2008 FULL YEAR AND FOURTH QUARTER RESULTS
Key Financials * Full Year Fourth
(unaudited) 2008 Quarter 2008
Turnover (EUR million) 40 523 + 1% 10 151 + 3%
Operating profit (EUR
million) 7 167 + 37% 1 458 + 33%
Net profit (EUR million) 5 285 + 28% 1 189 + 51%
Earnings per share (EUR) 1.79 + 32% 0.41 + 61%
Underlying sales growth + 7.4% + 7.3%
Underlying change in operating margin
(percent pts) + 0.1 pts - 0.7pts
* at current exchange rates
NV PLC
Dividends (EUR) increase (p) increase
Final (proposed) 0.51 + 2% 40.19 + 18%
Total (interim + final) 0.77 + 3% 60.74 + 19%
SOLID YEAR OF PROGRESS. STRONGER BUSINESS, BETTER PLACED TO MEET
CHALLENGES AHEAD.
Full Year Highlights
- Strong broad-based growth of 7.4% across categories, in line with
our markets overall and driven by increased prices, combined with
an underlying improvement in operating margin.
- More competitive cost base: EUR1.1 billion savings from supply chain
and organisational efficiencies.
- Increased investment behind our brands.
- Commodity costs increased by EUR2.7 billion. Brand strength enabled
pricing which offset most of the cost increases. Savings
covered the remainder.
- Portfolio reshaped through disposals, including North American
laundry, Boursin, Lawry's and Bertolli olive oil, and acquisition
of Inmarko ice cream.
- Profits on disposals of EUR2 190 million pre-tax and EUR1
612 million post-tax. Earnings per share of EUR1.79 including
EUR0.36 net benefit from RDIs (Restructuring, Disposals, and other
items)
- Strong balance sheet. EUR3.6 billion cash returned to shareholders
in 2008. Dividends to be increased and proposal to move to quarterly
dividends from 2010.
Fourth Quarter Highlights
- Underlying sales growth of 7.3%. Price increases peaked in the
quarter at over 9%. This, together with slowing economies and
reduced inventories at retailers resulted in volumes being lower by
1.6%.
- Reduced volumes, dilution from disposals and
exceptionally high increases in input costs put pressure on
margins. Cost pressure expected to ease beyond the first quarter
of 2009.
- Lower advertising and promotions reflecting easing media rates
and in line with reductions in spend by competitors.
Paul Polman, Chief Executive Officer: "In 2008 the business made
further solid progress. We achieved top line growth ahead of our target
range and, faced with unprecedented input cost pressures, protected
profit by early pricing action and savings programmes. The changes
already made over the past few years have strengthened the business and
leave us well placed to meet the challenges ahead. Whilst we have been
more or less holding value share our priority will be to focus first
and foremost on volume growth. At the same time we will protect cash
and margins, driving our savings programmes even harder. By doing this
we expect to emerge from the current conditions stronger and more
competitive than ever.
Given the current economic uncertainty I believe it would be
inappropriate at this stage to provide an outlook specifically for 2009
or to reaffirm the 2010 targets. That said, I am confident in the
underlying strength of the business and over the longer term expect
that we will deliver very competitive levels of growth and margin
improvement."
5 February 2009
In the following commentary we report underlying sales growth
(abbreviated to 'USG' or 'growth') at constant exchange rates,
excluding the effects of acquisitions and disposals. Turnover includes
the impact of exchange rates, acquisitions and disposals. Unilever
uses'constant rate' and 'underlying' measures primarily for internal
performance analysis and targeting purposes. We also comment on trends
in operating margins before RDIs (restructuring, disposals, and other
one-off items) and use the movements in Ungeared Free Cash Flow and
Return On Invested Capital to measure progress against our longer-term
value creation goals. We may also discuss net debt, for which we
provide an analysis in the notes to the financial statements. Unilever
believes that such measures provide additional information for
shareholders on underlying business performance trends. Such measures
are not defined under IFRS and are not intended to be a substitute for
GAAP measures of turnover, operating margin, profit, EPS and cash flow.
Please refer also to note 2 to the financial statements. Further
information about certain of these measures is available on our website
at www.unilever.com/investorrelations
1. FINANCIAL PERFORMANCE
Full Year
Underlying sales growth of 7.4% was partly offset by movements in
exchange rates (4.8%) and the net impact of disposals and acquisitions
(1.4%). Including these effects, turnover was EUR40 523 million for the
full year, increasing by 0.8%.
Operating profit increased by EUR1 922 million to EUR7 167 million,
including a higher level of profits on business disposals. These
generated a pre-tax profit of EUR2 190 million in 2008, compared with
EUR297 million in 2007. Before the impact of RDIs (Restructuring,
Disposals, and other one-off items), operating profit grew by 1% at
current exchange rates, or 6% at constant exchange rates, and there was
an underlying improvement in operating margin of 0.1 percentage points.
During the year we increased investment behind our brands and have now
raised our annual spending on advertising and promotions by EUR1 billion
over the past four years as well as benefiting from our media
efficiency programmes. With the effect of the much higher selling
prices, the ratio of advertising and promotions to turnover was 0.7
points lower than last year.
Net profit was 28% higher than last year, boosted by the profits on
disposals. Earnings per share were EUR1.79, including a net gain of
EUR0.36 from RDI's. This compared with EUR1.35 last year, which included
a net loss of EUR 0.07 from RDI's.
Net cash flow from operations at EUR3.9 billion was in line with last
year. Total cash returns to shareholders in the year were EUR3.6
billion, made up of EUR2.1 billion of dividends and EUR1.5 billion of
share buy-backs.
Fourth Quarter
In the fourth quarter underlying sales growth was 7.3% and turnover
increased by 2.6%.
Operating profit increased by EUR361 million, with a higher level of
profits on business disposals including the Bertolli and Komili olive
oil businesses and plantations in Cote D'Ivoire. Before the impact of
RDIs, there was an underlying reduction in operating margin of 0.7
percentage points. This reflected a combination of continued very large
increases in input costs exacerbated by adverse currency movements, the
effect of lower volumes and the impact of disposals which diluted
operating margin by 0.3 percentage points.
We continued to invest strongly behind our brands in the fourth quarter
and started to benefit from lower media rates in many countries as well
as media efficiency programmes. Against a relatively high
comparator the ratio of advertising and promotions to turnover was
lower by 1.3 percentage points. This followed similar reductions by
our competitors.
Net profit and earnings per share in the fourth quarter also benefited
from the profits on disposals.
Additional commentary on the financial statements is provided on
page 5.
2. REGIONAL REVIEW FOR THE YEAR
The regional reporting below reflects changes made to
our organisation during 2008. Our operations in Central & Eastern
Europe (CEE) are now managed within an enlarged region comprising
Asia, Africa and CEE (AAC). Western Europe is now a standalone
region. The segmental analysis on pages 11 and 12 provides full
details on both the old and the new basis, and the quarterly details on
the new basis are being made available on the website at Unilever.com.
Turnover EUR Underlying Sales Underlying change in
millions Growth % margin percent pts
Western Europe 12 853 + 1.3 % + 0.7
Americas 13 199 + 6.5 % -
Asia Africa CEE 14 471 + 14.2% - 0.2
Unilever Total 40 523 + 7.4% + 0.1
Western Europe: Underlying sales growth was 1.3% for both the year and
the fourth quarter, with pricing contributing 3.8% and volume lower by
2.4% for the year. Volume consumption in our markets has reduced and
shoppers are increasingly looking to economise on their purchases.
We have made good progress in simplifying the business including the
integration of the separate units in each country and the formation
of 'multi-country-organisations'. This is enabling faster decision
making and more efficient operations. The European supply chain
transformation is progressing well; so far, we have announced
restructuring plans at twenty factories together with additional
capital investments to increase efficiency. The implementation of a
harmonised IT system across the region is now complete. The portfolio
has been further focused with the sale of the Boursin cheese and
Bertolli olive oil businesses.
The UK and the Netherlands, where the change programme is most
advanced, performed well for the year as a whole and
finished strongly with positive volume growth in the fourth quarter.
In France, Spain and Germany markets have been difficult with branded
products losing ground to private label. Across the region there was
strong innovation-led growth in deodorants and oral care and
price-driven growth in spreads and dressings.
The operating margin benefited from profits on disposals. On an
underlying basis there was an improvement of 0.7 percentage points.
Gross margins were lower as a result of the unprecedented increases in
commodity costs, but this was more than offset by lower overhead costs
and the benefits of spending efficiency programmes.
The Americas: Underlying sales grew by 6.5% for the year driven by
pricing taken to recover commodity cost increases. Trading conditions
deteriorated in the fourth quarter, with a drop in consumer confidence
and purchasing power and a reduction of trade inventories. Despite this
more difficult environment consumers continued to spend on our brands
and underlying sales growth was sustained in the fourth quarter,
although volumes were lower.
Underlying sales growth in the US was 3.8% for the year and 3.1% in the
fourth quarter. Our sales have been very much in line with the markets.
While there has been some down-trading from branded products to private
label brands our own market shares have held up well. Growth in Latin
America was around 12% for both the full year and the fourth quarter.
All key countries have contributed well to this growth as we benefited
from our established brands and the breadth of our portfolio.
The move to a single head office for the US in Englewood Cliffs was
completed and the ice cream business has been integrated. We set up a
new multi-country organisation made up of the US, Canada, and
the Caribbean. This will enable us to build scale, drive efficiencies
and enhance our capabilities across these countries during 2009. The
reshaping of the portfolio continued with the disposals of Lawry's
seasonings and spices and the North American laundry business. We
signed agreements with Starbucks to include Tazo ready-to-drink tea in
the Pepsi-Lipton joint venture and for the manufacture, marketing and
distribution of Starbucks ice cream in the US and Canada.
The operating margin was boosted by profits on disposals. On an
underlying basis the operating margin was in line with last year as
overheads savings fully offset a lower gross margin from the sharp
input cost increases.
Asia Africa CEE: Underlying sales growth of 14.2% in 2008 was again
broad-based across countries and categories. Our top five Developing
and Emerging market countries in the region grew by around 20% and all
have grown from a combination of increased prices and higher volumes.
In the fourth quarter underlying sales growth remained strong but
volumes were flat with some countries seeing signs of a slow-down in
consumption and a reduction in inventories by retailers.
Throughout the year we saw continued strong growth
in India and Indonesia, both countries where we have tremendous scale.
In these countries we are benefiting from portfolios which span higher
and lower price tiers and from extensive micro-marketing tailored to
faster growing areas and channels. Our business in China also grew well
throughout the year.
The One Unilever organisation is in place throughout the region and the
move to a single SAP system is progressing to plan with the
implementation in Indonesia completed in January. Supply chain
management for the region is being centralised in Singapore.
In April we acquired Inmarko, the leading ice cream company in Russia,
and it has performed strongly with both sales and profits ahead of
plan. In the fourth quarter we reshaped our portfolio
in Cote D'Ivoire with the completion of the disposal of our palm oil
business and the acquisition of soap brands in the same country.
On an underlying basis the operating margin was 0.2 percentage points
below last year reflecting increased investment in building
capabilities to drive growth and the sharp increases in input
costs partly offset by the benefits of savings programmes.
3. CATEGORY REVIEW FOR THE YEAR
Turnover EUR Underlying Sales Growth
millions %
Savoury, dressings and 14 232 + 7.6 %
spreads
Ice Cream and beverages 7 694 + 5.9 %
Personal care 11 383 + 6.6 %
Home Care & Other 7 214 + 9.8 %
Unilever Total 40 523 + 7.4 %
Savoury, dressings and spreads
Growth has been driven by strong performance in the Americas and Asia
Africa CEE and by price increases taken to recover unprecedented levels
of cost increases in edible oils which particularly affected spreads
and dressings. We have strengthened our core brands with campaigns to
communicate the healthy goodness of margarine and mayonnaise as well as
the inherent value-for-money of our products. Rama margarine has been
reformulated for an even better taste with less fat, while Hellmann's
mayonnaise in the UK and other countries in Europe now emphasises the
benefits of free range eggs and other natural ingredients. Knorr Stock
Pots, using new bouillon gel technology to make more authentic
stocks, were introduced in China, in the UK, France and Spain. At the
same time we are addressing the needs of increasingly value-conscious
shoppers with both low unit price packs and larger 'value' packs of our
well-known brands.
Ice cream and beverages
Ice Cream grew well in Western Europe and in Developing and Emerging
markets, while in the US profitability has been improved. Magnum and
Ben & Jerry's ice creams performed particularly well with new products
appealing to consumers' continuing desire for indulgence treats. These
included new-look Magnum ice cream 'minis' in Europe, and the launch of
the top-of-the-range Magnum ice cream 'Temptation'. Beverages showed
strong, consistent growth through the year, with particularly good
performances in key countries in the Asia Africa CEE region. We have
been successfully up-trading consumers from loose leaf tea to tea bags
and from regular bags to pyramid bags. PG Tips and Lipton teas now
carry Rainforest Alliance certification in 12 countries in Europe and
we have extended Lipton Linea slimming teas and Lipton Clear Green
teas.
Personal care
Strong and well-balanced growth has been driven by innovative
communication behind our global brands and new product launches
targeting new benefits and new consumers. The latest Axe body spray'Dark
Temptation' with the effect of chocolate is on track to be the
most successful variant yet. Towards the end of the year we launched a
range of Axe hair products in North America including shampoo,
conditioners and styling variants focused on young men. Continued
support for Clear anti-dandruff shampoo was the key driver of hair care
growth in Developing and Emerging markets. In Asia we relaunched the
Pond's skin care range, adding a 'masstige' tier supported by strong
in-store programmes. In oral care, we launched Signal white now, the
first whitening toothpaste with an instant effect. Rexona deodorants
are being rolled out in China as the first step to building a market
for the category in that country.
Home Care and other
The laundry category saw sharp increases in commodity costs which put
pressure on gross margins. We raised prices to mitigate the cost
increases and this, together with the challenging economic conditions,
led to flat volumes. There was a continued good performance in
household care. Across the home care category we launched margin
enhancing innovation delivering new added value benefits. These
included Small & Mighty concentrated liquid detergents, a global
relaunch of detergent powders with encapsulated fragrance giving longer
lasting freshness, a new version of Comfort fabric conditioner which
releases fragrance as clothes are worn, and Cif Acti-Fizz spray
cleaners which clean in one quick wipe. The roll-out of Small and
Mighty also offered a more environmentally friendly option, as did
Comfort 'one rinse' in Asia. Surf, our global value brand in fabric
cleaning, is thriving in the current market conditions benefiting from
global consumer insight adapted to local markets.
4. Additional commentary on the financial statements:
4.1 Finance costs and tax
Costs of financing net borrowings were 1% lower than last year. The
average interest rate was around 4.5%, offsetting the impact of a
higher average level of net debt.
The effective tax rate was 26.4% and the underlying tax rate, before
RDI's, was 26.6% for the full year. This compared with an underlying
rate of 24.5% in 2007, which included substantial benefits from the
favourable settlement of prior year tax audits. Our longer-term
expectation for the underlying tax rate remains around 26%.
4.2 Joint ventures, associates and other income from non-current
investments
Share of net profit from joint ventures and associates and other income
from non-current investments contributed EUR219 million. This included a
gain of EUR 61 million in the fourth quarter in non-current investments
resulting from the disposal of our interests in plantations in Cote
D'Ivoire. Last year included a similar level of one-time gains in
associates in the first quarter.
4.3 Return on Invested Capital
Return on invested capital was 15.7%, boosted by profits on business
disposals. Excluding profits on disposals, ROIC was 11.2%, broadly in
line with 2007 on a comparable basis.
4.4 Cash Flow
Cash flow from operations of EUR5.3 billion was EUR0.1 billion higher
than last year. Lower cash costs of pensions more than offset higher
restructuring charges and a EUR0.2 billion increase in working capital.
Tax paid was also EUR0.1 billion higher, resulting from additional
one-off tax payments in 2008. Net cash flow from operations of EUR3.9
billion was in line with last year.
Ungeared free cash flow was EUR3.2 billion, which was EUR0.6 billion
lower than last year. The effect of underlying growth in operating
profit was offset by business disposals and adverse currency
movements. It also reflects higher restructuring costs, additional
investment in capital expenditure and higher working capital and tax
rates.
4.5 Dividends and share buy-backs
The proposed final dividend of EUR0.51 for NV takes the total dividend
for the year to EUR0.77, an increase of 3%. The proposed final dividend
of 40.19p for PLC takes the total dividend to 60.74p, an increase of
19%. The difference in the rates of increase reflects the weakening
of Sterling against the Euro. Further details, including
the US dividends, can be found on page 16.
It is proposed to simplify the current practice of setting dividends,
with a move to paying dividends on a quarterly basis. This is explained
further on page 17.
During the year, 75 million shares were bought back at a total cost of
EUR1.5 billion.
4.6 Balance sheet
The appreciation of the euro against many of the Group's operating
currencies has had the effect of reducing many of the reported asset
and liability balances. Higher cash balances reflect the decision to
maintain strong liquidity and the proceeds of the sale of the Bertolli
olive oil business. Working capital balances are up in response to
higher underlying turnover.
4.7 Pensions
The overall net liability for all pension arrangements was
EUR3.4 billion at the end of 2008, up from EUR1.1 billion at the end of
2007. Funded schemes show an aggregate deficit of EUR1.4 billion and
unfunded arrangements show a liability of EUR2.0 billion. The increase
in overall balance sheet liability is largely due to the falls in asset
values on world markets, partly offset by higher discount rates for
liabilities. In 2009 we currently expect cash contributions to be
higher than in 2008, but slightly below the levels in the preceding two
years.
5 OTHER INFORMATION
As previously announced, Unilever is currently engaged with both the
European Commission and other national competition authorities in
ongoing investigations in Europe. We continue to cooperate fully with
all ongoing investigations.
CAUTIONARY STATEMENT
This announcement may contain forward-looking statements, including'forward-
looking statements' within the meaning of the United States
Private Securities Litigation Reform Act of 1995. Words such as'expects',
'anticipates', 'intends', 'believes', or the negative of
these terms and other similar expressions of future performance or
results, including financial objectives to 2010, and their negatives
are intended to identify such forward-looking statements. These
forward-looking statements are based upon current expectations and
assumptions regarding anticipated developments and other factors
affecting the Group. They are not historical facts, nor are they
guarantees of future performance. Because these forward-looking
statements involve risks and uncertainties, there are important factors
that could cause actual results to differ materially from those
expressed or implied by these forward-looking statements, including,
among others, competitive pricing and activities, consumption levels,
costs, the ability to maintain and manage key customer relationships
and supply chain sources, currency values, interest rates, the ability
to integrate acquisitions and complete planned divestitures, the
ability to complete planned restructuring activities, physical risks,
environmental risks, the ability to manage regulatory, tax and legal
matters and resolve pending matters within current estimates,
legislative, fiscal and regulatory developments, political, economic
and social conditions in the geographic markets where the Group
operates and new or changed priorities of the Boards. Further details
of potential risks and uncertainties affecting the Group are described
in the Group's filings with the London Stock Exchange, Euronext
Amsterdam and the US Securities and Exchange Commission, including the
Annual Report on Form 20-F. These forward-looking statements speak only
as of the date of this document. Except as required by any applicable
law or regulation, the Group expressly disclaims any obligation or
undertaking to release publicly any updates or revisions to any
forward-looking statements contained herein to reflect any change in
the Group's expectations with regard thereto or any change in events,
conditions or circumstances on which any such statement is based.
ENQUIRIES
Media: Media Relations Team
UK +44 20 7822 6805 tim.johns@unilever.com
or +44 20 7822 6010 trevor.gorin@unilever.com
NL +31 10 217 4844 gerbert-van.genderen-stort@unilever.com
Investors: Investor Relations Team
+44 20 7822 6830 investor.relations@unilever.com
There will be a web cast of the results presentation available at:
www.unilever.com/ourcompany/investorcentre/results/quarterlyresults/
default.asp
The Annual General Meetings of Unilever PLC and Unilever N.V. will be
held on 13 May 2009 and 14 May 2009 respectively.
To view the full text of this press release, paste the following link
into your web browser:
http://www.rns-pdf.londonstockexchange.com/rns/8264M_1-2009-2-4.pdf
This information is provided by RNS
The company news service from the London Stock Exchange
END
Contact Information: Contacts: RNS Customer Services 0044-207797-4400 http://www.rns.com