Paul Polman's will continue into the fourth quarter and 2010.
Polman's second successive quarter of volume growth came as he spends more on marketing and cuts selective prices to drive growth in the current downturn, and he is being helped by falling prices for commodities like edible oils and packaging.
Anglo-Dutch Unilever Plc/NV (ULVR.L)(UNc.AS), the world's third-biggest food and consumer goods group, said all regions and categories showed growth while it was on track to restore volume growth for 2009, without hitting margins or cash flow.
"We expect volume growth in the fourth quarter and we don't see anything to slow up our underlying momentum," said Finance Director Jim Lawrence at a quarterly results briefing.
He added conditions for the maker of Ben & Jerry's ice cream, Knorr soup and Dove soap remained challenging with world unemployment still rising and consumer confidence low, but he said it sells affordable products to a range of consumers.
"A good third-quarter for volumes, margins and cash flow. The results provide further evidence of Unilever's improved performance," said Panmure Gordon analyst Graham Jones.
Unilever Plc shares dipped 2.8 to 17.78 pounds by 0940 GMT after a strong run up to results over the last month, and after outperforming the DJ European Food and Beverage index .SX3P by 3 percent this year since starting 2009 around 15.50 pounds.
"Excellent Q3 results indicate that Unilever is doing what it said it would do. This is our favourite stock in the consumer sector and increasingly looks to be leaving the old Unilever shortcomings behind," said James Edwardes Jones at Execution. (For a graphic showing global consumer staples valuations see: here)
Polman, who took over in January, having previously worked at larger rivals Procter & Gamble (PG.N) and Nestle (NESN.VX) has targeting reigniting volume growth after the group relied on price rises for all its sales increase in its first-quarter. [ID:nL5963309]
The quarterly 3.6 percent volume rise beat the consensus forecast for a 2.8 percent rise in a survey of 12 analysts by Reuters, while underlying sales in July-September rose 3.4 percent compared with the consensus of 3 percent, showing that Unilever cut average prices slightly across the quarter.
Lawrence said volumes were boosted by 0.5 percentage points due to an extra trading day in Western Europe and a systems change in Canada which would unwind in the fourth quarter.
Quarterly sales were buoyed by strong European ice cream sales and emerging market growth, as underlying profit margins rose despite a rise in advertising and promotion spend.
Sales volumes rose 2.6 percent in its West European region, hard-hit by the downturn, as prices were cut 2.3 percent to entice cash-strapped consumers and came after a 1 percent rise in volumes in the second quarter.
Unilever's volume rise beat the 2 percent seen at the world's largest food group Nestle in its third-quarter, while France's Danone (DANO.PA) saw a big 7.1 percent leap in its sales volumes due largely to big cuts in its yoghurt prices.
Unilever, whose 400 brands include Hellmann's mayonnaise, Omo detergent and Sunsilk shampoo, posted underlying quarterly earnings of 0.43 euros per share, beating a consensus forecast of 0.38 euros collated by Thomson Reuters I/B/E/S.
The half-year dividend was set at 0.2695 euros a share. (Reporting by David Jones, editing by Will Waterman and Hans Peters)
