2nd Quarter & Interims, etc.

UNILEVER PLC UNILEVER NV 6 August 1999 UNILEVER RESUMES TOP-LINE GROWTH IN SECOND QUARTER -- pretax profit improves to £726 million -- Unilever resumed its top-line growth in the second quarter 1999, with sales improving 3% over last year. Operating profit before exceptional items grew 18% to £754 million, reflecting an improvement in overall margin from 9.3% to 10.5%. Pretax profit for the quarter was £726 million, an 8% increase. In the quarter, sales and profits in Asia and Pacific advanced strongly as the economies returned to growth. North America delivered good sales and profits growth and the businesses in Africa and Middle East also performed well. Sales were marginally ahead in Western Europe, but the continuing economic crisis in Russia left overall European sales flat. The sales increase in Latin America was constrained by the economic slowdown. For the six months, Unilever sales were £13,656 million, a 1% improvement over 1998. Operating profit before exceptional items improved by 9% to £1,399 million. Pretax profit rose 2% to £1,392 million. Second Quarter Half Year 1999 1998 £millions 1999 1998 7,150 6,911 +3% Turnover 13,656 13,504 +1% 707 637 +11% Operating Profit 1,331 1,292 +3% 754 641 +18% -before exceptional items- 1,399 1,286 +9% 726 672 +8% Pretax Profit 1,392 1,363 +2% Net Profit 458 444 +3% at constant exchange rates 890 868 +2% 489 439 +11% - before exceptional items - 936 859 +9% 444 437 +2% at current exchange rates 866 863 -% Earnings 6.15p 5.84p +5% per 1.40p (1998:1.25p) 11.81p 11.54p +2% ord PLC share 6.00p 5.69p +5% per 1.40p (1998: 1.25p) 11.52p 11.26p +2% ord PLC share - diluted OUTLOOK: Chairman Niall FitzGerald comments: 'Overall, economic conditions in the second half of 1999 should be largely unchanged, although the specific impact of the Year 2000 changeover is difficult to predict. Some acceleration of economic growth in Western Europe may be balanced by slower growth in North America. The recovery in East Asia could be countered by continuing difficulties in Latin America and Eastern Europe. 'We expect top-line growth in the second half of 1999 to be at least that recorded in the second quarter. We are confident that margins, before exceptional items, will continue to improve. Net profit will be affected by lower interest earnings following the payment of the special dividend, but earnings per share growth will reflect the share consolidation.' BUSINESS PERFORMANCE FOR HALF-YEAR The first half-year has seen improved profitability in North America and Asia & Pacific, but progress in Europe and Latin America has been constrained by specific economic factors. Europe: sales declined 2% mainly due to much lower demand in Eastern Europe and a further portfolio pruning in foods. Home and personal care businesses in Western Europe again achieved good sales growth. Foods sales were lower but improved as the year progressed. Operating profit was flat, but margin improvement accelerated during the six months. North America: sales were up 1% with good performances in home and personal care compensating for the first quarter decline in foods. Profits were up strongly across operations, the result of focused investment and a simpler organisation. Africa & Middle East: sales were up 7% and profits grew strongly as a result of good performances in Arabia and South Africa. Margins well ahead of last year as result of portfolio focus. Asia & Pacific: the economies are recovering. This is reflected in sales and profit growth, with another strong performance in India and good results in Indonesia and Vietnam. Latin America: sales were up 3% due to price increases prompted by currency devaluations, mainly in Brazil. Operating profit was also slightly up. Marketing investment has been increased behind strong market positions. BALANCE SHEET & CASH FLOW Net funds at the half year were close to zero at closing exchange rates, compared to £4.1 billion at 31/12/98. This is mainly due to the special dividend of £4 billion together with the normal part of the final dividend for 1998. Capital and reserves increased by £1.5 billion to £4.9 billion at the half year. Cash flow from operating activities for the half year increased by £0.4 billion, compared to the same period last year, reflecting strong underlying cash generation. Enquiries Telephone: Press Office 0171 822 6805 E-mail: press-office.london@unilever.com Internet: http://www.unilever.com UNILEVER RESULTS Second Quarter and Half Year 1999 The directors of Unilever announce the Group's unaudited consolidated results for the second quarter and half year 1999. SECOND QUARTER 1999 Top-line growth resumed in the second quarter. At constant rates of exchange, sales increased by 3% over the corresponding period last year. In Western Europe sales were marginally ahead, but the continuing economic crisis in Russia left overall European sales flat. North America delivered good growth, particularly in personal care categories. Our businesses in Africa and Middle East performed well. In Asia and Pacific sales advanced strongly as the economies returned to growth. The sales increase in Latin America was constrained by the economic slowdown. Operating profit before exceptional items was up 18%, reflecting sustained margin improvement. After exceptional items operating profit increased by 11%, due to higher net restructuring charges than in 1998. Net profit before exceptional items increased 11%. The increase of 3% in net profit after exceptional items reflects lower interest income and a higher tax rate. At current rates of exchange, net profit increased 2% in sterling and guilders and decreased by 1% in US dollars. Taking account of the share consolidation element at the time of the special dividend payment, earnings per share increased by 5% in sterling, 6% in guilders and 2% in US dollars. HALF YEAR 1999 Financial Results At constant rates of exchange, sales increased by 1%. Operating profit before exceptional items was up 9%. Higher net exceptional charges resulted in operating profit after exceptional items increasing 3%. Net profit increased 2%. At current rates of exchange, net profit was unchanged in sterling and decreased 2% in both guilders and US dollars. Taking account of the share consolidation, earnings per share increased by 2% in sterling and were unchanged in guilders and in US dollars. Business Performance The first half year has seen improved profitability in North America and Asia & Pacific, but progress in Europe and Latin America has been constrained by specific economic factors. The following commentary is based on operating profit before exceptional items, at constant rates of exchange. In Europe, the sales decline of 2% is mainly attributable to much lower demand in Eastern Europe and the results of further portfolio pruning in foods. Our home and personal care businesses in Western Europe again achieved good sales growth. Whilst foods sales were lower than last year, they improved as the year progressed. Operating profit was flat, but margin improvement accelerated during the six months. In North America, sales were up 1% with good performances in home and personal care compensating for the first quarter decline in foods. Profits were up strongly across our operations, the result of focused investment and a simpler organisation. In Africa and Middle East, sales were up 7%. Profits grew strongly as a result of good performances in Arabia and South Africa. Margins were well ahead of last year as a result of our portfolio focus. In Asia & Pacific, the economies are recovering. This is reflected in growth in sales and profit, with another strong performance in India and good results in Indonesia and Vietnam. In Latin America, sales were up 3%, due to price increases prompted by currency devaluations, mainly in Brazil. Operating profit was also slightly up. We have increased marketing investments behind our strong market positions. OUTLOOK FOR 1999 Overall, economic conditions in the second half of 1999 should be largely unchanged, although the specific impact of the Year 2000 changeover is difficult to predict. Some acceleration of economic growth in Western Europe may be balanced by slower growth in North America. The recovery in East Asia could be countered by continuing difficulties in Latin America and Eastern Europe. We expect top-line growth in the second half of 1999 to be at least that recorded in the second quarter. We are confident that margins, before exceptional items, will continue to improve. Net profit will be affected by lower interest earnings following the payment of the special dividend, but earnings per share growth will reflect the share consolidation. Year 2000 In 1996 Unilever began a comprehensive programme to deal with the Year 2000 changeover. The first phase, dealing with internal compliance and covering more than 115,000 information and process control systems is now complete. The second phase, focusing on the risks arising from supply or service interruptions is also complete. It is difficult to assess the impact of any such interruptions resulting from Year 2000 failures. However, we believe we have taken the necessary action to mitigate the risks of disruption to the business during the date changeover period. We believe infrastructure services to be the most likely source of business interruptions. Detailed business continuity plans will be in place in each business by end September. Cumulatively we have spent £150 million on this programme. The current estimated total expenditure of protecting business continuity throughout the millennium change period is around £275 million. This includes all external costs, associated depreciation on capital expenditure, and directly related internal costs during the period from 1996 to completion of the programme, which will extend beyond 2000. European Monetary Union We are publishing supplementary results information in euro throughout 1999 and will replace the guilder and sterling with the euro as the reporting currency from the first quarter 2000. Following this change supplementary information will be available in sterling. We have made all the necessary changes to our internal transaction systems and have, since 1 January 1999, undertaken euro contracts covering foreign exchange, deposits and short term borrowings. Supplementary information in euro is given in the attachment to this announcement. Balance Sheet and Cash Flow The main movements in the balance sheet at the half year were in Net funds and Trade and other creditors. Net funds, at closing rates of exchange, were close to zero at the half year, compared to £4.1 billion at the end of l998. The decrease in funds is mainly due to the special dividend of £4 billion, together with the normal part of the final dividend for 1998. As is normal, working capital was somewhat higher at the half year due to seasonal factors. Capital and reserves increased by £1.5 billion to £4.9 billion at the half year. This reflects profits for the period together with the issue of 211 million of Preference Shares, amounting to £0.9 billion in value, issued to those shareholders in Unilever NV who elected to receive the special dividend in this form. Cash flow from operating activities for the half year increased by £0.4 billion, compared to the same period last year, reflecting strong underlying cash generation. CONSOLIDATED PROFIT AND LOSS ACCOUNT - CONSTANT EXCHANGE RATES (unaudited) In the profit and loss account given below, the results in both years have been translated at constant exchange rates, being the annual average exchange rates for 1998. This reporting convention facilitates comparisons since the impact of exchange rate fluctuations is eliminated. Second Quarter £ Millions Half Year 1999 1998 Increase 1999 1998 Increase 7,150 6,911 3 % TURNOVER 13,656 13,504 1 % 707 637 11 % OPERATING PROFIT 1,331 1,292 3 % 754 641 18 % Operating Profit before 1,399 1,286 9 % exceptional items 10 7 Income from fixed investments 17 12 9 28 Interest (net) 44 59 726 672 8 % PROFIT BEFORE TAXATION 1,392 1,363 2 % (232) (194) Taxation (441) (440) 494 478 3 % PROFIT AFTER TAXATION 951 923 3 % (36) (34) Minority Interests (61) (55) 458 444 3 % NET PROFIT AT CONSTANT 1998 890 868 2 % EXCHANGE RATES 489 439 11 % Net Profit before exceptional 936 859 9 % items 444 437 2 % NET PROFIT AT EXCHANGE RATES 866 863 - % CURRENT IN EACH PERIOD COMBINED EARNINGS PER SHARE * 6.15p 5.84p 5 % -per 1.40p(1998: 1.25p)ordinary 11.81p 11.54p 2 % share 6.00p 5.69p 5 % -per 1.40p(1998: 1.25p)ordinary 11.52p 11.26p 2 % share-diluted * See note on 'Share Consolidation' STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES (unaudited) £ millions Half Year 1999 1998 Net profit 866 863 Currency retranslation (98) (130) Total recognised gains 768 733 SUMMARY BALANCE SHEET (unaudited) £ millions As at 3 July As at 31 December 1999 1998 Goodwill 310 200 Fixed assets 5,721 5,885 Stocks 3,411 3,351 Debtors 5,109 4,755 Cash and current investments 4,569 7,329 Trade & other creditors (6,418) (11,586) 12,702 9,934 Borrowings 4,567 3,250 Provisions for liabilities and charges 2,911 3,044 Minority interests 328 288 Capital and reserves 4,896 3,352 12,702 9,934 CASH FLOW STATEMENT (unaudited) £ Millions Half Year 1999 1998 Cash flow from operating activities 1,423 1,058 Returns on investments and servicing of finance 21 21 Taxation (424) (334) Capital expenditure and financial investment (521) (426) Acquisitions and disposals (108) (33) Dividends paid on ordinary share capital (4,207) (466) CASH INFLOW / (OUTFLOW) BEFORE MANAGEMENT OF LIQUID RESOURCES AND FINANCING (3,816) (180) Management of liquid resources 2,628 (156) Financing 1,855 440 INCREASE IN CASH IN THE PERIOD 667 104 RECONCILIATION OF CASH FLOW TO MOVEMENT IN NET FUNDS NET FUNDS AT 1 JANUARY 4,079 3,183 INCREASE IN CASH IN THE PERIOD 667 104 Cash flow from (increase)/decrease in borrowings (1,862) (440) Cash flow from increase(decrease)in liquid (2,628) 156 resources Change in net funds resulting from cash flows (3,823) (180) Borrowings within group companies acquired (1) (17) Borrowings within group companies sold 3 1 Liquid resources within group companies acquired 1 - Liquid resources within group companies sold - (1) Non cash movements (13) 14 Currency retranslation (244) (14) MOVEMENT IN NET FUNDS IN THE PERIOD (4,077) (197) NET FUNDS AT HALF YEAR 2 2,986 GEOGRAPHICAL ANALYSIS Second Quarter £ Millions Half Year 1999 1998 % Incr./ 1999 1998 %Incr./ (Decr.) (Decr.) Turnover 3,374 3,389 - % Europe 6,318 6,446 (2)% 1,444 1,372 5 % North America 2,785 2,754 1 % 403 367 10 % Africa and Middle East 776 728 7 % 1,078 972 11 % Asia and Pacific 2,077 1,921 8 % 851 811 5 % Latin America 1,700 1,655 3 % 7,150 6,911 3 % TURNOVER 13,656 13,504 1 % Operating profit - before exceptional items 397 383 4 % Europe 687 690 - % 129 87 48 % North America 233 190 23 % 45 40 13 % Africa and Middle East 92 73 26 % 102 65 56 % Asia and Pacific 209 159 31 % 81 66 21 % Latin America* 178 174 2 % 754 641 18 % Sub-total 1,399 1,286 9 % (47) (4) Exceptional Items (68) 6 707 637 11 % OPERATING PROFIT 1,331 1,292 3 % Operating margin - % % before exceptional items % % 11.8% 11.3% Europe 10.9% 10.7% 9.0% 6.4% North America 8.4% 6.9% 11.2% 10.9% Africa and Middle East 11.9% 10.1% 9.5% 6.8% Asia and Pacific 10.1% 8.3% 9.5% 8.2% Latin America 10.5% 10.5% 10.5% 9.3% OPERATING MARGIN BEI 10.2% 9.5% 9.9% 9.2% OPERATING MARGIN 9.7% 9.6% * Note: At current rates of exchange for the first half year 1999 operating profit for Latin America reduces by approximately £27 million, reflecting the currency devaluations in the region. OPERATIONAL ANALYSIS Second Quarter £ Millions Half Year 1999 1998 % Incr. 1999 1998 % Incr. / (Decr.) /(Decr.) TURNOVER 3,714 3,738 (1)% Foods 6,984 7,185 (3)% 1,187 1,211 (2)% Oil and dairy based foods and bakery 2,407 2,494 (3)% 1,435 1,431 - % Ice cream and beverages 2,345 2,396 (2)% 1,092 1,096 - % Culinary and frozen products 2,232 2,295 (3)% 1,596 1,474 8 % Home Care and Professional Cleaning 3,113 2,943 6 % 1,753 1,614 9 % Personal Care 3,381 3,189 6 % 87 85 2 % Other Operations 178 187 (5)% 7,150 6,911 3 % TURNOVER 13,656 13,504 1 % OPERATING PROFIT - before exceptional items 389 357 9 % Foods 615 611 1 % 108 90 19 % Oil and dairy based foods and bakery 228 206 10 % 182 164 11 % Ice cream and beverages 193 202 (4)% 99 103 (4)% Culinary and frozen products 194 203 (4)% 138 131 5 % Home Care and Professional Cleaning 319 282 13 % 210 132 59 % Personal Care 433 348 25 % 17 21 (22)% Other Operations 32 45 (29)% 754 641 18 % Subtotal 1,399 1,286 9 % (47) (4) Exceptional items (68) 6 707 637 11 % OPERATING PROFIT 1,331 1,292 3 % % % OPERATING MARGIN - before exceptional items % % 10.5% 9.6% Foods 8.8% 8.5% 9.1% 7.5% Oil and dairy based foods and bakery 9.5% 8.3% 12.7% 11.4% Ice cream and beverages 8.3% 8.4% 9.0% 9.4% Culinary and frozen products 8.7% 8.8% 8.7% 8.9% Home Care and Professional Cleaning 10.3% 9.6% 12.0% 8.2% Personal Care 12.8% 10.9% 18.9% 24.7% Other Operations 17.8% 24.1% 10.5% 9.3% OPERATING MARGIN BEI 10.2% 9.5% 9.9% 9.2% OPERATING MARGIN 9.7% 9.6% NOTES Acquisitions In the first half 1999 the effect on turnover and operating profit of acquisitions made in the period was £19 million and a £1 million loss respectively. Exchange Rates The results for 1999 and the comparative figures for 1998 have been translated at constant average rates of exchange, being the annual average rates for 1998. For our reporting currencies these were £1 = Fl. 3.29 = US $1.66. In addition, the results, earnings per share and cash flow statement have been translated at rates current in each period. For our reporting currencies these were: Second Quarter Half Year 1999 £1 = Fl. 3.35 = US $ 1.61 £1 = Fl. 3.29 = US $ 1.62 1998 £1 = Fl. 3.33 = US $ 1.65 £1 = Fl. 3.36 = US $ 1.65 The balance sheet figures have been translated at period-end rates of exchange. For our reporting currencies these were £1 = Fl. 3.40 = US $1.58 at the half year (31 December 1998: £1 = Fl. 3.12 = US $1.66). Change in Accounting Standards Following the adoption of United Kingdom Financial Reporting Standard 14 'Earnings per share', dividends paid on own shares held internally to meet Employee Share Option plans have been excluded both from the results for the period and from dividends. 1998 figures have been restated on the same basis. Share consolidation On 9th June 1999 the 1.25p Ordinary shares of plc were consolidated, so that every 112 1.25p ordinary shares was replaced by 100 1.40p ordinary shares. This consolidation was associated with the payment of a special dividend of 66.13p per 1.25p share, so that the economic impact was that of a share buy back at fair value and therefore, in accordance with UK Accounting Standard FRS14, earnings per share for prior periods have not been restated. Dates The results for the third quarter and announcement of interim dividends will be published on Friday 5 November 1999. This announcement will include interim balance sheet and cash flow information. Salient figures for the above results will be published in the Financial Times and Daily Telegraph on Saturday 7th August 1999. Enquiries: Unilever Press Office 0171 822 6805 Email: press-office.london@unilever.com Internet: http://www.unilever.com

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