updated 8/4/2005 12:38:55 PM ET 2005-08-04T16:38:55

Unilever, the maker of Ben & Jerry’s ice cream, Dove soap and Lipton tea, reported a 27 percent drop in second-quarter net profit Thursday, singling out the troubles of its dieting product Slim-Fast and tough competition in Europe.

The Anglo-Dutch consumer goods company earned $967 million (784 million euros), down from 1.07 billion euros a year earlier. Sales totaled $12.47 billion (10.22 billion euros), up 1.4 percent from the same period last year.

Although Slim-Fast accounts for only 1 percent of its revenue, Unilever said it took a writedown of $431 million (353 million euros) on the business, attributed to the shrinking popularity of meal substitutes.

There is “a lot of consumer confusion out there” about dieting, said Chief Financial Officer Rudy Markham, with people continuing to move away from meal-replacement products despite the declining popularity of low-carb diets.

Analysts were encouraged by Unilever’s report that underlying sales growth was 3.3 percent globally, which was higher than predicted. Underlying sales rose 5 percent in the Americas, while in Europe the figure shrank by 0.6 percent in the face of strong price competition.

Unilever shares gained 4 percent to $69.78 (57.20 euros) in Amsterdam trading.

“Conditions in Western Europe generally remain difficult, and we have to do to improve our competitiveness there,” said Chief Executive Patrick Cescau. Emerging markets in the developing world were “a key driver of growth,” he said.

Cescau, who took over the company’s top job in February, said Unilever expects no significant market changes for the rest of the year.

“We continue to drive cost efficiency through our savings programs and these are being reinforced as we integrate our foods and home and personal care operations around the world,” he said. “This has meant that so far this year we have largely contained the impact on operating margin of higher input costs and the increased level of investment behind our brands,” he said.

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