1st Quarter Results
Unilever PLC
02 May 2003
UNILEVER FIRST QUARTER RESULTS 2003
(Unaudited)
Outlook for the year confirmed despite a slower than expected start to the year.
FINANCIAL HIGHLIGHTS
€ Millions (constant 2002 average exchange rates) First Quarter 2003
--------------
Turnover 11,124 (4) %
-------- --------
Operating profit - beia* 1,623 (2) %
-------- --------
Pre-tax profit 1,095 22 %
-------- --------
Net profit 670 57 %
-------- --------
Net profit - beia* 865 2 %
-------- --------
-------- --------
EPS NV - beia* (Euros) 0.88 4 %
-------- --------
EPS PLC - beia* (Euro cents) 13.22 4 %
-------- --------
* Before exceptional items and amortisation of goodwill and intangibles
When expressed at current rates of exchange, earnings per share (beia) were 7%
lower than the prior year.
KEY FEATURES FOR THE QUARTER
•Sales growth of our leading brands was 5.5% for the last twelve months,
and 3.0% in the first quarter, with continued excellent growth of 6.8% in
Home & Personal Care but a slow start in Foods which was flat against last
year.
•Operating margin (beia) of 14.6% was 30 basis points ahead of last year,
and is after a 180 basis points increase in advertising and promotions.
•Savings from restructuring continue to be delivered fully in line with
our Path to Growth programme.
•Interest on net debt was reduced by 13% through continued cash flow from
operations, proceeds of disposals and lower rates.
•Earnings per share (beia) grew by 4%.
CHAIRMEN'S COMMENT
Overall, we have seen a slower than expected start to the year in terms of
sales. In addition to known phasing effects including a later Easter, we faced a
number of short-term developments in the business environment in the latter part
of the quarter. In combination, these have particularly affected Foods and our
businesses in Europe and North America. However, a strengthening performance in
developing and emerging markets and an excellent performance in personal care
have contributed to another quarter of strong growth in Home & Personal Care.
Savings from restructuring and portfolio mix improvements continue to be
delivered in line with the Path to Growth programme. These provide the fuel for
investment behind our brands and support our plan for the year which is built
upon a step-up in the level of innovation and market place activities for Foods,
and a sustained rate for Home & Personal Care.
While we face a more challenging operating environment, our business,
strengthened by the Path to Growth progamme, is naturally resilient and we
remain comfortable that our plans will deliver the targets we have given for
leading brand and earnings growth.
N W A FitzGerald A Burgmans
Chairman, Unilever PLC Chairman, Unilever N.V.
2nd May 2003
FIRST QUARTER FINANCIAL RESULTS (at constant exchange rates)
Note: These results include the previously announced changes in accounting for
share options and pensions in both the prior and current years. Further details
are given in the notes on page 13. The impact of share options and pensions is
to dilute EPS before exceptional items and goodwill amortisation (beia) growth
by 6 percentage points in 2003 which is included in the outlook for the year.
Underlying sales grew by 2%. The impact of our disposal programme as we reshape
the portfolio under Path to Growth led to sales in the quarter being 4% lower
than last year.
Operating margin (beia) at 14.6% was ahead of last year by 30 basis points. The
improved margin, on a smaller base through the impact of disposals, led to
operating profit (beia) 2% lower than last year.
Amortisation of goodwill and intangibles was €291 million in the quarter.
Interest on net borrowings was €257 million, 13% down from €294 million in the
same period last year, as we benefited from continued cash flow from operations,
proceeds of business disposals, and lower interest rates. Financing of pension
fund assets and liabilities represented a net charge of €48 million which
compares with a credit of €27 million in the prior year.
Exceptional items were a profit of €78 million in operating profit and a charge
of €28 million in associated companies. The exceptional items in operating
profit include profits on disposals of €150 million and restructuring investment
costs of €72 million.
The effective tax rate was 32% and reflects the non-tax-deductibility of
Bestfoods goodwill amortisation largely offset this quarter by a net tax credit
on exceptional items of €32 million arising from the mix of restructuring
charges and profits on disposals. The underlying, or beia, rate of tax was 30%,
in line with our expectation of a structurally lower rate for the full year.
Net profit (beia) was up 2% to €865 million. Net profit, at €670 million,
increased by 57% due to profits on disposal and lower restructuring costs as we
move into the latter part of the programme.
Earnings per share (beia) rose by 4%, while earnings per share was ahead by 61%.
As a result of the strengthening of the Euro, earnings per share (beia),
expressed at current rates of exchange, were 7% lower than last year while
earnings per share on this basis rose by 48%.
FIRST QUARTER PERFORMANCE BY REGION (at constant exchange rates)
The following regional commentary is based on operating profit before
exceptional items and amortisation of goodwill and intangibles. Sales growth is
stated on an underlying basis, excluding the effects of acquisitions and
disposals. Turnover includes the impact of acquisitions and disposals.
EUROPE
Turnover was 7% lower than last year, primarily reflecting the disposal of
businesses as part of reshaping the portfolio within the Path to Growth
programme. Underlying sales were 1% below the prior year from phasing effects,
including a later Easter which affected our spreads, ice cream and dressings
businesses.
In Western Europe, Becel/Flora continued to grow well, particularly through
pro•activ cholesterol lowering spread. We also introduced a range of innovations
under the Knorr brand, including pasta sauces and the geographic expansion of
meal-kits and Vie vegetable rich soups. Pot Noodle also made good progress with
innovative advertising and new flavours. Bertolli further extended its
'Mediterranean lifestyle' position through a range of sauces and salad dressings
in key countries. Overall growth was affected by the end of a contract to supply
edible oils and a tough comparator for Slim• Fast with geographic roll-outs in
the prior year.
In Home & Personal Care in Western Europe, laundry grew in a competitive market,
particularly through the Aloe Vera variant and with a good contribution from new
perfume varieties in fabric conditioners. Dove continued to show its strength
across several categories with further progress for Dove shampoo, in the
heartland personal wash bar and with a range of shower products. Axe also
performed well with the introduction of new fragrances and a further extension
of its shower gel range. In hair, we started the roll-out of Sunsilk which is
now available in six European countries.
In Central and Eastern Europe, strong growth in personal care, especially in
hair and skin, was offset by our Foods business which was particularly impacted
by Easter given our strong presence in the spreads and dressings categories.
Operating margins at 16.1% are 270 basis points ahead of last year reflecting
the benefits of savings programmes, partly re-invested in advertising and
promotions which were ahead by 80 basis points.
NORTH AMERICA
Turnover was 9% lower than last year, again mainly reflecting the impact of
disposals. Underlying sales were lower by 2%. As well as the phasing effects
including the later Easter we saw additional short-term disruptions to the
operating environment, particularly in the latter part of the quarter. These
included sharp trade de-stocking, the impact of financial difficulties
experienced by some retailers and distributors and weak out-of-home markets.
Our Unilever Bestfoods business shows a more encouraging underlying trend as we
move from the focus on integration to one of innovation and growth. In
particular there were good performances from Lipton Asian side dishes, Ragu Rich
and Meaty, Skippy, Bertolli pasta sauces, in both Lipton ready-to-drink tea and
ready-to-drink lemonade and Becel in Canada. Slim• Fast sales declined in the
quarter through the impact of changes in promotional plans and timing. In
addition there has been a rapid growth of low carbohydrate diets. However the
more recent Slim• Fast innovations continue to do well and we have successfully
launched Slim• Fast ice cream. A range of other new Slim• Fast products will
follow later in the year. The reach of the Slim• Fast and Ben & Jerry's brands
has been broadened through expansion into the food service channel.
In Home & Personal Care underlying sales were flat with a strong performance in
personal care offset by lower sales in home care where we have been focussing on
segments which have the greatest opportunity for future profitable growth. Axe
has continued to make good progress and together with innovation under the
Degree brand has given us a strengthened market position. There has been a
promising start by Dove shampoo and further innovations behind the Dove and
Vaseline brands have improved our positions in skin care.
Operating margin at 13.1% is 220 basis points lower than last year after a 370
basis points increase in advertising and promotions to support our recent
product launches.
AFRICA, MIDDLE EAST AND TURKEY
Turnover was 11% ahead of last year with underlying sales growth of 9% and a net
gain from acquisitions and disposals.
Notwithstanding difficult economies in a number of countries and uncertainty in
the Middle East the region made excellent progress. Laundry performed especially
well through the Surf and Omo brands and Home & Personal Care was further
boosted in the skin, oral and hair care markets through activities behind Dove,
Lux, Sunsilk and Signal.
In Foods, Knorr has been extended across the north of the region including the
launch of the brand in Arabia and the launch of seasonings and meal-makers in
Turkey. Lipton also grew strongly especially in tea in Arabia and Egypt and
ready-to-drink tea in South Africa.
Operating margin at 11.4% is ahead by 270 basis points with advertising and
promotional spending at the same rate as last year.
ASIA AND PACIFIC
Turnover was ahead by 2% including the impact of disposals. Underlying sales
grew by 5% with excellent volume growth partially offset by price declines as we
enhanced our competitive position in India.
In Foods there was good growth in our leading brands. However, overall Foods was
flat as we continued to manage the tail of brands for value, particularly in
beverages and spreads and cooking products. Royco, Bango and Sariwangi led
another good quarter in Indonesia. The launch of Lipton Sparkle lemon
ready-to-drink tea contributed to a strong performance in Japan and Knorr
bouillon was introduced to China. The quarter saw a return to growth in our
beverage brands in India as we re-launched Lipton Yellow Label packet tea and
launched Brooke Bond boilable tea bags.
In Home & Personal Care there was excellent growth from personal care which was
broad based by category and geography. In skin, innovations behind Pond's,
Lifebuoy, Lux and Fair & Lovely led the way whilst in hair there was another
strong performance by Dove further boosted by a good contribution from Clear and
Lifebuoy. In home care Omo led healthy growth in laundry across all major
countries.
The SARS virus is clearly affecting economies in the region, but has had a
limited impact on our business.
Operating margin at 15.5% was 120 basis points below the prior year reflecting a
250 basis points increase in advertising and promotions.
LATIN AMERICA
Turnover was ahead by 6% including the impact of disposals while underlying
sales grew by 10%. In the north of the region volumes grew strongly, while in
the south pricing continued to be the main driver as we recovered devaluation
led cost increases, and both consumption and our volumes have been affected as a
result.
In Home & Personal Care growth was underpinned by a strong performance from
personal care. Dove shampoo was launched in Brazil, Chile and Andina and
continued to grow well in skin cleansing and deodorants. Sunsilk was boosted by
new variants across the region and the introduction last year into Andina and
the Caribbean. Rexona was relaunched in a number of countries and new fragrances
of Axe were introduced in Mexico, Andina and Chile, while the brand made its
debut in Colombia. Lux performed well including the introduction in Brazil of a
variant for the care of dark skin.
In Foods growth was again broad based across categories and with good
contribution from innovations, especially in Brazil and Mexico. These included
Knorr noodle cups in Mexico, Becel pro•activ and Becel de Capullo in Brazil and
Mexico respectively and strong growth of AdeS soy-based drinks in Mexico
following a relaunch last year. Arisco moved ahead in Brazil and Hellmann's made
good progress especially in Mexico.
Operating margin at 13.5% is 100 basis points below last year after an increase
in advertising and promotions of 170 basis points.
CASH FLOW
Cash flow from operations in the quarter was €0.8 billion compared with €1.1
billion during the corresponding period last year. Operating profit (beia) at
current exchange rates was €250 million lower, mainly through the impact of
currency movements. In addition, restructuring cash outflows were higher as we
implemented the Path to Growth cost savings programme.
Net interest paid was €171 million lower, reflecting reduced debt levels and the
timing of interest payments. Capital expenditure and financial investment was
€88 million lower mainly through reduced expenditure on fixed assets. The net
cash effect of acquisition and disposal activity this quarter was broadly
neutral.
Net debt decreased by €685 million in the quarter. €297 million of the reduction
was from cash flow with the balance from currency effects, particularly on our
US dollar debt.
BALANCE SHEET
Capital and reserves increased by €526 million in the quarter. Net profits of
€637 million and positive currency retranslation of €124 million were partially
offset by a €264 million balance sheet movement in net pension assets and
liabilities. This was reflected in reserves under the rules of FRS17, our new
accounting policy for pensions. Further information is given on page 13.
EURO REPORTING
Information in sterling and US dollars is available as a supplement to this Euro
report.
SAFE HARBOUR STATEMENT: This announcement may contain forward-looking
statements (within the meaning of the U.S. Private Securities Litigation
Reform Act 1995). Any forward-looking statements are based on current
expectations with respect to important risk factors. It is important to note
that the actual results could materially differ from the results anticipated
in any forward-looking statements which may be contained in this
announcement. Factors which might cause forward-looking statements to differ
materially from actual results include, among other things, the overall
economic, political, social and business conditions, the demand for our
goods and services, competition in the market, fluctuations in interest
rates and foreign currencies, the impact and other uncertainties of future
acquisitions and disposals and any changes in the tax laws and other
legislation and regulation, in the jurisdictions in which we operate.
We do not undertake any obligation to update any forward-looking statements
contained in or incorporated in this announcement to reflect actual results,
changes in assumptions or in other factors which may affect any
forward-looking statements.
CONSOLIDATED PROFIT AND LOSS ACCOUNT - CONSTANT EXCHANGE RATES (unaudited)
Note: A description of the exchange rate conventions used is given on page 12.
€ Millions - constant rates First Quarter
---------------
2003 2002 % Incr./
------ ------ ----------
Restated (Decr.)
--- ---------- ---------
TURNOVER 11,124 11,551 (4)%
Less: Share of turnover of joint (82) (142)
ventures ------- -------
Group turnover 11,042 11,409 (3)%
------- -------
Group operating profit 1,396 1,148 22%
Add: Share of operating profit of joint 14 14
ventures ------- -------
OPERATING PROFIT 1,410 1,162 21%
----------------------------------- ------- ------- -------
Operating profit beia * 1,623 1,648 (2)%
Exceptional items 78 (168)
Amortisation of goodwill and (291) (318)
intangibles ------- ------- -------
-----------------------------------
Share of operating profit of associates (13) -
Other income from fixed investments 3 (1)
Interest (excluding pension related (257) (294)
amounts)
Net interest cost/return on pension (48) 27
scheme assets and liabilities ------- -------
PROFIT BEFORE TAXATION 1,095 894 22%
Taxation (348) (406)
------- -------
PROFIT AFTER TAXATION 747 488 53%
Minority interests (77) (63)
------- -------
NET PROFIT 670 425 57%
------- -------
Net profit beia * 865 846 2%
----------------------------------- ------- ------- -------
COMBINED EARNINGS PER SHARE (Constant rates)
- per €0.51 ordinary NV share (Euros) 0.68 0.42 61%
- per 1.4p ordinary PLC share (Euro 10.21 6.32 61%
cents)
- per €0.51 ordinary NV share - beia * 0.88 0.85 4%
(Euros)
- per 1.4p ordinary PLC share - beia * 13.22 12.73 4%
(Euro cents)
- per €0.51 ordinary NV share - diluted 0.66 0.41 61%
(Euros)
- per 1.4p ordinary PLC share - diluted 9.92 6.15 61%
(Euro cents) ------- ------- -------
-----------------------------------
* Before exceptional items and amortisation of goodwill and intangibles
Restatements relate to the implementation of United Kingdom Financial Reporting
Standard 17 'Retirement Benefits' and changes in our accounting policy for share
option costs (see notes on page 13).
NET PROFIT AND EARNINGS PER SHARE - CURRENT EXCHANGE RATES (unaudited)
Net profit and earnings per share given below are stated at current exchange
rates i.e. the results in both years have been translated at the exchange rates
prevailing during the appropriate period.
For further details of the results at current exchange rates and impact of
exchange rate movements see notes on page 12.
€ Millions - current rates First Quarter
---------------
2003 2002 % Incr./
------ ------ ----------
Restated (Decr.)
--- ---------- ---------
NET PROFIT 637 441 45%
----------------------------------- ------- ------- -------
Net profit beia * 815 886 (8)%
----------------------------------- ------- ------- -------
COMBINED EARNINGS PER SHARE (Current rates)
- per €0.51 ordinary NV share (Euros) 0.65 0.44 48%
- per 1.4p ordinary PLC share (Euro cents) 9.69 6.54 48%
- per €0.51 ordinary NV share - beia * 0.83 0.89 (7)%
(Euros)
- per 1.4p ordinary PLC share - beia * 12.44 13.34 (7)%
(Euro cents)
- per €0.51 ordinary NV share - diluted 0.63 0.42 48%
(Euros)
- per 1.4p ordinary PLC share - diluted 9.42 6.36 48%
(Euro cents) ------- ------- -------
-----------------------------------
* Before exceptional items and amortisation of goodwill and intangibles
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES (unaudited)
€ Millions - current rates First Quarter
---------------
2003 2002
------ ------
Restated
----------
Net profit 637 441
Currency retranslation 112 (304)
------- -------
Total recognised gains for the year 749 137
Pension gains and losses net of tax (264) (91)
------- -------
Total recognised gains / (losses) since last annual 485 46
accounts ------- -------
Restatements relate to the implementation of United Kingdom Financial Reporting
Standard 17 'Retirement Benefits' and changes in our accounting policy for share
option costs (see notes on page 13).
MOVEMENTS IN SHAREHOLDERS' EQUITY (unaudited)
€ Millions - current rates First Quarter
---------------
2003 2002
------ -------
Restated
----------
Shareholders' equity as at 1 January (1) 4,629 8,437
Net profit 637 441
Dividends (6) (10)
Goodwill movements 10 1
Currency retranslation 124 (307)
Change in number of shares or certificates of
shares held in connection with share options (4) (17)
Pension gains and losses net of tax (264) (91)
Adjustment to cost of share options 29 15
-------- --------
Shareholders' equity as at the end of the period 5,155 8,469
-------- --------
SUMMARY BALANCE SHEET (unaudited)
€ Millions - current rates As at 29th As at 31st As at 30th
March December March
2003 2002 2002
------ ------ ------
Restated Restated
---------- ----------
Goodwill and intangibles 20,268 20,274 24,586
Other fixed assets 7,694 8,115 10,014
Stocks 4,818 4,500 5,506
Debtors 7,668 6,951 9,891
Cash and current investments 3,619 3,478 2,182
Trade and other creditors (11,986) (11,732) (12,913)
--------- -------- --------
32,081 31,586 39,266
--------- -------- --------
Borrowings 19,900 20,444 25,220
Provisions for liabilities and 6,376 5,894 4,845
charges
Minority interests 650 619 732
Capital and reserves 5,155 4,629 8,469
--------- -------- --------
32,081 31,586 39,266
--------- -------- --------
Restatements relate to the implementation of United Kingdom Financial Reporting
Standard 17 'Retirement Benefits' and changes in the accounting policy for share
option costs (see notes on page 13).
€ Millions - current rates As at 1st As at 1st
January January
2003 2002
------------ -------------
(1) Shareholders' equity as previously 5,867 6,993
reported
Change in accounting policy - pensions (1,238) 1,444
--------- --------
Shareholders' equity as restated 4,629 8,437
--------- --------
CASH FLOW STATEMENT (unaudited)
€ Millions - current rates First Quarter
---------------
2003 2002
-------- --------
Cash flow from group operating activities 823 1,138
Dividends from joint ventures 3 6
Returns on investments and servicing of finance (99) (275)
Taxation (255) (295)
Capital expenditure and financial investment (160) (248)
Acquisitions and disposals (15) 90
CASH INFLOW BEFORE MANAGEMENT OF LIQUID
RESOURCES AND FINANCING 297 416
Management of liquid resources 225 34
Financing (317) (278)
-------- --------
INCREASE / (DECREASE) IN CASH IN THE PERIOD 205 172
-------- --------
RECONCILIATION OF CASH FLOW TO MOVEMENT IN NET DEBT (unaudited)
€ Millions - current rates First Quarter
---------------
2003 2002
-------- --------
NET DEBT AT 1 JANUARY (16,966) (23,199)
-------- --------
INCREASE / (DECREASE) IN CASH IN THE PERIOD 205 172
Cash flow from (increase)/decrease in borrowings 317 276
Cash flow from increase/(decrease) in liquid (225) (34)
resources -------- --------
Change in net funds resulting from cash flows 297 414
Borrowings within group companies acquired (26) -
Borrowings within group companies sold - 14
Liquid resources within group companies acquired - -
Liquid resources within group companies sold (3) -
Non cash movements (123) (15)
Currency retranslation 540 (252)
-------- --------
MOVEMENT IN NET DEBT IN THE PERIOD 685 161
-------- --------
NET DEBT AT PERIOD END (16,281) (23,038)
-------- --------
GEOGRAPHICAL ANALYSIS (at constant rates - unaudited)
€ Millions - constant rates First Quarter
---------------
2003 2002 % Incr./
------ ------ ----------
Restated (Decr.)
TURNOVER 11,124 11,551 (4)%
-------------------------------- -------- -------- --------
Europe 4,323 4,670 (7)%
North America 2,811 3,075 (9)%
Africa, Middle East and Turkey 778 699 11%
Asia and Pacific 1,887 1,855 2%
Latin America 1,325 1,252 6%
-------------------------------- -------- -------- --------
OPERATING PROFIT - beia * 1,623 1,648 (2)%
-------------------------------- -------- -------- --------
Europe 694 626 11%
North America 369 470 (21)%
Africa, Middle East and Turkey 89 61 46%
Asia and Pacific 293 310 (6)%
Latin America 178 181 (2)%
-------------------------------- -------- -------- --------
OPERATING MARGIN - beia * 14.6% 14.3%
-------------------------------- -------- --------
Europe 16.1% 13.4%
North America 13.1% 15.3%
Africa, Middle East and Turkey 11.4% 8.7%
Asia and Pacific 15.5% 16.7%
Latin America 13.5% 14.5%
-------------------------------- -------- --------
* Before exceptional items and amortisation of goodwill and intangibles
OPERATIONAL ANALYSIS (at constant rates - unaudited)
€ Millions - constant rates First Quarter
---------------
2003 2002 % Incr./
------ ------ ----------
Restated (Decr.)
---------- ---------
TURNOVER 11,124 11,551 (4)%
------------------------------- -------- -------- --------
Foods 6,062 6,348 (5)%
------------------------------- -------- -------- --------
Savoury and dressings 2,197 2,243 (2)%
Spreads and cooking products 1,298 1,510 (14)%
Health & wellness and beverages 976 994 (2)%
Ice cream and frozen foods 1,591 1,601 (1)%
------------------------------- -------- -------- --------
Home care and professional cleaning 1,985 2,330 (15)%
Personal care 2,982 2,755 8%
Other operations 95 118 (20)%
------------------------------- -------- -------- --------
OPERATING PROFIT - beia * 1,623 1,648 (2)%
------------------------------- -------- -------- --------
Foods 799 799 - %
------------------------------- -------- -------- --------
Savoury and dressings 374 305 22%
Spreads and cooking products 191 224 (15)%
Health & wellness and beverages 136 172 (21)%
Ice cream and frozen foods 98 98 - %
------------------------------- -------- -------- --------
Home care and professional cleaning 247 258 (4)%
Personal care 583 578 1%
Other operations (6) 13 (147)%
------------------------------- -------- -------- --------
OPERATING MARGIN - beia * 14.6% 14.3%
------------------------------- -------- --------
Foods 13.2% 12.6%
------------------------------- -------- --------
Savoury and dressings 17.0% 13.6%
Spreads and cooking products 14.7% 14.8%
Health & wellness and beverages 13.9% 17.3%
Ice cream and frozen foods 6.1% 6.1%
------------------------------- -------- --------
Home care and professional cleaning 12.5% 11.1%
Personal care 19.6% 21.0%
Other operations (6.4)% 10.9%
------------------------------- -------- --------
* Before exceptional items and amortisation of goodwill and intangibles
NOTES
Exchange rate conventions and impact of movements in exchange rates
Consistent with our previous practice, the following exchange rate conventions
have been applied:
In the profit and loss account information given on page 6 and the segmental
analysis on pages 10 and 11, the results for 2003 and the comparative figures
for 2002 have been translated at constant exchange rates, being the annual
average exchange rates for 2002. This reporting convention facilitates
comparisons since the impact of exchange rate fluctuations is eliminated, and is
the basis on which we measure our annual operational performance internally. It
also forms the basis for target setting and the annual outlook statement. For
our reporting currencies these rates were €1 = £0.63 = US $0.94.
The quarterly results, earnings per share and cash flow are translated at rates
current in each period. For our reporting currencies these rates were €1 = £0.67
= US $1.07 for first quarter 2003 and €1 = £0.61 = US $0.88 for first quarter
2002.
Thus the two conventions apply different exchange rates to the individual
quarters for the prior year comparator. Over the year this evens out, so that
the full year numbers for the comparator are identical under both conventions.
The Euro strengthened progressively through 2002 against a basket of currencies.
As a result, the current rate results in the first quarter of last year
represent a particularly high base for comparison compared with results at
average exchange rates for the year. This effect will reverse over the remainder
of the year.
As a result of the strengthening Euro, the growth rates for turnover and net
profit beia were 13% and 10% lower at current exchange rates than at constant
rates, of which 5% relates to the phasing of the exchange rate movement during
2002 as described above. For illustrative purposes, if the first quarter 2003
exchange rates were to remain in place through the remainder of the year, then
growth in net profit beia for the year would be around 5% lower at current rates
than at constant rates.
Results at current rates of exchange
€ Millions - current rates First Quarter
---------------
2003 2002 % Incr.
------ ------ ---------
Restated /(Decr.)
---------- ----------
Turnover 10,182 12,238 (17) %
------- -------
Operating profit 1,302 1,232 6 %
-------------------------------------- ------- ------- -------
Operating profit beia * 1,496 1,746 (14) %
-------------------------------------- ------- ------- -------
Share of operating profit of associates & (9) -
income from investments
Interest (including net interest cost/ (262) (296)
return on pension scheme assets and
liabilities)
Taxation (325) (428)
Minority interests (69) (67)
------- -------
Net profit 637 441 45 %
------- -------
-------------------------------------- ------- ------- -------
Net profit beia * 815 886 (8) %
-------------------------------------- ------- ------- -------
The impact of exchange rate movements on the results at current exchange rates
in Euros, £ sterling and US dollars is given below, along with the year on year
percentage change at constant rates.
First Quarter Constant rates At current rates of exchange
- Millions ---------------- ------------------------------
% Incr. € % Incr. £ % Incr. US $ % Incr.
--------- --- --------- --- --------- ------ ---------
/(Decr.) 2003 /(Decr.) 2003 /(Decr.) 2003 /(Decr.)
---------- ------ ---------- ------ ---------- ------ ----------
Turnover (4) % 10,182 (17) % 6,812 (9) % 10,915 2 %
Operating (2) % 1,496 (14) % 1,000 (7) % 1,603 5 %
profit beia *
Net profit 57 % 637 45 % 426 57 % 683 77 %
-------------- --------- -------- ------- -------- -------- ------- -------
Net profit beia* 2 % 815 (8) % 545 - % 874 13 %
--------- -------- ------- -------- -------- ------- -------
--------------
% Change in EPS 61 % 48 % 61 % 81 %
--------- -------- ------- -------- -------- ------- -------
--------------
% Change in 4 % (7) % 1 % 14 %
EPS - beia * --------- -------- ------- -------- -------- ------- -------
--------------
* Before exceptional items and amortisation of goodwill and intangibles
The balance sheet figures have been translated at period-end rates of exchange.
For our reporting currencies these were €1 = £0.69 = US $1.07 at 31 March 2003,
€1 = £0.65 = US $1.05 at 31 December 2002 and €1 = £0.61 = US $0.87 at 31 March
2002.
Acquisitions and disposals
On 18 February 2003, we announced an agreement to acquire the remaining unheld
shares in CPC/Aji Asia, a joint venture with activities in six countries, from
Ajinomoto Co. Inc., Japan. The acquisition is in two parts with approximately
one half of Ajinomoto's holding transferred on 25 March 2003 and the balance
scheduled for transfer in March 2004. Unilever will pay a total of US $381
million for Ajinomoto's holding. Unilever has full management control of the
business with effect from 25 March 2003, and accordingly the business was fully
consolidated in the balance sheet at 29 March 2003.
On 28 March 2003, we completed the sale of Frigedoc, our mobile home-vending
frozen foods and ice cream business in France, to Toupargel.
FRS 17
From 1 January 2003 we have adopted United Kingdom Financial Reporting Standard
17 (FRS 17) 'Retirement Benefits' which requires that pension assets and
liabilities be stated at fair values. The impact of adoption of this standard
has been reflected in all periods covered by this announcement by means of prior
period adjustments to the balance sheets and profit and loss accounts.
The implementation of FRS 17 has resulted in a restatement of €1,238 million
reduction in the opening capital and reserves for 2003 (2002: increase of €1,444
million). In the 2003 opening balance sheet pension liabilities have increased
by €1,752 million (2002: decrease of €628 million). Deferred tax within
liabilities has been reduced by €1,785 million (2002: reduction of €1,383
million). The change in debtors because of changes in pension assets and
deferred tax is a net reduction of €1,280 million in the 2003 opening balance
(2002: reduction of €561 million). Minority interests have also been reduced by
€9 million (2002: increase of €6 million).
In the profit and loss account for the first quarter of 2002 operating profit
has decreased by €16 million and interest has increased by €27 million. Total
recognised gains and losses for the first quarter of 2002 have reduced by €91
million for actuarial gains and losses and differences between actual and
expected return on pensions plan assets.
Share options
In line with recommendations of various standard setting bodies, from 1 January
2003 we changed our accounting policy for share options. The impact of adoption
of this change has been reflected in all periods covered by this announcement by
means of prior period adjustments to the balance sheets and profit and loss
accounts. We have been hedging our existing share option programmes by buying
shares at the time of grant and taking the financing cost within interest. The
accounting change is to include an additional non cash charge against operating
profit to reflect the value to the employee of the share options granted. In
determining this charge we are applying a Black-Scholes based valuation spread
over the vesting period of the option.
In the profit and loss account for the first quarter of 2002 operating profit
has been reduced by €15 million, and in the first quarter of 2003 a charge of
€29 million has been included in operating profit.
Combined earnings per share
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 year, less the average number of shares held to meet options granted
under various employee share plans.
The number of combined share units is calculated from the underlying NV and PLC
shares using the exchange rate of £1 = €5.445, in accordance with the
Equalisation Agreement.
The diluted earnings per share are based on the average number of share units,
plus all shares under option, together with certain PLC shares which may be
issued in 2038 under the arrangements for the variation of the Leverhulme Trust.
The number of shares is reduced, in accordance with FRS 14, by the number of
shares that could be purchased at fair value with the expected proceeds from the
exercise of options by employees.
Earnings per share in Euro for the quarter
Constant rates Current rates
---------------- ---------------
2003 2002 2003 2002
------ ------ ------ ------
Restated Restated
---------- ----------
Thousands of units
Average number of 973,339 981,988 973,339 981,988
combined share units of
€0.51
Average number of 6,488,927 6,546,584 6,488,927 6,546,584
combined share units of
1.4p
COMBINED EPS € Millions
--------------
Net profit 670 425 637 441
Less: Preference (8) (13) (8) (13)
dividends -------- -------- -------- -------
Net profit attributable 662 412 629 428
to ordinary capital -------- -------- -------- -------
Combined EPS per €0.51 0.68 0.42 0.65 0.44
(Euros)
Combined EPS per 1.4p 10.21 6.32 9.69 6.54
(Euro cents) -------- -------- -------- -------
COMBINED EPS - BEIA * € Millions
-----------------------
Net profit 670 425 637 441
Add back exceptional (82) 116 (74) 121
items net of tax
Add back amortisation of 277 305 252 324
goodwill / intangibles -------- -------- -------- -------
net of tax
Net profit beia * 865 846 815 886
Less: Preference (8) (13) (8) (13)
dividends -------- -------- -------- -------
Net profit attributable 857 833 807 873
to ordinary capital - -------- -------- -------- -------
beia
Combined EPS - beia* per 0.88 0.85 0.83 0.89
€0.51 (Euros)
Combined EPS - beia* per 13.22 12.73 12.44 13.34
1.4p (Euro cents) -------- -------- -------- -------
COMBINED EPS - Diluted Thousands of units
------------------------
Adjusted average 1,002,138 1,009,836 1,002,138 1,009,836
combined share units of
€0.51
Adjusted average 6,680,920 6,732,239 6,680,920 6,732,239
combined share units of
1.4p
€ Millions
Net profit attributable 662 412 629 428
to ordinary capital -------- -------- -------- -------
Combined diluted EPS per 0.66 0.41 0.63 0.42
€0.51 (Euros)
Combined diluted EPS per 9.92 6.15 9.42 6.36
1.4p (Euro cents) -------- -------- -------- -------
* Before exceptional items and amortisation of goodwill and intangibles
Dates
The results for the second quarter and first half-year 2003 will be announced on
30 July 2003.
Internet: http://www.unilever.com
E-mail: press-office.london@unilever.com
2 May 2003
CONSOLIDATED PROFIT AND LOSS ACCOUNT - CONSTANT EXCHANGE RATES (unaudited)
Note: A description of the exchange rate conventions used is given on page 12.
£ Millions - constant rates First Quarter
---------------
2003 2002 % Incr./
------ ------ ----------
Restated (Decr.)
---------- ---------
TURNOVER 6,986 7,254 (4)%
Less: Share of turnover of joint (51) (89)
ventures ------- -------
Group turnover 6,935 7,165 (3)%
------- -------
Group operating profit 877 721 22%
Add: Share of operating profit of joint 9 9
ventures ------- -------
OPERATING PROFIT 886 730 21%
----------------------------------- ------- ------- -------
Operating profit beia * 1,020 1,035 (2)%
Exceptional items 49 (105)
Amortisation of goodwill and intangibles (183) (200)
----------------------------------- ------- ------- -------
Share of operating profit of associates (8) -
Other income from fixed investments 2 -
Interest (excluding pension related (162) (185)
amounts)
Net interest cost/return on pension scheme (30) 17
assets and liabilities ------- -------
PROFIT BEFORE TAXATION 688 562 22%
Taxation (219) (255)
------- -------
PROFIT AFTER TAXATION 469 307 53%
Minority interests (48) (39)
------- -------
NET PROFIT 421 268 57%
------- -------
Net profit beia * 544 531 2%
----------------------------------- ------- ------- -------
COMBINED EARNINGS PER SHARE (Constant
rates)
- per 1.4p ordinary PLC share 6.41p 3.97p 61%
- per 1.4p ordinary PLC share - beia * 8.30p 8.00p 4%
- per 1.4p ordinary PLC share - diluted 6.23p 3.86p 61%
----------------------------------- ------- ------- -------
* Before exceptional items and amortisation of goodwill and intangibles
Restatements relate to the implementation of United Kingdom Financial Reporting
Standard 17 'Retirement Benefits' and changes in our accounting policy for share
option costs (see notes on page 13).
NET PROFIT AND EARNINGS PER SHARE - CURRENT EXCHANGE RATES (unaudited)
Net profit and earnings per share given below are stated at current exchange
rates i.e. the results in both years have been translated at the exchange rates
prevailing during the appropriate period.
For further details of the results at current exchange rates and impact of
exchange rate movements see notes on page 12.
£ Millions - current rates First Quarter
---------------
2003 2002 % Incr./
------ ------ ----------
Restated (Decr.)
---------- ---------
NET PROFIT 426 271 57%
----------------------------------- ------- ------- -------
Net profit beia * 545 545 - %
----------------------------------- ------- ------- -------
COMBINED EARNINGS PER SHARE (Current rates)
- per 1.4p ordinary PLC share 6.49p 4.02p 61%
- per 1.4p ordinary PLC share - beia * 8.32p 8.20p 1%
- per 1.4p ordinary PLC share - diluted 6.30p 3.91p 61%
----------------------------------- ------- ------- -------
* Before exceptional items and amortisation of goodwill and intangibles
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES (unaudited)
£ Millions - current rates First Quarter
---------------
2003 2002
------ --------
Restated
----------
Net profit 426 271
Currency retranslation 251 (178)
------- -------
Total recognised gains for the year 677 93
Pension gains and losses net of tax (147) (56)
------- -------
Total recognised gains / (losses) since last annual 530 37
accounts ------- -------
Restatements relate to the implementation of United Kingdom Financial Reporting
Standard 17 'Retirement Benefits' and changes in our accounting policy for share
option costs (see notes on page 13).
MOVEMENTS IN SHAREHOLDERS' EQUITY (unaudited)
£ Millions - current rates First Quarter
---------------
2003 2002
------ --------
Restated
----------
Shareholders' equity as at 1 January (1) 3,011 5,154
Net profit 426 271
Dividends (4) (6)
Goodwill movements 7 1
Currency retranslation 262 (177)
Change in number of shares or certificates of
shares held in
connection with share options (3) (10)
Pension gains and losses net of tax (177) (56)
Adjustment to cost of share options 20 9
-------- --------
Shareholders' equity as at the end of the period 3,542 5,186
-------- --------
SUMMARY BALANCE SHEET (unaudited)
£ Millions - current rates As at 29th As at 31st As at 30th
March December March
2003 2002 2002
------ ------ ------
Restated Restated
---------- ----------
Goodwill and intangibles 13,928 13,188 15,056
Other fixed assets 5,287 5,279 6,133
Stocks 3,311 2,927 3,372
Debtors 5,269 4,522 6,057
Cash and current investments 2,487 2,263 1,336
Trade and other creditors (8,237) (7,632) (7,909)
-------- -------- --------
22,045 20,547 24,045
-------- -------- --------
Borrowings 13,675 13,299 15,445
Provisions for liabilities and 4,382 3,834 2,967
charges
Minority interests 446 403 447
Capital and reserves 3,542 3,011 5,186
-------- -------- --------
22,045 20,547 24,045
-------- -------- --------
Restatements relate to the implementation of United Kingdom Financial Reporting
Standard 17 'Retirement Benefits' and changes in the accounting policy for share
option costs (see notes on page 13).
£ Millions - current rates As at 1st As at 1st
January January
2003 2002
------------ -------------
(1) Shareholders' equity as previously 3,816 4,272
reported
Change in accounting policy - pensions (805) 882
-------- --------
Shareholders' equity as restated 3,011 5,154
-------- --------
CASH FLOW STATEMENT (unaudited)
£ Millions - current rates First Quarter
---------------
2003 2002
-------- --------
Cash flow from group operating activities 551 699
Dividends from joint ventures 2 4
Returns on investments and servicing of finance (66) (169)
Taxation (171) (181)
Capital expenditure and financial investment (107) (152)
Acquisitions and disposals (10) 55
CASH INFLOW BEFORE MANAGEMENT OF LIQUID 199 256
RESOURCES AND FINANCING
Management of liquid resources 150 21
Financing (212) (171)
-------- --------
INCREASE / (DECREASE) IN CASH IN THE PERIOD 137 106
-------- --------
RECONCILIATION OF CASH FLOW TO MOVEMENT IN NET DEBT (unaudited)
£ Millions - current rates First Quarter
---------------
2003 2002
-------- --------
NET DEBT AT 1 JANUARY (11,036) (14,173)
-------- --------
INCREASE / (DECREASE) IN CASH IN THE PERIOD 137 106
Cash flow from (increase)/decrease in borrowings 212 170
Cash flow from increase/(decrease) in liquid (150) (21)
resources -------- --------
Change in net funds resulting from cash flows 199 255
Borrowings within group companies acquired (18) -
Borrowings within group companies sold - 9
Liquid resources within group companies acquired - -
Liquid resources within group companies sold (2) -
Non cash movements (82) (9)
Currency retranslation (249) (191)
-------- --------
MOVEMENT IN NET DEBT IN THE PERIOD (152) 64
-------- --------
NET DEBT AT PERIOD END (11,188) (14,109)
-------- --------
GEOGRAPHICAL ANALYSIS (at constant rates - unaudited)
£ Millions - constant rates First Quarter
---------------
2003 2002 % Incr./
------ ------ ----------
Restated (Decr.)
TURNOVER 6,986 7,254 (4)%
-------------------------------- -------- -------- --------
Europe 2,715 2,933 (7)%
North America 1,765 1,931 (9)%
Africa, Middle East and Turkey 489 439 11%
Asia and Pacific 1,185 1,165 2%
Latin America 832 786 6%
-------------------------------- -------- -------- --------
OPERATING PROFIT - beia * 1,020 1,035 (2)%
-------------------------------- -------- -------- --------
Europe 436 393 11%
North America 232 295 (21)%
Africa, Middle East and Turkey 56 38 46%
Asia and Pacific 184 195 (6)%
Latin America 112 114 (2)%
-------------------------------- -------- -------- --------
OPERATING MARGIN - beia * 14.6% 14.3%
-------------------------------- -------- --------
Europe 16.1% 13.4%
North America 13.1% 15.3%
Africa, Middle East and Turkey 11.4% 8.7%
Asia and Pacific 15.5% 16.7%
Latin America 13.5% 14.5%
-------------------------------- -------- --------
* Before exceptional items and amortisation of goodwill and intangibles
OPERATIONAL ANALYSIS (at constant rates - unaudited)
£ Millions - constant rates First Quarter
---------------
2003 2002 % Incr./
------ ------ ----------
Restated (Decr.)
---------- ---------
TURNOVER 6,986 7,254 (4)%
------------------------------- -------- -------- --------
Foods 3,807 3,987 (5)%
------------------------------- -------- -------- --------
Savoury and dressings 1,380 1,409 (2)%
Spreads and cooking products 815 949 (14)%
Health & wellness and beverages 613 624 (2)%
Ice cream and frozen foods 999 1,005 (1)%
------------------------------- -------- -------- --------
Home care and professional cleaning 1,246 1,463 (15)%
Personal care 1,873 1,730 8%
Other operations 60 74 (20)%
------------------------------- -------- -------- --------
OPERATING PROFIT - beia * 1,020 1,035 (2)%
------------------------------- -------- -------- --------
Foods 502 502 - %
------------------------------- -------- -------- --------
Savoury and dressings 235 192 22%
Spreads and cooking products 120 141 (15)%
Health & wellness and beverages 86 108 (21)%
Ice cream and frozen foods 61 61 - %
------------------------------- -------- -------- --------
Home care and professional cleaning 156 162 (4)%
Personal care 366 363 1%
Other operations (4) 8 (147)%
------------------------------- -------- -------- --------
OPERATING MARGIN - beia * 14.6% 14.3%
------------------------------- -------- --------
Foods 13.2% 12.6%
------------------------------- -------- --------
Savoury and dressings 17.0% 13.6%
Spreads and cooking products 14.7% 14.8%
Health & wellness and beverages 13.9% 17.3%
Ice cream and frozen foods 6.1% 6.1%
------------------------------- -------- --------
Home care and professional cleaning 12.5% 11.1%
Personal care 19.6% 21.0%
Other operations (6.4)% 10.9%
------------------------------- -------- --------
* Before exceptional items and amortisation of goodwill and intangibles
Earnings per share in Sterling for the quarter
Constant rates Current rates
---------------- ---------------
2003 2002 2003 2002
------ ------ ------ ------
Restated Restated
---------- ----------
Thousands of units
Average number of 6,488,927 6,546,584 6,488,927 6,546,584
combined share units of
1.4p
COMBINED EPS £ Millions
--------------
Net profit 421 268 426 271
Less: Preference (5) (8) (5) (8)
dividends -------- -------- -------- -------
Net profit attributable 416 260 421 263
to ordinary capital -------- -------- -------- -------
-------- -------- -------- -------
Combined EPS per 1.4p 6.41p 3.97p 6.49p 4.02p
-------- -------- -------- -------
COMBINED EPS - BEIA * £ Millions
-----------------------
Net profit 421 268 426 271
Add back exceptional (51) 73 (50) 74
items net of tax
Add back amortisation of 174 190 169 200
goodwill / intangibles -------- -------- -------- -------
net of tax
Net profit beia * 544 531 545 545
Less: Preference (5) (8) (5) (8)
dividends -------- -------- -------- -------
Net profit attributable 539 523 540 537
to ordinary capital - -------- -------- -------- -------
beia
-------- -------- -------- -------
Combined EPS - beia* per 8.30p 8.00p 8.32p 8.20p
1.4p -------- -------- -------- -------
COMBINED EPS - Diluted Thousands of units
------------------------
Adjusted average 6,680,920 6,732,239 6,680,920 6,732,239
combined share units of
1.4p
£ Millions
Net profit attributable 416 260 421 263
to ordinary capital -------- -------- -------- -------
-------- -------- -------- -------
Combined diluted EPS per 6.23p 3.86p 6.30p 3.91p
1.4p -------- -------- -------- -------
* Before exceptional items and amortisation of goodwill and intangibles
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