THE HAGUE, Nov 5, 2009 (AFP) - Anglo-Dutch food and cosmetics giant Unilever reported a third quarter net profit drop of 35 percent to 1.1 billion euros even as sales volumes grew in "challenging" market conditions.

Dove

"Market conditions remain challenging and in this environment we will continue to increase investment behind our brands and build long-term capabilities in research and development," Unilever chief executive Paul Polman said in a statement.

"We are on track towards our objective of restoring volume growth while protecting margins and cash flow for the year as a whole."

Unilever, the maker of such brands as Knorr soups, Dove soap, Lipton tea and Omo detergent, said third quarter sales volumes grew by 3.6 percent.

Turnover fell by two percent to 10.2 billion euros (15.15 billion dollars), and operating profit by 41 percent to 1.5 billion euros.

"All regions showed an improving trend in both volumes and operating margins in the third quarter," said the statement.

Volume growth was especially strong in Asia, where "economic conditions are slowly improving in several key countries but overall growth in consumer demand continues to be slower than in the past."

The cost of financing net borrowing was 325 million euros for the first nine months of the year, 24 million euros higher than in 2008, said the statement.