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Unilever: Unilever 2nd Quarter Results 2009

^{Published on 2009-08-05 23:38:22, Last Modified on 2009-08-05 23:38:34 - Market Wire}
 

LONDON--(Marketwire - August 6, 2009) -

 SECOND QUARTER UNDERLYING SALES GROWTH 4.1%, VOLUME GROWTH 2.0%. CASH FLOW EUR 1.6 BILLION AHEAD OF LAST YEAR IN FIRST HALF. Key Financials (unaudited, Second Quarter 2009 Half Year 2009 at current rates) Turnover (EUR million) 10,458 + 1% 19,963 + 0% Operating profit (EUR million) 1,320 - 4% 2,554 - 20% Operating profit before RDIs* (EUR million) 1,523 - 4% 2,915 - 3% Net profit (EUR million) 833 - 15% 1,636 - 31% Net profit before RDIs* (EUR million) 997 - 12% 1,914 - 12% Earnings per share (EUR) 0.27 - 16% 0.53 - 33% Earnings per share before RDIs* (EUR) 0.33 - 12% 0.63 - 13% * RDIs: Restructuring, disposals and other one-off items Note: operating profit in the first half of 2008 included profits on disposal of EUR516 million pre-tax. Second Quarter highlights * Underlying sales growth 4.1%. Volume growth 2.0%, with all regions positive. Growth driven by improved execution, innovation and increased marketing spend. * Advertising and promotion spend increased by 50 bps. * Operating margin before RDIs down by 60 bps (including 30 bps of margin dilution from disposals), in line with expectations. First Half Highlights * Underlying sales growth 4.4%, with volumes up 0.2%. Turnover in line with last year after the effects of currency movements (-0.9%) and disposals/acquisitions (-3.2%). * Operating margin before RDIs down by 50 bps (including 30 bps of margin dilution from disposals), in line with expectations. * Earnings per share before RDIs down 13%, including -6% from the pensions finance charge and -3% from a higher first half tax charge. * Net cash flow from operating activities EUR1.6 billion ahead of last year with much improved working capital. Paul Polman, Chief Executive Officer: "While conditions remain difficult in many markets, I am encouraged by the return to volume growth across all regions and the majority of countries and categories. More of our brands are improving share again behind strong innovations, greater consumer value, increased marketing support and better execution. We continue to focus on restoring volume growth while protecting margins and cash flow for the year as a whole." 6 August 2009 INTERIM MANAGEMENT REPORT FOR HALF YEAR TO JUNE 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). 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 notes 2 and 3 to the financial statements. Further information about certain of these measures is available on our website at [ www.unilever.com/investorrelations ] OPERATIONAL REVIEW Second Quarter 2009 Half Year 2009 Turnover USG Volume Price Turnover USG Volume Price EUR m % % % EUR m % % % Asia Africa CEE 3,856 8.2 3.3 4.8 7,431 8.8 1.3 7.4 Americas 3,335 4.9 1.6 3.2 6,491 5.9 0.4 5.5 Western Europe 3,267 (1.1) 1.0 (2.0) 6,041 (1.9) (1.2) (0.7) Unilever Total 10,458 4.1 2.0 2.1 19,963 4.4 0.2 4.2 Savoury, dressings & spreads 3,232 (0.2) 6,544 1.4 Ice cream & beverages 2,468 4.9 4,132 4.5 Personal care 2,996 5.4 5,803 4.6 Home care & other 1,762 9.2 3,484 9.9 Unilever Total 10,458 4.1 19,963 4.4 REGIONS Asia Africa CEE - Half year USG +8.8%, Volume +1.3% Underlying sales have grown in all our main developing and emerging markets and in all categories. The region returned to positive volume growth in the second quarter as we rolled out innovations and increased our level of marketing support. Overall consumer demand in our categories has continued to grow this year, but with volumes increasing at a slower rate than in the past. We have established a regional supply chain centre, based in Singapore, and are progressively rolling out common systems across the region. We have continued to invest in our priority markets of Russia and China. We have completed a new global R&D centre in Shanghai. In Russia, we completed the acquisition of Baltimor, the market leader in ketchup, on 3 July, and we have announced the construction of a new ice cream factory to support Inmarko which has grown rapidly since its acquisition last year. The operating margin before RDIs was up by 150 bps in the first half year. The Americas - Half year USG +5.9%, Volume +0.4% The region has sustained a good performance. North America grew by 2.7% in the first half year, with volumes sustained at last year's levels despite lower foodservice sales including the exit from unbranded business. Sales in Latin America have grown at around 10% in the first half year with an improving volume trend. The integration of the US, Canada and Caribbean businesses is progressing well and Canada will move onto the US SAP platform on 1 October. Our new Customer Insight and Innovation Centre is helping to generate ideas for fresh ways of growing with our customers. The operating margin before RDIs was up by 40 bps in the first half year. Western Europe - Half year USG -1.9%, Volume -1.2% Markets remain very challenging. Our own business returned to positive volume growth in the second quarter, with an improving trend across all key countries and benefiting from good ice cream sales in the first half of the season. Net prices were lower than last year as commodity cost pressures eased and we restored price competitiveness. We made good progress on reducing costs. This includes rationalising the supply chain, investing in more efficient production lines, leveraging our single IT system to drive regional synergies and streamlining overheads. The operating margin before RDIs was lower by 330 bps in the first half year reflecting high commodity costs, the depreciation of sterling, and investments to reignite volume growth. CATEGORIES We have grown sales in all categories in the first half year, despite the economic environment. We are seeing the benefits of rolling out innovations faster across countries and regions under our strong global brands. Consumers are looking, more than ever, for good value in the products they buy, so our innovation programme places even greater emphasis on superior functional benefits, backed up by clinical proofs and strong communication. At the same time we continue to build consumption in our categories by developing new market segments and converting users from alternative products. Savoury, dressings and spreads - Half year USG +1.4% In spreads and dressings, we continued the roll-out of the successful'goodness of margarine' campaign, while reducing prices to reflect the easing of edible oil prices. We are re-launching our value brands in a number of countries to compete at the lower end of the market. In savoury, Knorr has grown well in the Americas and Asia Africa CEE but sales were down in Western Europe. We have implemented comprehensive 30 day action plans to address this and have seen an improving trend, particularly in Germany. The roll-out of Knorr Stockpots throughout Europe has gone well and consumption is building. In the US we have capitalised on the move to more in-home eating with successful campaigns behind Hellmann's mayonnaise, Ragu pasta sauces and Bertolli frozen meals. This was partly offset by lower Foodservice sales, including the exit from unbranded business. Hellmann's new'double whisked' light mayonnaise is driving good growth for the brand globally. Ice cream and beverages - Half year USG +4.5% The good performance in the first half has been led by strong growth in Developing and Emerging markets in both ice cream and tea. In tea we are benefiting from innovations behind a portfolio of brands covering all consumer income levels. We have introduced a range of herbal infusions under our value brand in Russia and a new flavour under our value brand in Poland. Growth of our premium brand Lipton has been boosted by pyramid bags, while Lipton Linea slimming teas are building well in Europe and have recently been launched in Russia and China. We have continued to extend distribution for ice cream brands in Asia Africa CEE and Latin America with good results. In Western Europe we saw good growth in the second quarter, and sales were up for the half year. Magnum, with the successful 'Temptation' variant, and Ben & Jerry's were particularly strong. Personal care - Half year USG +4.6% Growth in personal care was driven by our global innovation programme, supported by strong advertising, as well as an increased focus on value across the portfolio. Skin cleansing performed well with new functional advertising for Dove bar, the roll-out of Lux Soft Skin in Latin America and campaigns that address current heightened needs for hygiene. In North America we also introduced Dove shower gels with new technology which reverses dryness. In hair care we benefited from the launch of Lux Shine in China and Japan, continued momentum for Clear anti-dandruff shampoo in Developing and Emerging markets and good growth for Suave, our value brand in the US. We have launched a new Dove deodorant which makes underarms look and feel hair-free for longer and a new Axe body spray fragrance. The successful Signal White Now oral care range has been extended with the introduction of a mouthwash line. Home care and other - Half year USG +9.9% Both laundry and household cleaning have performed very well in the first half year. Growth has come from innovation supported by strong advertising and increased promotional intensity. In laundry, we have upgraded our 'Dirt is Good' range in key Developing and Emerging markets and launched a version for semi-automatic machines in Brazil. In Europe we are seeing good momentum in Small & Mighty concentrated liquids and in new 'clear and fresh' Surf detergents. In household cleaning Cif 'acti-fizz' and Domestos '24 hour protection' continue to do well and we have now launched Cif in India. ADDITIONAL COMMENTARY ON THE FINANCIAL STATEMENTS - FIRST HALF YEAR Finance costs and tax The cost of financing net borrowings was EUR244 million. This was EUR36 million higher than last year because of a higher average level of net debt and one-off charges this year. The interest rate on borrowings was 4.6%, slightly lower than last year. There was a net charge of EUR90 million for pensions financing compared with a credit of EUR67 million in the first half of last year. The effective tax rate was 29.4% and the underlying tax rate, before RDIs, was 28.5%. The underlying tax rate is expected to be lower in the second half and to be around 27% for the year as a whole. Our longer term guidance remains around 26%. Joint ventures, associates and other income from non-current investments Net profit from joint ventures and associates, together with other income from non-current investments contributed EUR72 million. This compares with EUR92 million last year which included a one-time gain on the extension of the Pepsi/Lipton joint venture for ready-to-drink tea in the first quarter. On an underlying basis there was an increase of EUR4 million. Cash Flow Cash flow from operating activities was EUR1.6 billion higher than last year in the first half. Working capital improvement has been a priority for the business and the good progress made has largely offset the normal seasonal working capital movements. Balance sheet Balances at the half year include the acquisition of the TIGI hair care business. The net deficit on pensions increased from EUR3.4 billion at the start of the year to EUR3.7 billion, mainly reflecting lower corporate bond rates used to discount liabilities. Changes in the level and maturity profile of financial liabilities reflect bond issues and redemptions since the start of the year. Currency changes had significant effects on goodwill and financial liabilities. PRINCIPAL RISK FACTORS On pages 25 to 27 of our 2008 Report and Accounts we set out our assessment of the principal risk issues that would face the business through 2009, including global economic slowdown and changing consumer demand; competitive markets and consolidation of customers; financial risks relating to liquidity, currency, interest, pensions and taxation; exposure to developing and emerging markets; input costs, supplier and supply chain reliance; safety, sustainability and environment; restructuring and changes to the way we operate; and people and talent. In our view, the nature and potential impact of such risks remains essentially unchanged as regards our performance over the second half of 2009. COMPETITION LAW INVESTIGATIONS As previously reported, in June 2008 the European Commission initiated an investigation into potential competition law infringements in the European Union in relation to consumer detergents. Unilever has received a number of requests for information from the European Commission regarding the investigation and has been subject to unannounced investigations at some of its premises. No statement of objections against Unilever has been issued to date. It is too early to be able reasonably to assess the outcome or to estimate the fines which the Commission may seek to impose on Unilever as a result of this investigation, if determined against Unilever. Therefore no provision has been made. However, substantial fines can be levied as a result of European Commission investigations. Fines imposed in other sectors for violations of competition rules have amounted to hundreds of millions of euros. Unilever is, as previously reported, involved in a number of other on-going investigations by national competition authorities within the EU in relation to potential national competition law infringements, primarily in relation to the home care and personal care sectors. It is too early to be able reasonably to assess the outcome or to estimate the fines which the authorities may seek to impose on Unilever as a result of these national investigations, if determined against Unilever. Therefore no provision has been made. OTHER INFORMATION This document represents Unilever's half-yearly report for the purposes of the Disclosure and Transparency Rules (DTR) issued by the UK Financial Services Authority (DTR 4.2) and the Dutch Act on Financial Supervision, section 5:25d (8)/(9) (Half-yearly financial reports). In this context: (i) the condensed set of financial statements can be found on pages 6 to 14; (ii) pages 2 to 5 comprise the interim management report; and (iii) the Directors' responsibility statement can be found on page 15. No material related parties transactions have taken place in the first six months of the year. 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 any financial objectives, 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 and Accounts on Form 20-F. These forward-looking statements speak only as of the date of this announcement. 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 Investors: Investor Relations Team UK +44 20 7822 6805 [ tim.johns@unilever.com ] +44 20 7822 6830[ investor.relations@unilever.com ] or +44 20 7822 6010 [ trevor.gorin@unilever.com ] NL +31 10 217 4844 [ fleur-van.bruggen@unilever.com ] There will be a web cast of the results presentation available at: [ www.unilever.com/ourcompany/investorcentre/results/quarterlyresults/default.asp ] To view the full text of this press release, paste the following link into your web browser: [ http://www.rns-pdf.londonstockexchange.com/rns/9676W_1-2009-8-5.pdf ] This information is provided by RNS The company news service from the London Stock Exchange END