By Richa Naidu
LONDON (Reuters) -Unilever smashed quarterly sales forecasts on Thursday as another big rise in prices from the maker of Dove soap and Ben & Jerry's ice cream triggered only a small dip in volumes, sending its shares up nearly 2% in early trade.
The 10.7% increase in prices was, however, lower than in recent quarters, adding to signs inflationary pressures might be easing as input costs declined.
Packaged goods companies have been hiking prices as they grapple with a surge in costs of everything from sunflower oil and shipping to packaging and grain.
Consumers have so far coped with the cost-of-living squeeze better than many analysts' had expected, but some warn companies could eventually take a hit to margins if shoppers start switching to cheaper brands in greater numbers.
Unilever (LON:ULVR) reported a 10.5% rise in underlying first-quarter sales to 14.8 billion euros ($16.4 billion), beating analysts' average forecast for a 7.2% increase, according to a company-provided consensus.
That included a 10.7% increase in prices and a 0.2% dip in volumes. Price growth was slower versus the previous two quarters, and down from a record 13.3% reported in February, while the decline in volumes improved from the 3.6% drop posted at that time.
"The expectation was that volumes were going to be down about 4% so that very slight decrease was very nice to see," Neil Denman, a fund manager at Sarasin & Partners, said.
Looking ahead, Unilever finance chief Graeme Pitkethly said: "We think it (price hikes) will step down from there ... it will start to taper off over the quarters," while adding the group's individual businesses would ease price rises at different rates.
"Beauty and wellbeing and personal care - they are seeing much lower inflation, hence the lower rates of pricing ... homecare is a bit of a mixed bag given the emerging market footprint and foreign exchange evaluations."
Rivals P&G and Nestle have also recently reported stronger than expected quarterly sales, with price hikes offsetting lower volumes.
($1 = 0.9043 euros)