Unilever: Unilever Announces Final Results

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

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Unilever: Unilever Announces Final Results