INTEREST in diet foods in the US is shrinking as rapidly as shoppers put on the pounds, forcing Unilever to take a €353 million (£244 million) charge at its struggling Slim-Fast diet drinks business.

The writedown at Slim-Fast was revealed yesterday as the Anglo-Dutch multinational announced a recovery in sales but a sharp slide in net profits, which fell 26 per cent in the second quarter to €787 million.

The value of Slim-Fast has shrunk by more than €1 billion since the company acquired the Florida-based diet foods company in April 2000. Rudy Markham, Unilever’s finance director, said he was disappointed by the additional charge to the value of Slim-Fast, after the €791 million writedown in last year’s accounts.

Slim-Fast has not profited from consumer disenchantment with the Atkins diet, the low-carb fashion that did such damage to Unilever’s expensive venture into the weight-loss sector. Instead of returning to conventional calorie-counting, consumers are abandoning diet foods altogether. “The meal-replacement category in the US has continued to decline, and at a faster rate than we anticipated,” Mr Markham said. “Year-on-year sales in this category are down by around 25 per cent.”

The Slim-Fast writedown accounted for 27 points of a 29 per cent fall in Unilever’s second- quarter earnings per share of 11.19 euro cents.

Unilever shares rose 25p to 576p as investors reacted to signs of a sales recovery at the food and soap combine, which last year fell victim to a price war with its competitor, Procter & Gamble.

Patrick Cescau, Unilever’s chief executive, hailed a 3.3 per cent increase in underlying sales, up from 2 per cent in the first quarter and evidence of Unilever’s decision to hold the line against P&G. Unilever retaliated successfully with price cuts in India, beating off attacks on its market share in detergent and shampoo. However, similar action in Europe only failed to slow the deterioration in a sluggish market.

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