Final Results
Unilever PLC
08 February 2007
FOURTH QUARTER AND ANNUAL RESULTS 2006
KEY FINANCIALS
(unaudited)
Fourth Quarter 2006 € million Full Year 2006
Current Current Constant Current Current Constant
rates rates rates rates rates rates
Continuing operations:
9 727 0% 3% Turnover 39 642 3% 3%
1 062 5% 10% Operating profit 5 408 7% 6%
1 042 20% 25% Pre-tax profit 4 831 7% 7%
898 30% 35% Net profit from continuing operations 3 685 10% 10%
2 100 185% 195% Net profit from total operations 5 015 26% 26%
0.29 31% 35% EPS from continuing operations (Euros) 1.19 11% 10%
0.71 196% 206% EPS from total operations (Euros) 1.65 27% 27%
HIGHLIGHTS
Focus on business priorities results in growth across all regions
Change programme delivering improved operational effectiveness
Full Year Financials
• Underlying sales growth of 3.8%.
• Operating margin of 13.6%, up from 13.2% in 2005.
• Savings delivered ahead of plan, but commodity costs higher than expected.
Further increase in advertising and promotions.
• Net profit from continuing operations up 10%. Net profit from total
operations up by 26% including a profit of €1.2 billion from the sale of
European frozen foods businesses in the fourth quarter.
• Strong ungeared free cash flow of €4.2 billion.
• Proposed final dividend of €0.47 per NV ordinary share and 32.04p per
PLC ordinary share, raising the total regular dividend per share by 6% for
both NV and PLC. Additional 'one-off' dividend of €750 million paid in the
fourth quarter as previously announced.
Fourth Quarter Financials
• Underlying sales growth of 3.4% against a strong comparator.
• Operating margin of 10.9%, after charging €469 million of restructuring
costs, partly offset by one-time gains of €266 million from changes in
pension plans and healthcare plans. High investment in market research and
development in support of another strong innovation programme for 2007.
Operational Highlights of the Year
• Focus on personal care, developing and emerging markets, and Vitality
delivering strong growth and share gains in priority areas.
• Growth in Europe of 1%.
• Market competitiveness restored - market shares stable in aggregate.
• Change programme delivering tangible results - better execution in customer
management and marketing; good progress in the move to 'One Unilever'
around the world; faster roll-out of high impact innovations; research and
development capabilities being enhanced.
GROUP CHIEF EXECUTIVE COMMENT
The improved performance in 2006 shows that the wide-ranging changes made to the
business over the last two years are working. I am particularly pleased that
this improvement is broad-based, with every region and category contributing.
The new organisation and the implementation of 'One Unilever' are improving
Unilever's operational effectiveness; bringing faster decision making, better
local execution and enabling us to allocate resources more effectively across
our portfolio.
The work we have done in setting clear priorities and implementing change has
made Unilever a stronger business, able to build on its local strengths and
better exploit the power of being global. However, there is much more to be
done and there are many exciting opportunities ahead of us.
In 2007 we will continue to focus on our growth priorities in order to build
sustainable advantage for our portfolio and a structural improvement in our
growth rate in the long term; and we intend to go further, faster and deeper in
our drive to improve margins.
I am confident that we are well on track to achieve our long-term targets.
2007 Outlook
We expect the business and competitive environment in 2007 to be broadly
unchanged, with consumer demand remaining modest in Europe but robust elsewhere.
Prospects for home and personal care input costs are more favourable than in
2006 but there has been no let-up in the rise of foods commodity prices.
Against this background, and with a strong innovation programme, we expect to
deliver underlying sales growth in 2007 within our 3-5% longer term target
range. Savings programmes are expected to drive an improvement in operating
margin to over 13.6%, after charging restructuring costs of 0.5 to 1 percent of
sales.
Strategy and long term financial targets
At the heart of Unilever's strategy is a concentration of resources on areas
where we have leading positions and on high growth spaces, especially in
personal care, in developing and emerging markets and in Vitality. While the
focus is on developing the business organically, acquisitions and disposals also
have a role to play in accelerating the portfolio development.
To execute this strategy the business has been reorganised to simplify the
management structure and to improve capabilities in marketing, customer
management and research and development. The result is better allocation of
resources, better execution, faster decision-making and greater focus on
efficiency. The new organisation, augmented by the successful 'One Unilever'
project, allows us to leverage our scale both globally and locally.
Unilever's long term ambition is to achieve top-third total shareholder return
and our targets reflect this. Over the period 2005 - 2010 we target ungeared
free cash flow of €25-30 billion. Disposals made in the past two years, with no
significant acquisitions to date, have reduced the cash generation over the
period by just over €1 billion. Return on invested capital is targeted to
increase over the 2004 base of 11%. We expect underlying sales growth of 3-5%
and an operating margin in excess of 15% by 2010 after a normal level of
restructuring of 0.5 to 1 percent of sales. We are lowering our longer term
guidance for the tax rate from around 28% to around 26%.
Patrick Cescau, Group Chief Executive 8 February 2007
ENQUIRIES
Media: Contacts 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 FOURTH QUARTER AND ANNUAL
RESULTS 2006:
PRELIMINARY STATEMENT
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 YEAR
Underlying sales grew by 3.8% in the year and by 3.4% in the fourth quarter
against a strong comparator. Each quarter of the year has seen growth in the
3-5% range, in line with our markets and with market shares broadly maintained
in each region. Most of the growth continues to come from volume increases, but
the year saw a return to positive pricing (+0.9%).
Our business in Europe returned to growth of 1% in 2006. We are now more
competitive and have also benefited from a modest pick-up in consumer demand.
There were encouraging improvements in the UK and Germany. The Netherlands grew
well, but France remains a difficult market for us.
The Americas grew by 3.7%. Sales in the US were ahead by 2.4% with good
progress in hair care and deodorants, but lower sales in laundry and ice cream.
Our businesses in South America grew strongly, but Mexico was disappointing.
Asia Africa continues to be a major driver of Unilever's growth across both
foods and home and personal care with sales up 7.7% in the year. Almost all
countries contributed, with very strong performances from China, India and
Indonesia.
Savings programmes delivered slightly ahead of plan, but significantly higher
costs held back profitability. Commodity costs rose more sharply than expected
and were up by over €600 million in the year. Productivity savings and a return
to positive pricing ensured gross margins were maintained at last year's levels,
although this was below our expectations.
Overhead costs were broadly in line with our plans for the year. The move to a
single operating company in each market, under the 'One Unilever' programme, is
bringing simpler, lower-cost, structures. However, savings from the programme
in the year were offset by cost inflation, especially in Asia Africa and planned
investments in infrastructure. Substantial further savings opportunities have
been identified and as we go forward we expect to see overheads fall as a
percentage of turnover.
Investment in advertising and promotions was increased by nearly €300 million,
mainly in advertising, and was carefully focused behind our priorities for
growth.
There were significant one-time gains reflecting changes in pension plans and
healthcare plans in the fourth quarter. These were offset by additional
restructuring, largely in order to move quickly to eliminate overheads in Europe
following the frozen foods disposal.
The sale of European frozen foods businesses was completed in the quarter with a
net profit of €1.2 billion.
2. FINANCIAL COMMENTARY
2.1 Turnover
Turnover increased by 3.2% in the year. This included 3.8% of underlying sales
growth and 0.3% from favourable currency movements, with disposals accounting
for the difference.
In the fourth quarter, turnover was lower by 0.3%. Underlying sales grew by
3.4%, while currency effects, particularly the weakening of the US dollar,
reduced turnover by 3.0%, again with disposals accounting for the difference.
2.2 Operating profit
Full Year
Operating profit increased by 7% in the year.
The operating margin for the year was 13.6%, up by 0.4 percentage points on
2005. This was after charging restructuring, disposals and impairment costs
equivalent to 1.3 percentage points of sales (compared with 1.5 percentage
points last year). It also included €266 million of one-off gains from changes
to US healthcare and UK pensions plans in the fourth quarter, equivalent to 0.7
percentage points of sales. Before these items, and the profit on the US office
sale in the second quarter of 2005, the operating margin would have been 0.3
percentage points lower than last year.
Gross margins have been held steady through the year, with supply chain savings
programmes, pricing action and a positive mix fully offsetting around €600
million of higher input costs.
Investment in advertising and promotions increased by nearly €300 million, from
12.8% to 13.1% of sales.
Fourth Quarter
Operating profit increased by 5% in the fourth quarter.
The operating margin was 10.9%, with a high charge for restructuring, disposals
and impairments, equivalent to 4.4 percent of sales, offset by the gains on
healthcare and pension plans equivalent to 2.7 percent of sales. Before these
items the operating margin would have been 0.1 percentage point higher than last
year.
Advertising and promotion was 0.5 percentage points lower in the fourth quarter
than last year, reflecting the planned different phasing this year. Market
research and development costs were again high in the fourth quarter, in support
of another strong innovation programme for 2007.
2.3 Finance costs and tax
Costs of financing net borrowings were 17% lower for the year than in 2005,
benefiting from a lower overall level of net debt.
Pensions financing, which was a net expense of €53 million in 2005, showed a net
income of €41 million in 2006, reflecting an improved asset base.
As already announced, in the third quarter we took a provision of €300 million
relating to preference shares, and this is included in financing costs.
The tax rate for the year was 24%, compared with 26% last year, and including
the benefits of a better country mix. The fourth quarter rate was unusually low
at 14% and included a substantial benefit from higher tax deductibility on the
provision taken in the third quarter in relation to preference shares. We
expect a rate of around 24% again in 2007 and are lowering our longer term
guidance from around 28% to around 26%.
2.4 Joint Ventures and Associates
Share of net profit from joint ventures was ahead of last year due to continued
growth in the partnerships between Lipton and Pepsi for ready-to-drink tea.
Share of net profit from associates included a profit from a placement of equity
by one of our venture capital fund investments in the fourth quarter.
2.5 Net profit and Earnings per share
For the full year, net profit from continuing operations grew by 10% and EPS on
the same basis was up by 11%.
In the fourth quarter, net profit and EPS from continuing operations increased
by 30% and 31% respectively helped by the low tax rate in the quarter.
Net profit including discontinued operations increased by 26% in the year, with
a net profit of €1 170 million on the sale of frozen foods businesses in the
fourth quarter. EPS on this basis increased by 27% for the year.
2.6 Dividends and share buy-backs
The 2006 interim dividend was paid on 4 December 2006 at €0.23 per share for NV
and 15.62p for PLC. In addition a one-off dividend of €750 million was paid at
the same time. The Boards will recommend to the Annual General Meetings final
dividends of €0.47 per ordinary share of Unilever N.V. and 32.04p per ordinary
share of Unilever PLC. This will bring the total regular dividend, excluding
the additional one-off payment, to €0.70 per share for NV and 47.66p for PLC, an
increase of 6% in each case.
We are planning to buy back €1.5 billion of shares in 2007.
2.7 Cash flow
Cash from operating activities was €0.3 billion lower than in 2005 due to
significantly higher contributions to pension schemes. There was a further
improvement in the level of working capital, with a reduction of €0.1 billion,
in addition to a €0.2 billion reduction last year.
Income tax paid was substantially lower through a combination of tax relief on
the higher pension contributions, structural improvements in the tax rate and
timing differences. As a result, net cash flow from operating activities was
€0.2 billion higher than last year.
Net capital expenditure was €0.1 billion higher than a year ago as investment
was stepped up behind growth priorities.
Ungeared Free Cash Flow increased by €0.2 billion to €4.2 billion.
Net debt reduced from €10.5 billion at the start of the year, to €7.5 billion at
the end of the year. This was driven by the combination of cash generated by
the business, proceeds of disposals (particularly of frozen foods businesses in
the fourth quarter), and the effect of the weaker US dollar.
2.8 Return on Invested Capital
Return on invested capital increased from 12.5% in 2005 to 14.6% in 2006. Both
years included significant profits on disposals of discontinued operations.
Excluding these, the return on invested capital increased from 11.3% to 11.5%.
2.9 Balance sheet
The two most significant changes to the shape of the balance sheet are the
reduction in net funding deficit on pensions and post retirement healthcare
schemes, and the reduction in net debt.
Improvements in asset yields and increased contributions have caused pension
assets for funded schemes in surplus to rise by €0.7 billion. Net pensions and
post retirement liabilities have declined by €1.8 billion mainly due to the
combination of increases in discount rates and changes to scheme benefits,
offset by higher life expectancies. There have been consequent movements in
deferred tax balances.
Cash generated by the business and from the sale of the frozen foods business
has funded an additional one-off dividend of €0.75 billion in December and a
reduction in net borrowings.
For most other items, changes in translation rates had a greater impact than
underlying movements. Most notably, goodwill and intangible assets were reduced
by €0.8 billion largely due to exchange rates.
2.10 Pensions and healthcare plans
The overall funding shortfall before tax has significantly reduced from €5.6
billion at the end of 2005 to €3.1 billion at the end of 2006. Within this,
there is now an aggregate surplus of €0.3 billion on our funded plans,
reflecting a combination of strong equity returns, increased contributions and
higher real interest rates, partly offset by increased life expectancy
assumptions. The value of our unfunded obligations has reduced from
€4.2 billion to €3.4 billion due to the rise in interest rates, favourable
exchange rate movements and changes to various retiree medical benefits.
We made a number of changes in 2006. In particular, in the US retiree
healthcare plan we introduced an annual cap on the benefits which each
participant can claim. In the UK we updated assumptions on pension commutations
and now reduce some deferred pensions if they are taken early, to align with
market practice.
3. OPERATIONAL REVIEW
3.1 Full Year Performance - Europe
Fourth Quarter 2006 Full Year 2006
2006 2005 % % 2006 2005 % %
change Underlying change Underlying
sales growth sales growth
3 615 3 618 (0.1) 0.1 Turnover (€ million) 15 000 14 940 0.4 1.0
5.3 4.4 Operating Margin (%) 12.7 13.8
Includes:
(7.3) (3.7) - RDIs* (2.2) (0.9)
3.3 - Gain on UK Pensions 0.8
* Restructuring, business disposals and impairments.
Growth
Much work has been done to make our business in Europe more competitive. There
has been a single-minded drive to improve the value we offer to consumers and
stronger innovation, more targeted at the core of our portfolio. At the same
time, the implementation of 'One Unilever', the building of capabilities and
changes in leadership are resulting in better execution.
These changes, together with improved consumer demand, returned the region to
modest growth. Underlying sales grew by 1% in the year, entirely from volume,
and by 0.1% in the fourth quarter, against a relatively strong comparator.
Market shares were broadly stable, with gains in ice cream, soups, deodorants
and body-care but losses in laundry, hair care and tea.
The UK, our largest European business, returned to growth in the year, with good
results across most foods and personal care categories. Laundry sales declined
but there were promising signs of progress in recent market shares with Persil
regaining its position as the country's leading laundry brand.
The Netherlands had a strong year as it benefited from going to market as a
single company being a pioneer of the 'One Unilever' programme. Highlights were
rapid growth for Lipton, Dove, Rexona and Axe. France remained a difficult
market for us and sales were lower in spreads, laundry and hair care. New
management is in place and there was an improvement in the second half year.
Sales in Germany held up better in 2006, and there was good growth in personal
care, but some turnover in Lipton ice tea was lost following changes in rules
for bottle returns.
Central and Eastern Europe continued to do well, driven by double-digit growth
in Russia.
Innovation
Our 2006 innovation programme in foods has seen our brands embrace Vitality
across all categories, with new products designed to deliver the health benefits
that our consumers are seeking. Rama/BlueBand Idea!, a spread with added
nutrients that are beneficial to children's mental development, was launched in
nine countries. The AdeS brand of healthy soya-based drinks has been brought
from Latin America to the UK as AdeZ. A range of Knorr bouillon cubes with
selected natural ingredients and a better, richer taste has been rolled out
across the region and Vie 'one shot' fruit and vegetable drinks are now
available in ten countries. Meanwhile, the global 'Choices' programme is being
rolled out. The front-of-pack logo helps people identify products which meet
international benchmarks for trans fat, saturated fat, salt and sugar content.
Product launches in home and personal care with clear functional or emotional
benefits are being rolled out rapidly across the region. A range of new Dove
launches in several categories in 2006 included 'Summer Glow', a light
moisturising body lotion with a unique combination of special Dove moisturisers
and a hint of self tan. In household care, Domestos 5X with C-TAC kills germs
on first contact and continues to do so even after flushes, while the power of
Cif has been applied to a series of power sprays.
Profitability
The operating margin, at 12.7%, was 1.1 percentage point lower than a year ago,
with higher net costs for restructuring, disposals and impairments, and a
one-time gain of €120 million in the fourth quarter of 2006 from changes to the
UK pensions plan. Before these items, the operating margin would have been 0.6
percentage points lower than in 2005. Margins in foods were lower than in 2005
as we absorbed significant increases in commodity costs which were only partly
compensated by savings programmes.
3.2 Full Year Performance - The Americas
Fourth Quarter 2006 Full Year 2006
2006 2005 % % 2006 2005 % %
change Underlying change Underlying
sales growth sales growth
3 448 3 521 (2.1) 4.3 Turnover (€ million) 13 779 13 179 4.6 3.7
16.7 16.7 Operating Margin (%) 15.8 13.0
Includes:
(3.4) (1.6) - RDIs* (1.0) (3.4)
4.2 - US Healthcare gain 1.0
* Restructuring, business disposals and impairments.
Growth
Underlying sales growth accelerated progressively through the quarters, with
3.7% for the year, and a healthy balance of volume and price.
Overall, we have maintained share in the US in markets which are growing at
around 3%. Underlying sales growth in the US was 2.4%, additionally reflecting
trade de-stocking in personal care in the first half of the year and in ice
cream in the second half. Degree, Dove and Axe, our three main deodorants
brands, all gained share, while the launch of Sunsilk drove growth in hair care.
In laundry we initiated the move to concentrated liquids, but have lost
further share in conventional detergents.
Bertolli frozen meals and Slim Fast gained share in the US as did Lipton
ready-to-drink tea, in our joint venture with Pepsi. Our share for the year as
a whole was also up in ice cream, but sales were down. The category has been
heavily promoted in recent years but in 2006 the level of promotional intensity
reduced. As a result, the trade bought less as they used up stocks.
Brazil picked up well after a slow start with very good innovation-driven
performances in hair, deodorants and laundry, with Omo shares at their highest
level for many years. Sales in Mexico were lower for the year, affected by a
combination of a decline in the traditional retail trade and local low priced
competition. In addition there were several operational issues which have been
addressed and the business returned to growth in the fourth quarter. Elsewhere
there was good growth in Argentina, Central America and Venezuela. Taken
together, sales in Latin America were ahead by 5.8% with home and personal care
continuing to do well but more modest growth in foods in the face of tough local
competition.
Innovation
Products introduced in the year in the US included Wishbone salad 'spritzers',
with one calorie per spray, further development of the Bertolli premium frozen
meal range, and Lipton pyramid tea bags. Across the region, new Knorr soups and
bouillons cater for local flavour and tastes and the highly successful AdeS
nutritional drink has been extended with a 'light' variant, new fruit flavours
and the launch of Soymilk in Brazil and Mexico.
We have strengthened our hair portfolio in the US with the launch of Sunsilk.
This followed improvements to both the Suave and Dove hair care lines and the
sale of the Aquanet and Finesse brands. After a good response to all Small &
Mighty concentrated liquid detergents, we have applied the same technology to
fabric conditioners to create Snuggle Exhilarations, a three-times more
concentrated premium sub-range delivering superior fragrance. In Brazil, the
Omo laundry brand has been further strengthened with a new top performance
product and 'baby' and 'foam control' variants.
Profitability
The operating margin, at 15.8%, was 2.8 percentage points higher than a year
ago, with lower costs for restructuring, disposals and impairments, and a
one-time benefit in the fourth quarter of 2006 of €146 million from changes to
US healthcare plans. In 2005 there was a gain on the sale of an office in the
second quarter. Before these items the operating margin would have been 0.3
percentage points lower than last year. Innovation-driven mix, pricing and
productivity offset higher commodity costs. Advertising and promotions was
increased behind key launches.
3.3 Full Year Performance - Asia Africa
Fourth Quarter 2006 Full Year 2006
2006 2005 % % 2006 2005 % %
change Underlying change Underlying
sales growth sales growth
2 664 2 618 1.8 7.0 Turnover (€ million) 10 863 10 282 5.7 7.7
11.1 10.2 Operating Margin (%) 12.2 12.6
Includes:
(1.6) (0.3) - RDIs* (0.3) -
* Restructuring, business disposals and impairments.
Growth
Markets remained buoyant in most of the key countries, though there was a
slow-down in consumer spending in Thailand during the year.
Underlying sales growth of 7.7% was broadly based and our aggregate market
shares remained stable.
India grew well across all major categories. A mix of global, regional and
local brands are driving growth, notably Wheel and Surf Excel in laundry and
Clinic in hair care. A second year of excellent growth in China stemmed from a
combination of market growth, better distribution and innovations behind global
brands such as Omo, Lux, Ponds, and the local toothpaste brand, Zhonghua.
Indonesia sustained good momentum, not only in the large home and personal care
categories, but also in foods, through strong performances in ice cream and
savoury. Thailand had a disappointing year through weak demand and intense
competition, and a major programme of activities is under way to correct this.
There was a much improved performance in Australia with share gains in a number
of categories. In Japan, the hair care market has seen another major brand
launched by competition. Against this, Lux Super Rich, the leading brand,
performed well, but Dove and mod's, our other two brands, lost share.
Savoury, ice cream, laundry and household care were the main drivers of strong
growth in Turkey, while sales in Arabia were well ahead in every category.
In South Africa, aggressive price promotions by a local competitor have reduced
our sales in laundry, but there was strong growth and share gains in foods
categories.
Innovation
Innovation is increasingly being driven globally and regionally, rather than
locally. The new Sunsilk range has been introduced in most major markets and in
laundry the 'Dirt is Good' positioning is now in place across the region.
Pond's age miracle cream, incorporating unique technology and designed
specifically for the needs of Asian skin has been launched in the Philippines,
Indonesia, Thailand and China. Meanwhile the latest global Axe/Lynx fragrance,
'Click' has been introduced in Australia and New Zealand.
As in the rest of the world, the foods innovation programme picked up the
Vitality theme. Moo, a delicious vanilla and chocolate ice cream, with its high
calcium content and fun packaging and shape, is both a wholesome and appealing
option for kids. Healthy green tea innovations are being rolled out
extensively, while in South Africa, Rama magarine now communicates the healthy
oils in the product. At the same time, addressing the needs of lower income
consumers, low-unit priced Knorr bouillon cubes, already successful in Latin
America, were introduced to the region.
Profitability
The operating margin at 12.2% was 0.4 percentage points lower than a year ago.
Before the impact of restructuring, disposals and impairments, the operating
margin would have been in line with last year. The benefits to margin of strong
volume growth and savings programmes were fully offset by higher commodity costs
and other cost inflation which could not be fully recovered in pricing.
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 and Accounts 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.
CONDENSED FINANCIAL STATEMENTS
INCOME STATEMENT
(unaudited)
Fourth Quarter € million Full Year
2006 2005 Increase/ 2006 2005 Increase/
(Decrease) (Decrease)
Current Constant Current Constant
rates rates rates rates
Continuing operations:
9 727 9 757 0% 3% Turnover 39 642 38 401 3% 3%
1 062 1 012 5% 10% Operating profit 5 408 5 074 7% 6%
After (charging)/crediting:
(469) (198) Restructuring (704) (328)
45 (4) Business disposals and impairments 196 (249)
Gains on US healthcare and UK
266 - pensions 266 -
(83) (152) Net finance costs (721) (613)
27 7 Finance income 128 129
(117) (146) Finance costs (590) (689)
- - Preference shares provision (300) -
7 (13) Pensions and similar obligations 41 (53)
Share in net profit/(loss) of joint
27 15 ventures 78 47
Share in net profit/(loss) of
32 (19) associates 36 (25)
4 9 Other income from non-current 30 33
investments
1 042 865 20% 25% Profit before taxation 4 831 4 516 7% 7%
(144) (176) Taxation (1 146) (1 181)
898 689 30% 35% Net profit from continuing operations 3 685 3 335 10% 10%
1 202 47 Net profit/(loss) from discontinued 1 330 640
operations
2 100 736 185% 195% Net profit for the period 5 015 3 975 26% 26%
Attributable to:
68 52 Minority interests 270 209
2 032 684 197% 206% Shareholders' equity 4 745 3 766 26% 26%
Combined earnings per share
0.29 0.22 31% 35% Continuing operations (Euros) 1.19 1.07 11% 10%
0.28 0.21 30% 34% Continuing operations - diluted 1.15 1.04 11% 10%
(Euros)
0.42 0.01 Discontinued operations (Euros) 0.46 0.22
0.41 0.02 Discontinued operations - diluted 0.45 0.21
(Euros)
0.71 0.23 196% 206% Total operations (Euros) 1.65 1.29 27% 27%
0.69 0.23 196% 205% Total operations - diluted (Euros) 1.60 1.25 27% 27%
STATEMENT OF RECOGNISED INCOME AND EXPENSE
(unaudited)
€ million Full Year
2006 2005
Fair value gains/(losses) on financial instruments net of tax (758) 346
Actuarial gains/(losses) on pension schemes net of tax 853 (49)
Currency retranslation gains/(losses) net of tax 444 181
Net income/(expense) recognised directly in equity 539 478
Net profit for the period 5 015 3 975
Total recognised income and expense for the period 5 554 4 453
Attributable to:
Minority interests 242 249
Shareholders' equity 5 312 4 204
MOVEMENTS IN EQUITY
(unaudited)
€ million Full Year
2006 2005
Equity at 1 January 8 765 6 515
Total recognised income and expense for the period 5 554 4 453
Dividends (2 684) (1 867)
Conversion of preference shares - 930
Movements in treasury stock 118 (1 262)
Share-based payment credit 111 186
Dividends paid to minority shareholders (184) (217)
Currency retranslation gains/(losses) net of tax (6) 13
Other movements in equity (2) 14
Equity at the end of the period 11 672 8 765
BALANCE SHEET
(unaudited)
€ million As at As at
31 December 31 December
2006 2005
Non-current assets
Goodwill and intangible assets 17 206 18 055
Property, plant and equipment 6 276 6 492
Pension asset for funded schemes in surplus 1 697 1 036
Deferred tax assets 1 266 1 703
Other non-current assets 1 126 1 072
Total non-current assets 27 571 28 358
Current assets
Inventories 3 796 4 107
Trade and other current receivables 4 290 4 830
Current tax assets 125 124
Other financial assets 237 335
Cash and cash equivalents 1 039 1 529
Non-current assets held for sale 14 217
Total current assets 9 501 11 142
Current liabilities
Borrowings due within one year (4 362) (5 942)
Trade payables and other current liabilities (7 934) (8 228)
Current tax liabilities (579) (554)
Provisions (1 009) (644)
Liabilities associated with non-current assets held for sale - (26)
Total current liabilities (13 884) (15 394)
Net current assets/(liabilities) (4 383) (4 252)
Total assets less current liabilities 23 188 24 106
Non-current liabilities
Borrowings due after one year 4 239 6 457
Pensions and post-retirement healthcare benefits liabilities:
Funded schemes in deficit 1 379 2 415
Unfunded schemes 3 398 4 202
Provisions 826 732
Deferred tax liabilities 1 003 933
Other non-current liabilities 671 602
Total non-current liabilities 11 516 15 341
Equity
Shareholders' equity 11 230 8 361
Minority interests 442 404
Total equity 11 672 8 765
Total capital employed 23 188 24 106
CASH FLOW STATEMENT
(unaudited)
€ million Full Year
2006 2005
Operating activities
Cash flow from operating activities 5 574 5 924
Income tax paid (1 063) (1 571)
Net cash flow from operating activities 4 511 4 353
Investing activities
Interest received 125 130
Net capital expenditure (934) (813)
Acquisitions and disposals 1 777 784
Other investing activities 187 414
Net cash flow from/(used in) investing activities 1 155 515
Financing activities
Dividends paid on ordinary share capital (2 602) (1 804)
Interest and preference dividends paid (605) (643)
Change in borrowings and finance leases (3 281) (880)
Movement on treasury stock 98 (1 276)
Other financing activities (182) (218)
Net cash flow from/(used in) financing activities (6 572) (4 821)
Net increase/(decrease) in cash and cash equivalents (906) 47
Cash and cash equivalents at the beginning of the year 1 265 1 406
Effect of foreign exchange rate changes 351 (188)
Cash and cash equivalents at the end of period 710 1 265
RECONCILIATION OF NET PROFIT TO CASH FLOW FROM OPERATING ACTIVITIES
(unaudited)
€ million Full Year
2006 2005
Net profit 5 015 3 975
Taxation 1 332 1 301
Share of net profit of joint ventures/associates and other income from non-current (145) (55)
investments
Net finance costs 725 618
Depreciation, amortisation and impairment 982 1 274
Changes in working capital 87 193
Pensions and similar provisions less payments (1 038) (532)
Restructuring and other provisions less payments 107 (230)
Elimination of (profits)/losses on disposals (1 620) (789)
Non-cash charge for share-based compensation 120 192
Other adjustments 9 (23)
Cash flow from operating activities 5 574 5 924
ANALYSIS OF NET DEBT
(unaudited)
€ million As at As at
31 December 31 December
2006 2005
Total borrowings (8 601) (12 399)
Borrowings due within one year (4 362) (5 942)
Borrowings due after one year (4 239) (6 457)
Cash and cash equivalents as per balance sheet 1 039 1 529
Cash and cash equivalents as per cash flow statement 710 1 265
Add bank overdrafts deducted therein 329 265
Less cash and cash equivalents in assets/liabilities held for sale - (1)
Other financial assets 237 335
Derivatives and finance leases included in other receivables and other liabilities (198) 33
Net debt (7 523) (10 502)
GEOGRAPHICAL ANALYSIS
(unaudited)
Continuing operations - Fourth Quarter
€ million Europe Americas Asia Africa Total
Turnover
2005 3 618 3 521 2 618 9 757
2006 3 615 3 448 2 664 9 727
Change (0.1)% (2.1)% 1.8% (0.3)%
Impact of:
Exchange rates 0.5% (5.4)% (4.5)% (3.0)%
Acquisitions 0.3% 0.1% 0.0% 0.1%
Disposals (0.9)% (0.8)% (0.4)% (0.7)%
Underlying sales growth 0.1% 4.3% 7.0% 3.4%
Price 0.1% 1.3% 2.4% 1.2%
Volume 0.0% 2.9% 4.5% 2.2%
Operating profit
2005 158 587 267 1 012
2006 191 575 296 1 062
Change current rates 20.6% (1.9)% 11.0% 5.0%
Change constant rates 19.6% 3.0% 17.7% 9.6%
Operating margin
2005 4.4% 16.7% 10.2% 10.4%
2006 5.3% 16.7% 11.1% 10.9%
Includes restructuring, business disposals and
impairments, and Q4 2006 gains on UK pensions and
US healthcare plans
2005 (3.7)% (1.6)% (0.3)% (2.0)%
2006 (4.0)% 0.8% (1.6)% (1.6)%
Continuing operations - Full Year
€ million Europe Americas Asia Africa Total
Turnover
2005 14 940 13 179 10 282 38 401
2006 15 000 13 779 10 863 39 642
Change 0.4% 4.6% 5.7% 3.2%
Impact of:
Exchange rates 0.2% 1.4% (1.1)% 0.3%
Acquisitions 0.1% 0.1% 0.0% 0.1%
Disposals (0.9)% (0.7)% (0.8)% (0.8)%
Underlying sales growth 1.0% 3.7% 7.7% 3.8%
Price (0.1)% 1.4% 1.8% 0.9%
Volume 1.1% 2.3% 5.8% 2.8%
Operating profit
2005 2 064 1 719 1 291 5 074
2006 1 903 2 178 1 327 5 408
Change current rates (7.7)% 26.7% 2.8% 6.6%
Change constant rates (7.9)% 25.0% 4.0% 6.3%
Operating margin
2005 13.8% 13.0% 12.6% 13.2%
2006 12.7% 15.8% 12.2% 13.6%
Includes restructuring, business disposals and
impairments, and Q4 2006 gains on UK pensions and
US healthcare plans
2005 (0.9)% (3.4)% 0.0% (1.5)%
2006 (1.4)% 0.0% (0.3)% (0.6)%
Operating profit of discontinued operations - Full Year
€ million Europe Americas Asia Africa Total
2005 228 20 - 248
2006 170 - - 170
PRODUCT AREA ANALYSIS
(unaudited)
Continuing operations - Fourth Quarter
€ million Savoury, Ice cream Foods Personal Home care Home and Total
dressings and care and Personal
and spreads beverages other Care
Turnover
2005 3 732 1 461 5 193 2 752 1 812 4 564 9 757
2006 3 709 1 416 5 125 2 786 1 816 4 602 9 727
Change (0.7)% (3.0)% (1.3)% 1.2% 0.2% 0.8% (0.3)%
Impact of:
Exchange rates (2.2)% (4.2)% (2.8)% (3.6)% (2.9)% (3.3)% (3.0)%
Acquisitions 0.1% 0.2% 0.1% 0.2% 0.0% 0.2% 0.1%
Disposals (0.7)% (0.8)% (0.7)% (1.0)% (0.5)% (0.8)% (0.7)%
Underlying sales growth 2.2% 1.9% 2.1% 5.8% 3.7% 4.9% 3.4%
Operating profit
2005 438 20 458 447 107 554 1 012
2006 499 (37) 462 471 129 600 1 062
Change current rates 14.0% (283.5)% 1.2% 5.2% 20.5% 8.2% 5.0%
Change constant rates 17.6% (278.6)% 5.3% 9.4% 28.6% 13.1% 9.6%
Operating margin
2005 11.7% 1.4% 8.8% 16.2% 6.0% 12.2% 10.4%
2006 13.5% (2.6)% 9.0% 16.9% 7.0% 13.0% 10.9%
Continuing operations - Full Year
€ million Savoury, Ice cream Foods Personal Home care Home and Total
dressings and care and Personal
and spreads beverages other Care
Turnover
2005 13 557 7 332 20 889 10 485 7 027 17 512 38 401
2006 13 767 7 578 21 345 11 122 7 175 18 297 39 642
Change 1.5% 3.4% 2.2% 6.1% 2.1% 4.5% 3.2%
Impact of:
Exchange rates 0.2% 0.0% 0.1% 0.5% 0.3% 0.4% 0.3%
Acquisitions 0.0% 0.1% 0.0% 0.1% 0.0% 0.1% 0.1%
Disposals (1.2)% (0.4)% (0.9)% (0.9)% (0.5)% (0.7)% (0.8)%
Underlying sales growth 2.6% 3.7% 2.9% 6.3% 2.3% 4.7% 3.8%
Operating profit
2005 2 026 609 2 635 1 793 646 2 439 5 074
2006 1 993 900 2 893 1 913 602 2 515 5 408
Change current rates (1.6)% 48.0% 9.8% 6.7% (6.8)% 3.1% 6.6%
Change constant rates (1.5)% 48.5% 10.1% 5.6% (7.4)% 2.2% 6.3%
Operating margin
2005 14.9% 8.3% 12.6% 17.1% 9.2% 13.9% 13.2%
2006 14.5% 11.9% 13.6% 17.2% 8.4% 13.7% 13.6%
NOTES
(unaudited)
Basis of Preparation
The condensed interim financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRS) as adopted by the EU. These
are the same accounting policies as those used for preparation of the Annual
Report and Accounts for the year ended 31 December 2005 except that the
presentation of secondary segments has been changed following the disposal of
the majority of the European frozen foods business and we now present
restructuring, business disposals and impairments on the face of the income
statement.
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.
Discontinued operations
Following the announcement of the disposal of the majority of our European
frozen foods businesses, the results for these businesses have been presented in
our income statement as discontinued operations, in line with the requirements
of IFRS 5. The amount reported for the year represents the profits and losses
arising on these operations during the period to the date of disposal, together
with the profit arising on disposal. On 3 November 2006, Unilever completed the
sale of these businesses to Permira. Net assets disposed of amounted to €314
million; after deducting tax and other adjustments from the gross proceeds of €1
725 million, this resulted in a profit after tax of €1 170 million.
Discontinued operations for 2005 also include the results of our prestige
fragrances business, Unilever Cosmetics International (UCI), up until its
disposal in July of that year, together with the profit arising on disposal.
The net cash flows attributable to the discontinued operations in respect of
operating, investing and financing activities for the year were €79 million, €1
618 million and €(1) million respectively (2005: €62 million, €621 million and
€(4) million).
Taxation
The charge for the year to date includes €177 million (2005: €123 million)
relating to United Kingdom taxation.
Issuances and repayments of debt and purchase of own shares
There was a repayment of 5.125% notes during the quarter of US $500 million.
Preference shares provision
On 8 November 2006 Unilever N.V. (NV) announced that it had agreed a settlement
with the main parties in the legal dispute over the €0.05 (NLG 0.10) cumulative
preference shares. The terms of the agreement are that NV will pay an amount of
€1.38 plus interest of €0.16 compensation per preference share held at the
beginning of 24 March 2004, the day on which NV announced its intention to
convert the preference shares into NV ordinary shares. The settlement includes
all former preference shareholders that had initiated the inquiry procedure. On
20 January 2007 NV announced that the settlement offer will be extended to all
those other former preference shareholders who held preference shares at the
beginning of 24 March 2004. As announced at Q3, we have provided €300 million
to cover the agreement.
Exchange rate conventions
The income statement on page 10, the statement of recognised income and expense
and the movements in equity on page 11 and the cash flow statement on page 13
are translated at average rates for each period.
The balance sheet on page 12 and the analysis of net debt on page 13 are
translated at period-end rates of exchange.
Supplementary information in US dollars and sterling is available on our website
at www.unilever.com/ourcompany/investorcentre.
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 2005 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.
DIVIDENDS
The dividend information given below, including the comparative amounts for
2005, 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 Boards have resolved to recommend to the Annual General Meetings for NV and
PLC, to be held on 15 May 2007 and 16 May 2007 respectively, the declaration of
final dividends in respect of 2006 on the Ordinary capitals at the following
rates which are equivalent in value at the rate of exchange applied in terms of
the Equalisation Agreement between the two companies:
Unilever N.V.
€0.47 per ordinary share* (2005: €0.44). Together with the interim dividend
already paid, this brings the total of NV's regular interim and final dividends
for 2006 to €0.70 per ordinary share (2005: €0.66). In addition, a one-off
dividend of €0.26 per ordinary share was paid in December 2006.
*Unilever N.V. ordinary shares and Unilever N.V. depositary receipts for
ordinary shares.
Unilever PLC
32.04p per ordinary share (2005: 30.09p). Together with the interim dividend
already paid, this brings the total of PLC's regular interim and final dividends
for 2006 to 47.66p per ordinary share (2005: 45.13p). In addition, a one-off
dividend of 17.66p was paid in December 2006.
The NV final dividend will be paid on 21 June 2007, to shareholders registered
at close of business on 21 May 2007, and will go ex-dividend on 17 May 2007.
The PLC final dividend will be paid on 21 June 2007, to shareholders registered
at close of business on 25 May 2007, and will go ex-dividend on 23 May 2007.
Dividend on New York shares of NV
US dollar checks for the final dividend on the New York Shares of €0.16 nominal
amount after deduction of Netherlands withholding tax at the appropriate rate,
converted at the euro/dollar European Central Bank rate of exchange on 15 May
2007 will be mailed on 20 June 2007 to holders of record at the close of
business on 21 May 2007. If converted at the euro/dollar rate of exchange on 7
February 2007, the NV final dividend would be US $0.6103 per New York share
(2005 final dividend: US $0.5613 actual payment) before deduction of Netherlands
withholding tax. With the interim dividend in respect of 2006 of US $0.2934 at
the actual euro/dollar conversion rate, already paid, this would result in a
total for regular interim and final dividends in respect of 2006 of US $0.9037
per New York Share (2005: US $0.8251 actual payment). In addition, a one-off
dividend of US $0.3316 was paid in December 2006.
Dividend on American Depositary Receipts of PLC
US Dollar checks for the final dividend on the American Depositary Receipts in
PLC converted at the sterling/dollar rate of exchange current in London on 16
May 2007 will be mailed on 20 June 2007 to holders of record at the close of
business on 25 May 2007. If converted at the sterling/dollar rate of exchange
on 7 February 2007, the PLC final dividend would be US $0.6317 per American
Depositary Receipt in PLC (2005 final dividend: US $0.5583 actual payment).
With the interim dividend in respect of 2006 of US $0.2983 at the actual
sterling/dollar conversion rate, already paid, this would result in a total for
regular interim and final dividends in respect of 2006 of US $0.9300 per
American Depositary Receipt in PLC (2005: US $0.8238 actual payment). In
addition, a one-off dividend of US $0.3372 was paid in December 2006.
EARNINGS PER SHARE
(unaudited)
Combined earnings per share
The earnings per share information given below, including the comparative
amounts for 2005, 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; (ii) conversion of the
€0.05 NV preference shares (up to the point of conversion); and (iii) the
exercise of share options by employees.
Earnings per share for total operations for the full year
2006 2005
Combined EPS Thousands of units
Average number of combined share units 2 883 258 2 912 970
€ million
Net profit attributable to shareholders' equity 4 745 3 766
Combined EPS (Euros) 1.65 1.29
Combined EPS - Diluted Thousands of units
Adjusted average number of combined share units 2 972 468 3 006 909
€ million
Adjusted net profit attributable to shareholders' equity 4 745 3 769
Combined EPS - diluted (Euros) 1.60 1.25
Earnings per share in US Dollars and Sterling
Combined EPS (Dollars) 2.06 1.61
Combined EPS - diluted (Dollars) 2.00 1.56
Combined EPS (Pounds) 1.12 0.88
Combined EPS - diluted (Pounds) 1.09 0.86
DATES
The results for the first quarter 2007 will be published on 3 May 2007.
ENQUIRIES: UNILEVER PRESS OFFICE
+44 (0) 20 7822 6805/6010
Internet: www.unilever.com
E-mail: press-office.london@unilever.com
8 February 2007
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