3rd Quarter Results
Unilever PLC
01 November 2007
THIRD QUARTER AND NINE MONTH RESULTS 2007 AND INTERIM DIVIDENDS
KEY FINANCIALS
(unaudited)
Third Quarter 2007 € million Nine Months 2007
Increase/(Decrease) Increase/(Decrease)
Current Current Constant Current Current Constant
rates rates rates rates rates rates
Continuing operations:
10 243 1 % 4 % Turnover 30 297 1 % 4 %
1 403 (7)% (4)% Operating profit 4 148 (5)% (1)%
1 370 21 % 24 % Pre-tax profit 4 114 9 % 11 %
1 069 37 % 40 % Net profit from continuing operations 3 274 17 % 20 %
1 068 31 % 34 % Net profit from total operations 3 349 15 % 18 %
0.35 44 % 47 % EPS from continuing operations (Euros) 1.07 20 % 23 %
0.35 38 % 40 % EPS from total operations (Euros) 1.10 17 % 20 %
THIRD QUARTER RESULTS SUSTAIN MOMENTUM
HIGHLIGHTS
Financial Highlights
• Underlying sales growth of 5.3% in the first nine months. Third quarter
underlying sales growth of 4.5% (5.2% adjusted for systems change in the US
which pulled sales forward into the second quarter).
• Operating margin of 13.7% in the quarter and in the first nine months, with
an underlying improvement of 0.2 percentage points and 0.3 percentage
points respectively.
• Earnings per share from continuing operations up 20% in the first nine
months, with an increased contribution from joint ventures and associates,
lower financing costs, and a lower tax rate.
Operational Highlights
• Growth momentum sustained across regions and categories, broadly in line
with markets.
• Further sharp rise in commodity costs offset by increased pricing and
strong contribution from savings programmes.
• Good progress in implementation of accelerated restructuring plans and
portfolio development. Restructuring charges of €234 million charged to
operating profit in the third quarter.
Interim dividend
• Interim dividend of €0.25 per NV share and 17.00p per PLC share.
GROUP CHIEF EXECUTIVE COMMENT
'The third quarter marks a continuation of the momentum established in the first
half of 2007.
The focus on our growth priorities, together with stronger innovation, improved
speed to market and better in-market execution, is delivering consistent and
sustainable organic growth.
At the same time, we have seen a third consecutive quarter of underlying
improvement in operating margins, despite a significantly tougher cost
environment. Commodity pressures have increased sharply, but we have
successfully offset these through timely pricing action and continued delivery
from our savings programmes.
We have made a strong start in implementing the accelerated change programme
announced in August. In the third quarter, we have progressed the establishment
of several new multi-country organisations as well as significant supply chain
restructuring in Europe. We have also announced a number of portfolio changes,
including the extension of our international Lipton ready-to-drink-tea joint
venture with PepsiCo.
Looking forward, I am confident that we will achieve our outlook for 2007, given
in August, and that our change programme leaves us well placed to deliver our
longer term objectives.'
Patrick Cescau, Group Chief Executive 1 November 2007
ENQUIRIES
Media: Media Relations Team Investors: Investor Relations Team
UK +44 20 7822 6805 tim.johns@unilever.com UK +44 20 7822 6830 investor.relations@unilever.com
NL +31 10 217 4844 US +1 201 894 2615 investor.relations-NewYork@unilever.com
tanno.massar@unilever.com
There will be a web cast of the results presentation available at:
www.unilever.com/ourcompany/investorcentre/results/quarterlyresults/default.asp
UNILEVER THIRD quarter results 2007 AND INTERIM DIVIDENDS
In the following commentary we report underlying sales growth (USG) at constant
exchange rates, excluding the effects of acquisitions and disposals. Turnover
includes the impact of exchange rates and acquisitions and disposals. Unilever
uses 'constant rate' and 'underlying' measures primarily for internal
performance analysis and targeting purposes. We also use the movements in
Ungeared Free Cash Flow and Return On Invested Capital to measure progress
against our longer-term value creation goals. Unilever believes that such
measures provide additional information for shareholders on underlying business
performance trends. Such measures are not defined under IFRS or US GAAP and are
not intended to be a substitute for GAAP measures of turnover, profit and cash
flow. Further information about these measures is available on our website at
www.unilever.com/ourcompany/investorcentre.
1. SUMMARY OF BUSINESS PERFORMANCE FOR THE THIRD QUARTER
Underlying sales grew by 4.5% in the third quarter. This sustained the positive
momentum of the first half year. But for the systems implementation in the US,
which boosted the second quarter by 0.7% and reduced the third quarter by the
same amount, the third quarter underlying sales growth would have been 5.2%.
The underlying sales growth for the first nine months was 5.3% with consistent
performance across all three quarters. There has been an increasing
contribution from pricing, to 2.1% in the third quarter, as we take increases
against sharply rising commodity costs.
The steady underlying improvement in Europe has continued, with 1.9% growth in
the first nine months. The third quarter growth, at 0.7%, was lower, primarily
due to the effect of weather on ice cream sales, which reduced overall European
growth in the quarter by about 2 percentage points. The Americas were up by
4.2% in the first nine months, with solid growth of 3.6% in the US and 5.1%
growth in Latin America. Asia Africa is showing consistent, broad-based growth
across countries and categories, up by 11.4% in the first nine months.
All categories are showing good, volume-driven, growth in the first nine months.
Savoury, dressings, spreads and home care performed particularly well in the
third quarter. In ice cream and beverages, there has been sustained strong
growth in developing and emerging markets, but lower sales in Europe in the
third quarter. Personal care had a slower third quarter, after a strong start
to the year, partly reflecting the different phasing of innovation and the US
systems implementation.
Investment in advertising and promotions is being focused behind priority
initiatives and has been increased broadly in line with sales in the first nine
months.
Material costs continue to increase sharply, but we have been able to more than
counter this over the first nine months through savings programmes and pricing
actions. In the third quarter, the impact of higher commodity costs was 2.5
percentage points of sales, but this was offset by price growth and an increased
level of savings.
2. FINANCIAL COMMENTARY
2.1 Turnover
The underlying sales growth of 4.5% in the quarter and 5.3% in the first nine
months was partly offset by the effects of disposals and exchange rates to leave
turnover ahead by 1.2% for the quarter and by 1.3% for the year to date.
2.2 Operating profit
Operating profit was 6.6% lower in the quarter. The operating margin at 13.7%
was 1.1 percentage points lower than a year ago because of a higher level of
restructuring costs. Before the impact of restructuring, disposals and
impairments, the operating margin was 0.2 percentage points higher in the
quarter. Advertising and promotions as a percentage of sales was 0.4 points
lower than last year.
For the first nine months, operating profit was 4.6% lower than a year ago. The
operating margin at 13.7% included a higher level of restructuring charges and
less profit on disposals. Before these items the operating margin was 0.3
percentage points higher than a year ago.
2.3 Finance costs and tax
Costs of financing net borrowings were 4.3% lower than last year in the quarter
with the benefits of a lower level of net debt more than offsetting higher
rates. For the first nine months, the cost of financing net borrowings was 19%
lower.
In the third quarter of last year, a provision of €300 million was taken in
relation to the 2005 conversion of preference shares issued in 1999. We are
close to making the final payments and, with fees, the overall cost is some €310
million.
The credit on pensions financing increased to €42 million in the third quarter
and €109 million for the first nine months, reflecting an improved funding
position of our schemes and higher expected equity returns.
The tax rates of 22% in the quarter and 21% in the first nine months were lower
than last year mainly reflecting the favourable settlement of tax audits and a
better country mix. We now expect a tax rate of around 23% for the full year
2007.
2.4 Joint Ventures, associates and other income from non-current investments
Our share in net profit from joint ventures has increased by around 50% in the
quarter and by around 60% in the first nine months, mainly driven by continuing
strong growth in the partnerships between Lipton and PepsiCo for ready-to-drink
tea.
The combined share of net profit in associates and other income was slightly
lower in the quarter but has increased to €88 million in the first nine months,
from €30 million last year. This mainly reflects a gain in the first quarter in
one of our venture capital funds.
2.5 Net profit and earnings per share
Net profit from continuing operations grew by 37% in the quarter and by 17% in
the first nine months. EPS on the same basis grew by 44% and by 20%
respectively.
Net profit, including discontinued operations, increased by 31% in the quarter
and by 15% in the first nine months, with earnings per share on this basis up by
38% and 17%.
2.6 Dividends
In accordance with policy, the interim dividend has been set at 35% of last
year's total dividend, based on the stronger of the two reporting currencies
over the first nine months, which for this period was Sterling. The interim
dividend, to be paid on 5 December 2007, is therefore fixed at 17.00p per 3 1/9p
ordinary share of Unilever PLC, an increase of 9% from last year. The interim
dividend per €0.16 ordinary share of Unilever N.V., is set at €0.25, also an
increase of 9% from last year. The Unilever PLC shares will go ex-dividend on 7
November 2007, and the Unilever N.V. shares will go ex-dividend on 2 November
2007.
2.7 Share buy-backs
By the end of September we had bought back shares to a value of €1.1 billion as
part of this year's planned €1.5 billion programme.
2.8 Cash flow
In the first nine months of the year, cash flow from operating activities was
€0.4 billion lower than in the same period of 2006. Cash flow from underlying
operations was up but was more than offset by higher cash outflows on
restructuring programmes and by working capital, particularly in Europe,
following a low position at the start of the year.
Other investing activities include higher profits in joint ventures and
associates.
The inflow on treasury stocks is largely from executive share option plans.
Other financing activities were €0.3 billion higher and include compensation
payments to former holders of preference shares.
2.9 Balance sheet
Improvements in the funding position of pension schemes are reflected in higher
assets for schemes in surplus and lower liabilities for schemes in deficit.
Deferred tax liabilities and assets have moved mainly in response to the
pensions changes.
The reduction in goodwill and intangible assets is due to the impact of a strong
euro on translating US dollar assets.
Working capital has increased from a particularly low point at the start of the
year. Trade payables and other current liabilities include obligations to
purchase shares under the buy-back programme.
2.10 Pensions
The funding position of the group's main pension schemes has improved since the
start of the year with higher valuations of assets, contributions and reduced
liabilities due to higher discount rates, net of slightly increased inflation
assumptions. Since the start of 2007 the changes have been incorporated in the
balance sheet each quarter.
The net liability for all schemes was €0.8 billion, a reduction from €3.1
billion at the start of the year. This includes funded schemes in surplus with
a net balance of €2.4 billion, funded schemes in deficit with a net balance of
€0.9 billion and unfunded schemes of €2.3 billion. Some previously unfunded
schemes are now partially funded.
3. OPERATIONAL REVIEW
3.1 Europe
Third Quarter 2007 Nine Months 2007
% %
% Underlying % Underlying
2007 2006 Change sales growth 2007 2006 Change sales growth
3 880 3 905 (0.6) 0.7 Turnover (€ million) 11 465 11 385 0.7 1.9
13.0 15.1 Operating Margin (%) 13.7 15.0
Includes:
(4.6) (1.1) - RDIs* (2.6) (0.6)
* Restructuring, business disposals and impairments
Growth
The region has sustained its steady improvement with underlying sales growth of
1.9% in the first nine months. Consumer demand is holding up across the region
and our business is benefiting from the 'One Unilever' programme and improved
innovation.
There have been positive contributions from Southern Europe (particularly Italy,
Spain and Greece) and from Central and Eastern Europe (notably Russia and
Poland). Our businesses in France and Germany have continued to improve. In
the UK, performance has been mixed with market share gain in dressings and
deodorants, but share loss in hair care and laundry.
The weather in Northern Europe hit ice cream sales in the third quarter reducing
overall growth in Europe by 2 percentage points to 0.7%. However, with a strong
innovation and marketing programme, we have gained market share in ice cream and
after a good start to the season, sales for the first nine months have been
broadly in line with last year.
Volumes grew by 2.5% for the year to date. We have been increasing prices in a
number of categories, but have also responded to a step-up in competitor
promotional activity in a number of markets. This, together with lower olive
oil prices led to a small overall reduction in pricing in the first nine months.
Accelerating change
There has already been substantial progress with portfolio development and
restructuring. We agreed to expand the successful international joint venture
for Lipton ready-to-drink tea with PepsiCo to include all countries in Europe,
and plan to sell the Boursin brand. We have furthered moves to three new
multi-country organisations and have announced the streamlining or closure of
factories in four countries.
Innovation
Innovations continue to be targeted at Vitality opportunities. We have
introduced Lipton Linea slimming teas to France, Switzerland and Portugal and
have rolled-out Knorr Vie shots to Germany. Growth in Hellmann's has been
boosted by the new light mayonnaise with citrus fibre technology. In ice cream,
a strong innovation programme this year has seen Frusi frozen yoghurt with
wholegrain cereals and real fruit pieces, complementing fresh initiatives behind
Magnum.
Clear anti-dandruff shampoo has been launched in Russia, at the same time as
launches in Asia and Latin America, with good initial results. The new Dove
pro-age range of products specifically designed for the over 50's is building
well in Europe as well as elsewhere. 'Small and mighty' concentrated liquid
laundry detergents have been launched in six European countries this year.
Profitability
The operating margin, at 13.7% for the first nine months, was 1.3 percentage
points lower than a year ago. This was entirely due to higher restructuring,
disposal and impairment costs. Before these items, the operating margin was 0.7
percentage points higher than a year ago. Savings programmes and a lower level
of advertising and promotions more than offset increases in materials and other
costs.
3.2 The Americas
Third Quarter 2007 Nine Months 2007
% %
% Underlying % Underlying
2007 2006 Change sales growth 2007 2006 Change sales growth
3 357 3 435 (2.3) 2.8 Turnover (€ million) 10 108 10 331 (2.2) 4.2
14.8 15.9 Operating Margin (%) 14.7 15.5
Includes:
(0.7) (0.7) - RDIs* (0.7) (0.2)
* Restructuring, business disposals and impairments
Growth
Underlying sales grew by 4.2% in the first nine months, with a robust
contribution from the US at 3.6%. Pricing is coming through well, with
increases being taken in most countries and categories and totalling 2.1% for
the region for the year to date.
Stocking-up by customers ahead of the implementation of a unified IT system (as
part of the 'One Unilever' programme) in the US boosted sales in the second
quarter and reduced sales in the third quarter by about €70 million. This
reduced the third quarter growth for the Americas by about 2 percentage points
to 2.8% but had no effect on the year to date.
In the US, consumer demand in our markets has so far been fairly robust. Our
sales have grown well in the first nine months in most categories. In the third
quarter, there were particularly good performances by Skippy spreads, Bertolli
frozen meals and Hellmann's mayonnaise. However, it was a weaker quarter in
personal care with a different phasing of innovation this year and some share
loss in skin care in a very competitive market. In ice cream, sales are down
for the year to date as higher prices were offset by lower volume.
Our business in Mexico has made further progress and grew well in the quarter.
The improved performance was driven by Knorr savoury products, AdeS soy-based
drinks and Hellmann's mayonnaise. Sales in Brazil grew only modestly in the
first nine months in the face of increased competition from local manufacturers
in spreads, tomato products and skin care. In hair care, we have taken
significant price increases in Seda which led to lower sales in the quarter with
a sharp reduction in trade stocks and some share loss. There have been strong
performances overall in Canada, Argentina, Andina and Central America.
Accelerating change
During the quarter, we completed the creation of a joint venture with
Perdigao to develop our heart health margarine Becel and the disposal of our
local Brazilian margarine brands. We announced the integration of the North
American ice cream operations into our US and Canadian businesses.
Innovation
In Latin America, Knorr has been building its health credentials with new
varieties of bouillons and improved soups. Hellmann's 'real' campaign
highlights its simple ingredients, naturally rich in Omega 3, and a
cholesterol-free mayonnaise has been launched in the US. In ice cream, we have
extended Breyers 'double churn' in the US to fat-free, light and no sugar added
versions, while innovations in Latin America address both Vitality and low
income consumer opportunities. In the third quarter, cholesterol-lowering
mini-drinks, already successful in Europe, were introduced to the US as Promise
Activ SuperShots.
Innovation in personal care this year reflects the new more global approach.
Clear anti-dandruff shampoo has recently been launched in Brazil, while the Dove
pro-age range of skin, deodorants and shampoos has been introduced in the US at
the same time as in Europe. Axe now comes in the same new 'telescoping' can as
in Europe and the new variant Vice is available across the region.
Profitability
The operating margin, at 14.7% for the first nine months, was 0.8 percentage
points lower than a year ago, mainly due to a higher level of restructuring,
disposal and impairment costs. Before these items the margin was 0.3 percentage
points lower than last year. With flat advertising and promotions, sharp
increases in material and other costs have not yet been fully offset by price
increases and savings programmes.
3.3 Asia Africa
Third Quarter 2007 Nine Months 2007
% %
% Underlying % Underlying
2007 2006 Change sales growth 2007 2006 Change sales growth
3 006 2 782 8.1 11.7 Turnover (€ million) 8 724 8 199 6.4 11.4
13.3 13.1 Operating Margin (%) 12.5 12.6
Includes:
(0.6) (0.5) - RDIs* (0.6) 0.1
* Restructuring, business disposals and impairments
Growth
The region had another strong quarter, taking the growth for the first nine
months to 11.4%. Demand remains buoyant in most countries and we are growing in
line with our markets in home and personal care and gaining share in foods.
Pricing is making an increasing contribution, with 3.2% for the year to date.
Growth is broad-based by category and country. India has delivered consistent
double-digit growth in the first three quarters. In laundry, hair care and tea,
we have successfully implemented price increases to offset rising costs. Sales
in China are up by close to 20% in the first nine months, with all categories
contributing and tea, savoury, and hair care particularly strong.
Growth in Indonesia has been driven by foods categories, off a small base, and
by further building of our personal care brands. Thailand has continued to
improve through the year after a disappointing 2006. Japan had a good quarter
driven by innovation in tea and personal care and has shown modest growth for
the first nine months. Australia is also ahead for the year to date, but
declined in the third quarter in competitive markets and against a tougher
comparator.
Turkey has been having a good year, particularly benefiting from a successful
cabinet placement programme in ice cream. Our business in South Africa has
enjoyed broad-based growth and has taken price increases, particularly in
personal care.
Accelerating change
In the third quarter, we announced the acquisition of the Buavita brand of
fruit-based vitality drinks in Indonesia. We have also announced the
reorganisation of our shareholdings in South Africa and Israel helping to
facilitate the 'One Unilever' organisation.
Innovation
The new, more global, approach to innovation is evident in this year's
programme. Clear anti-dandruff shampoo has been launched in China, Arabia,
Egypt, Pakistan and the Phillipines. In Japan, we have followed up the launch of
Axe with the introduction of Dove pro-age in the third quarter. An improved
range of Dove shower products has just been extended to North East Asia,
while in India we have introduced a new variant of Lifebuoy soap and in
the third quarter launched the latest version of Axe.
The 'Moo' range of ice creams containing super absorbent calcium for children's
development continues to be extended through the region. Knorr seasonings are
being rejuvenated with premium ingredients, as in Europe, and in China we are
launching a new form of Knorr bouillions for preparing thick soups. At the same
time, milk tea powders have been launched under the Lipton brand in South East
Asia.
Profitability
The operating margin of 12.5% for the first nine months was broadly in line with
last year. There was a net charge for restructuring, disposals and impairments
this year compared with a small profit last year. Before these items the
operating margin was 0.6 percentage points higher than a year ago. The
improvement was driven by the benefits of volume growth, pricing actions and the
delivery of savings programmes. These more than offset higher input costs and
an increased level of advertising and promotions.
SAFE HARBOUR 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' 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,
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.
OTHER INFORMATION
Supplementary information in US dollars and sterling is available on our website
at: www.unilever.com/ourcompany/investorcentre.
The results for the fourth quarter and for the year 2007 will be published on 7
February 2008.
CONDENSED INTERIM FINANCIAL STATEMENTS
INCOME STATEMENT
(unaudited)
Third Quarter € million Nine Months
2007 2006 Increase/ 2007 2006 Increase/
(Decrease) (Decrease)
Current Constant Current Constant
rates rates rates rates
Continuing operations:
10 243 10 122 1 % 4 % Turnover 30 297 29 915 1 % 4 %
1 403 1 501 (7)% (4)% Operating profit 4 148 4 346 (5)% (1)%
After (charging)/crediting:
(234) (74) Restructuring (475) (235)
16 (4) Business disposals and impairments 61 151
(64) (403) Net finance costs (204) (638)
50 33 Finance income 121 101
(161) (149) Finance costs (424) (473)
5 (300) Preference shares provision (10) (300)
42 13 Pensions and similar obligations 109 34
25 17 Share in net profit/(loss) of joint
ventures 82 51
(1) (2) Share in net profit/(loss) of associates 50 4
7 15 Other income from non-current investments 38 26
1 370 1 128 21 % 24 % Profit before taxation 4 114 3 789 9 % 11 %
(301) (349) Taxation (840) (1 002)
1 069 779 37 % 40 % Net profit from continuing operations 3 274 2 787 17 % 20 %
(1) 33 Net profit/(loss) from discontinued
operations 75 128
1 068 812 31 % 34 % Net profit for the period 3 349 2 915 15 % 18 %
Attributable to:
58 75 Minority interests 182 202
1 010 737 37 % 39 % Shareholders' equity 3 167 2 713 17 % 19 %
Combined earnings per share
0.35 0.25 44 % 47 % Continuing operations (Euros) 1.07 0.90 20 % 23 %
0.34 0.24 44 % 46 % Continuing operations - diluted (Euros) 1.04 0.87 19 % 22 %
0.00 0.00 Discontinued operations (Euros) 0.03 0.04
0.00 0.00 Discontinued operations - diluted (Euros)0.02 0.04
0.35 0.25 38 % 40 % Total operations (Euros) 1.10 0.94 17 % 20 %
0.34 0.24 37 % 40 % Total operations - diluted (Euros) 1.06 0.91 16 % 19 %
STATEMENT OF RECOGNISED INCOME AND EXPENSE
(unaudited)
€ million Nine Months
2007 2006
Fair value gains/(losses) on financial instruments net of tax 43 (551)
Actuarial gains/(losses) on pension schemes net of tax 1 125 6
Currency retranslation gains/(losses) net of tax (185) 323
Net income/(expense) recognised directly in equity 983 (222)
Net profit for the period 3 349 2 915
Total recognised income and expense for the period 4 332 2 693
Attributable to:
Minority interests 177 182
Shareholders' equity 4 155 2 511
CASH FLOW STATEMENT
(unaudited)
€ million Nine Months
2007 2006
Operating activities
Cash flow from operating activities 3 463 3 830
Income tax paid (871) (718)
Net cash flow from operating activities 2 592 3 112
Investing activities
Interest received 105 79
Net capital expenditure (634) (660)
Acquisitions and disposals 34 182
Other investing activities 212 55
Net cash flow from/(used in) investing activities (283) (344)
Financing activities
Dividends paid on ordinary share capital (1 518) (1 337)
Interest and preference dividends paid (331) (400)
Change in financial liabilities 1 387 (1 205)
Share buy-back programmes (1 144) -
Other movements on treasury stock 287 (5)
Other financing activities (473) (178)
Net cash flow from/(used in) financing activities (1 792) (3 125)
Net increase/(decrease) in cash and cash equivalents 517 (357)
Cash and cash equivalents at the beginning of the year 710 1 265
Effect of foreign exchange rate changes 28 317
Cash and cash equivalents at the end of period 1 255 1 225
BALANCE SHEET
(unaudited)
€ million As at As at As at
30 September 31 December 30 September
2007 2006 2006
Non-current assets
Goodwill and intangible assets 16 769 17 206 17 527
Property, plant and equipment 6 260 6 276 6 198
Pension asset for funded schemes in surplus 2 396 1 697 1 128
Deferred tax assets 960 1 266 1 373
Other non-current assets 1 214 1 126 1 099
Total non-current assets 27 599 27 571 27 325
Current assets
Inventories 4 120 3 796 3 930
Trade and other current receivables 4 995 4 254 4 563
Current tax assets 261 125 91
Other financial assets 237 273 413
Cash and cash equivalents 1 566 1 039 1 440
Non-current assets held for sale 146 14 509
Total current assets 11 325 9 501 10 946
Current liabilities
Financial liabilities (5 095) (4 458) (5 860)
Trade payables and other current liabilities (8 364) (7 838) (7 433)
Current tax liabilities (595) (579) (441)
Provisions (770) (1 009) (780)
Liabilities associated with non-current assets held for sale (43) - (237)
Total current liabilities (14 867) (13 884) (14 751)
Net current assets/(liabilities) (3 542) (4 383) (3 805)
Total assets less current liabilities 24 057 23 188 23 520
Non-current liabilities
Financial liabilities due after one year 4 944 4 377 5 160
Pensions and post-retirement healthcare benefits liabilities:
Funded schemes in deficit 874 1 379 2 051
Unfunded schemes 2 339 3 398 3 992
Provisions 754 826 788
Deferred tax liabilities 1 286 1 003 931
Other non-current liabilities 471 533 482
Total non-current liabilities 10 668 11 516 13 404
Equity
Shareholders' equity 12 883 11 230 9 704
Minority interests 506 442 412
Total equity 13 389 11 672 10 116
Total capital employed 24 057 23 188 23 520
NOTES TO THE FINANCIAL STATEMENTS
(unaudited)
1 SEGMENTAL ANALYSIS BY GEOGRAPHY
Continuing operations - Third Quarter
€ million Europe Americas Asia Africa Total
Turnover
2006 3 905 3 435 2 782 10 122
2007 3 880 3 357 3 006 10 243
Change (0.6)% (2.3)% 8.1% 1.2%
Impact of:
Exchange rates 0.2 % (4.6)% (2.9)% (2.3)%
Acquisitions 0.0 % 0.1 % 0.0 % 0.0 %
Disposals (1.5)% (0.5)% (0.4)% (0.9)%
Underlying sales growth 0.7 % 2.8 % 11.7 % 4.5 %
Price (0.6)% 4.1 % 3.2 % 2.1 %
Volume 1.3 % (1.3)% 8.2 % 2.3 %
Operating profit
2006 591 547 363 1 501
2007 504 498 401 1 403
Change current rates (14.7)% (9.0)% 10.3 % (6.6)%
Change constant rates (14.7)% (4.1)% 14.4 % (3.8)%
Operating margin
2006 15.1 % 15.9 % 13.1 % 14.8 %
2007 13.0 % 14.8 % 13.3 % 13.7 %
Includes restructuring, business disposals and
impairments
2006 (1.1)% (0.7)% (0.5)% (0.8)%
2007 (4.6)% (0.7)% (0.6)% (2.1)%
Continuing operations - Nine Months
€ million Europe Americas Asia Africa Total
Turnover
2006 11 385 10 331 8 199 29 915
2007 11 465 10 108 8 724 30 297
Change 0.7 % (2.2)% 6.4 % 1.3 %
Impact of:
Exchange rates 0.3 % (5.7)% (4.1)% (3.0)%
Acquisitions 0.1 % 0.1 % 0.1 % 0.1 %
Disposals (1.6)% (0.5)% (0.5)% (0.9)%
Underlying sales growth 1.9 % 4.2 % 11.4 % 5.3 %
Price (0.5)% 2.1 % 3.2 % 1.4 %
Volume 2.5 % 2.1 % 8.0 % 3.9 %
Operating profit
2006 1 712 1 603 1 031 4 346
2007 1 571 1 486 1 091 4 148
Change current rates (8.3)% (7.3)% 5.8 % (4.6)%
Change constant rates (8.4)% (1.4)% 11.0 % (1.2)%
Operating margin
2006 15.0 % 15.5 % 12.6 % 14.5 %
2007 13.7 % 14.7 % 12.5 % 13.7 %
Includes restructuring, business disposals and
impairments
2006 (0.6)% (0.2)% 0.1 % (0.3)%
2007 (2.6)% (0.7)% (0.6)% (1.4)%
2 SEGMENTAL ANALYSIS BY PRODUCT AREA
Continuing operations - Third Quarter
€ million Savoury, Ice cream Foods Personal Home care Home and Total
dressings and care and Personal
and spreads beverages other Care
Turnover
2006 3 321 2 170 5 491 2 870 1 761 4 631 10 122
2007 3 464 2 096 5 560 2 861 1 822 4 683 10 243
Change 4.3 % (3.4)% 1.3 % (0.3)% 3.5 % 1.1 % 1.2 %
Impact of:
Exchange rates (1.9)% (2.2)% (2.0)% (3.2)% (1.9)% (2.7)% (2.3)%
Acquisitions 0.1 % 0.0 % 0.1 % 0.0 % 0.0 % 0.0 % 0.0 %
Disposals (0.4)% (1.2)% (0.7)% (0.8)% (1.4)% (1.1)% (0.9)%
Underlying sales growth 6.6 % (0.1)% 4.0 % 3.8 % 7.1 % 5.0 % 4.5 %
Operating profit
2006 457 393 850 492 159 651 1 501
2007 489 341 830 457 116 573 1 403
Change current rates 7.1 % (13.2)% (2.3)% (7.3)% (27.2)% (12.1)% (6.6)%
Change constant rates 10.3 % (11.8)% 0.1 % (3.9)% (23.9)% (8.8)% (3.8)%
Operating margin
2006 13.8 % 18.1 % 15.5 % 17.2 % 9.0 % 14.1 % 14.8 %
2007 14.1 % 16.2 % 14.9 % 16.0 % 6.3 % 12.2 % 13.7 %
Continuing operations - Nine Months
€ million Savoury, Ice cream Foods Personal Home care Home and Total
dressings and care and Personal
and spreads beverages other Care
Turnover
2006 10 058 6 162 16 220 8 336 5 359 13 695 29 915
2007 10 216 6 151 16 367 8 471 5 459 13 930 30 297
Change 1.6 % (0.2)% 0.9 % 1.6 % 1.9 % 1.7 % 1.3 %
Impact of:
Exchange rates (2.6)% (2.8)% (2.7)% (3.7)% (3.0)% (3.4)% (3.0)%
Acquisitions 0.1 % 0.1 % 0.1 % 0.1 % 0.0 % 0.0 % 0.1 %
Disposals (0.5)% (1.1)% (0.8)% (1.0)% (1.2)% (1.1)% (0.9)%
Underlying sales growth 4.7 % 3.8 % 4.4 % 6.5 % 6.3 % 6.4 % 5.3 %
Operating profit
2006 1 494 937 2 431 1 442 473 1 915 4 346
2007 1 472 858 2 330 1 382 436 1 818 4 148
Change current rates (1.5)% (8.5)% (4.2)% (4.2)% (7.7)% (5.0)% (4.6)%
Change constant rates 1.7 % (6.0)% (1.3)% (0.4)% (3.4)% (1.1)% (1.2)%
Operating margin
2006 14.9 % 15.2 % 15.0 % 17.3 % 8.8 % 14.0 % 14.5 %
2007 14.4 % 13.9 % 14.2 % 16.3 % 8.0 % 13.1 % 13.7 %
3 ACCOUNTING INFORMATION AND POLICIES
The condensed interim financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRS) as adopted by the EU. The
basis of preparation is consistent with the year ended 31 December 2006 except
that:
• Finance lease creditors and funding-related derivatives have been
reclassified in the balance sheet in order to facilitate the presentation
of net debt. Comparatives for 31 December 2006 and 30 September 2006 have
been restated accordingly; and
• Line items relating to borrowings in the balance sheet have been renamed
to financial liabilities to align with the requirements of IFRS 7
'Financial Instruments - Disclosures' which Unilever has adopted as at
1 January 2007.
The condensed interim financial statements, which comply with IAS 34, are shown
at current exchange rates, while percentage year-on-year changes are shown at
both current and constant exchange rates to facilitate comparison.
The income statement on page 10, the statement of recognised income and expense
and the cash flow statement on page 11 and the movements in equity on page 17
are translated at rates current in each period.
The balance sheet on page 12 and the analysis of net debt on page 18 are
translated at period-end rates of exchange.
The financial statements attached do not constitute the full financial
statements within the meaning of Section 240 of the UK Companies Act 1985. Full
accounts for Unilever for the year ended 31 December 2006 have been delivered to
the Registrar of Companies. The auditors' report on these accounts was
unqualified and did not contain a statement under Section 237(2) or Section 237
(3) of the UK Companies Act 1985.
4 TAXATION
The tax rate for the first nine months of 2007 was 21.1% compared with 26.8% for
the first nine months of 2006. The tax rate is calculated by dividing the tax
charge by pre-tax profit excluding the contribution of joint ventures and
associates. The tax charge for the first nine months of 2007 includes €112
million (2006: €95 million) relating to United Kingdom taxation.
5 DISCONTINUED OPERATIONS
Operating profit of discontinued operations (excluding profit/loss on disposals)
was as follows:
Third Quarter
€ million Europe Americas Asia Africa Total
2006 44 - - 44
2007 - - - -
Nine Months
€ million Europe Americas Asia Africa Total
2006 163 - - 163
2007 - - - -
The net cash flows attributable to the discontinued operations in respect of
operating, investing and financing activities for the first nine months of 2007
were €(3) million, €81 million and €nil million respectively (2006: €83 million,
€13 million and €(1) million).
6 COMBINED EARNINGS PER SHARE
The earnings per share information given below, including the comparative
amounts for 2006, is expressed in terms of the nominal share values which have
applied since 22 May 2006 following the split of NV shares and the consolidation
of PLC shares which were approved at the 2006 AGMs.
The combined earnings per share calculations are based on the average number of
share units representing the combined ordinary shares of NV and PLC in issue
during the period, less the average number of shares held as treasury stock.
In calculating diluted earnings per share, a number of adjustments are made to
the number of shares, principally the following: (i) conversion into PLC
ordinary shares in the year 2038 of shares in a group company under the
arrangements for the variation of the Leverhulme Trust and (ii) the exercise of
share options by employees.
Earnings per share for total operations for the nine months were calculated as
follows:
2007 2006
Combined EPS Thousands of units
Average number of combined share units 2 880 727 2 882 122
€ million
Net profit attributable to shareholders' equity 3 167 2 713
Combined EPS (Euros) 1.10 0.94
Combined EPS - Diluted Thousands of units
Adjusted average number of combined share units 2 979 792 2 968 519
Combined EPS - diluted (Euros) 1.06 0.91
Earnings per share in US Dollars and Sterling
Combined EPS (Dollars) 1.48 1.17
Combined EPS - diluted (Dollars) 1.43 1.14
Combined EPS (Pounds) 0.74 0.64
Combined EPS - diluted (Pounds) 0.72 0.63
The numbers of shares included in the calculation of earnings per share is an
average for the period. These numbers are influenced by the share buy-back
programme that we have undertaken during 2007. During that period the following
movements in shares have taken place:
Millions
Number of shares at 31 December 2006 (net of treasury stock) 2 889.9
Net movements in shares under incentive schemes 20.8
Share buy-back (51.2)
Number of shares at 30 September 2007 2 859.5
7 DIVIDENDS
The Boards have declared interim dividends in respect of 2007 on the ordinary
shares at the following rates which are equivalent in value at the rate of
exchange applied under the terms of the Equalisation Agreement between the two
companies:
Per Unilever N.V. ordinary share: €0.25 (2006: €0.23)
Per Unilever PLC ordinary share: 17.00p (2006: 15.62p)
The NV interim dividend will be payable as from 5 December 2007, to shareholders
registered at close of business on 6 November 2007.
The PLC interim dividend will be paid on 5 December 2007, to shareholders
registered at close of business on 9 November 2007.
The NV interim dividend, when converted at the Euro/Dollar European Central Bank
rate of exchange on 31 October 2007, represents US $0.3612 per New York Share
of €0.16 (2006: US $0.2934) before deduction of Netherlands withholding tax.
The New York shares of NV will go ex-dividend on 2 November 2007; US dollar
checks for the interim dividend, after deduction of Netherlands withholding tax
at the appropriate rate, will be mailed on 4 December 2007, to holders of record
of New York shares at the close of business on 6 November 2007. The interim
dividend will be payable on 5 December 2007.
Each American Depositary Receipt of PLC represents one 3 1/9p ordinary share of
PLC. When converted at the Bank of England Sterling/Dollar rate of exchange on
31 October 2007, the interim dividends for holders resident in the US will
therefore be US $0.3525 per American Depositary Receipt (2006: US $0.2983).
The American Depositary Receipts of PLC will go ex-dividend on 7 November 2007;
US dollar checks for the interim dividend will be mailed on 4 December 2007 to
holders of record of American Depositary Receipts at the close of business on
9 November 2007. The interim dividend will be payable on 5 December 2007.
8 MOVEMENTS IN EQUITY
€ million Nine Months
2007 2006
Equity at 1 January 11 672 8 765
Total recognised income and expense for the period 4 332 2 693
Dividends (1 362) (1 268)
Movement in treasury stock (1 218) 2
Share-based payment credit 93 92
Dividends paid to minority shareholders (169) (170)
Currency retranslation gains/(losses) net of tax (9) (8)
Other movements in equity 50 10
Equity at the end of the period 13 389 10 116
9 RECONCILIATION OF NET PROFIT TO CASH FLOW FROM OPERATING ACTIVITIES
€ million Nine Months
2007 2006
Net profit 3 349 2 915
Taxation 847 1 052
Share of net profit of joint ventures/associates and other income from non-current
investments (170) (82)
Net finance costs 204 643
Operating profit (continuing and discontinued operations) 4 230 4 528
Depreciation, amortisation and impairment 712 678
Changes in working capital (836) (704)
Pensions and similar provisions less payments (509) (456)
Restructuring and other provisions less payments (26) (112)
Elimination of (profits)/losses on disposals (194) (210)
Non-cash charge for share-based compensation 106 99
Other adjustments (20) 7
Cash flow from operating activities 3 463 3 830
10 NET DEBT
€ million As at As at
30 September 31 December
2007 2006
Total financial liabilities (10 039) (8 835)
Financial liabilities due within one year (5 095) (4 458)
Financial liabilities due after one year (4 944) (4 377)
Cash and cash equivalents as per balance sheet 1 566 1 039
Cash and cash equivalents as per cash flow statement 1 255 710
Add bank overdrafts deducted therein 311 329
Financial assets 237 273
Net debt (8 236) (7 523)
There was one repayment of 4.25% bonds during the quarter of €1.0 billion.
During the quarter we continued to purchase shares under the share buy-back
programme announced in March 2007. As at the end of September, shares to the
value of €1.1 billion had been purchased under these arrangements.
11 ACQUISITIONS AND DISPOSALS
On 14 September 2007, Unilever and PepsiCo announced they have agreed to expand
their International partnership for the marketing and distribution of
ready-to-drink tea products under the Lipton brand, the world's best-selling
tea. The new agreement adds 11 countries to the partnership's existing Lipton
ready-to-drink tea business. The business in these countries - eight in Europe
(Germany, Italy, France, Netherlands, Switzerland, Austria, Belgium and
Portugal) as well as Korea, Taiwan and South Africa - had combined systems sales
of around €300 million in 2006.
With effect from 1 October 2007, Unilever and Remgro Ltd. have reached agreement
to reorganise their respective shareholdings in the Unilever businesses in South
Africa and Israel. In the reorganised shareholding Unilever will have a
majority share in a single South African business and will fully own the
Unilever Israel foods and home and personal care business. As a result of this
transaction, Unilever will in its fourth quarter results report a profit of
approximately €200 million in respect thereof.
1 November 2007
This information is provided by RNS
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