REPORT & ACCOUNTS I959 U Nt I L E V E R REPORT & ACCOUNTS UNILEVER N.V. F. J. TEMPEL - CHAIRMAN SIDNEY J. VAN DEN BERGH -VICE-CHAIRMAN THE LORD HEYWORTH -VICE-CHAIRMAN COLIN BAXTER G. D. A. KLIJNSTRA J. P. VAN DEN BERGH J. F. KNIGHT A. F. H. BLAAUW ANDREW M. KNOX A. D. BONHAM CARTER D. J. MANN A. W. J. CARON J. F. VAN MOORSEL GEORGE COLE F. D. MORRELL J. A. CONNEL F. J. PEDLER HAROLD HARTOG R. H. SIDDONS M. M. VAN HENGEL A. H. SMITH RUDOLF G. JURGENS J. P. STUBBS E. G. WOODROOFE A H. M. HIRSCHFELD J. M. HONIG K. P. VAN DER MANDELE PAUL RIJKENS JHR. J. A. G. SANDBERG H. L. WOLTERSOM E. A. HOFMAN AU s PRICE WATERHOUSE & Co. COOPER BROTHERS & Co. This is a translation of the original Dutch refjort. AllJTgures relate to the J~.F'. and LLWTED Groups combined 1958 1959 F1. F1. 18,388,000,000 TURNOVER............ 19,O 16,000,000 976,000,000 TRADINGPROFIT .......... 1,207,000,000 490,000,000 TAXATIONFORTHEYEAR...... 594,000,000 32,000,000 EXCEPTIONALPROFITS ....... 43,000,000 503,000,000 CONSOLIDATEDNET PROFIT ..... 640,000,000 105,000,000 ORDINARYDIVIDENDS ........ 146,000,000 * 18 "3 "0 N.V.. ............ 20 "lo * 4s. 2.4d. LIMITED (PER E 1 OF CAPITAL) ... 4s. 6.5d." 360,000,000 PROFITRETAINED IN THE BUSINESS ... 454,000,000 5,598,000,000 CAPITALEMPLOYED ........ 6,140,000,000 429,000,000 EXPENDITUREON FIXED ASSETS (NET). 439,000,000 244,000,000 DEPRECIATION.......... 271,000,000 %. %. On increased capital. 5 UNILEVERN.V. and UNILEVER LIMITED are linked by a series of agreements of which the principal is the Equalisation Agreement. This, inter alia, in effect equalises the rights of the ordinary capitals of the two companies as to dividends and, on liquidation, as to capital value, on the basis of F1. 12 nominal of N.V.’S ordinary capital being equivalent to jC; 1 nominal of LIMITED’S ordinary capital. 6 REPORT OF THE DIRECTORS FOR THE YEAR I959 to be submitted at the General Meeting of Shareholders to be held at Rotterdam on 26th April, 196‘0 The Directors submit their Report and Accounts for the year 1959. As usual, these combine the results and operations of the two Groups, UNILEVER N.V. (cc~.~.’’)and UNILEVER LIMITED (“LIMITED”),with the sterling equivalents of all N.V. figures calculated at the official parity, i.e. E 1 = F1. 10.64. CHANGES IN CAPITAL During 1959, N.V.issued a nominal amount of F1. 4,744,000 ordinary capital. F1. 1,249,000 was issued to third parties who held minority interests in two of our German companies, F. ThSrls Vereinigte Harburger Oelfabriken A.G. and Verein deutscher Oelfabriken after these companies had been absorbed by Margarine Union G.m.b.H. The balance of nominal F1. 3,495,000 was issued for the acquisition of virtually the whole share capital of N.V. Koninklijke Stearine Kaarsenfabrieken c‘Gouda-Apollo’’ of Gouda. The Gouda-Apollo shares thus acquired were subsequently transferred by N.V. to Unilever-Emery, a company in which half the capital is held by N.V. and half by Emery Industries, Inc. of Cincinnati, U.S.A. Details of this venture are given on page 19. RESULTS Turnover, particulars of which are shown in the table on page 11, again increased, F1. 19,015,776,000 as compared with F1. 18,388,474,000 in 1958. 7 Trading profits rose to F1. 1,207,196,000 (Fl. 976,303,000 in 1958). The main factors accounting for the improved trading results were as follows. The improvement in profit margins for margarine and edible fats, which began in the second half of 1958, was generally maintained in 1959, and shorter supplies of butter in Europe helped the sales of our premium brands. The volume of our soap and detergents trade increased almost everywhere and the increase occurred largely in the higher quality products, which yield a better margin. As a result, profits rose. There was a considerable rise in the profits of our business in toilet prepa- rations in the United States. The hot, dry summer of 1959 in Northern Europe made the farmers turn to compound feeds earlier in the year. This brought useful increases in both sales and profits of the animal feeding stuffs side of the business. The hot summer was also partly responsible for a substantial rise in the sales and profits of ice cream. In addition our other food businesses, particularly quick-frozen foods and dry soups, continued to yield an increasing return on the heavy development expenditure of recent years. In the United Africa Group the improvement reported last year for the later months of 1958 continued into 1959, and, with the steps taken to combat rising costs and obtain better margins, resulted in much better profits. The consolidated net profit rose from F1. 503,152,000 in 1958 to Fl. 639,730,000. This was after charging taxation in 1959 of F1. 593,765,000 (1958, F1. 490,069,000). Profit for the year after taxation, but before deducting loan interest, was equivalent in 1959 to 10.3°/0on the capital employed as against in 1958. The returns on capital employed and on turnover for the ten years ending with 1959 are shown in the chart on page 35. The proposed appropriations of the profits are shown in the consolidated profit and loss account (statement A). Interim dividends in respect of 1959 were paid on 17th December last on the ordinary capitals at the rate of 7°/0 for N.V. and 1s. 7.2d. per ?(T 1 of stock before deducting income tax for LIMITED. The Directors now recommend the payment of final ordinary dividends of 13°/0for N.V. and 2s. 11.3d. per iC: 1 of stock before deducting income tax for 8 LIMITED, both payable as from 10th May, 1960. This will make total dividends for 1959 of 20°/0 for N.V. and 4s. 6.5d. for LIMITED, which are equivalent in value under the terms of the Equalisation Agreement. In order to compare the dividends in respect of 1958, 181/20/0for N.V. and 4s. 2.4d. for LIMITED, with those now proposed, it should be noted that the dividends for 1959 will be distributed on the ordinary capitals as increased by the one for four scrip issues made in December, 1958. On the basis of these increased capitals the dividends for 1958 would have been 14.8O/, for N.V. and 3s. 4.3d. for LIMITED. After payment of the final ordinary dividends for 1959, an amount of F1.453,967,000 remains to be added to the profits retained in the business which, after taking into account the adjustments set out in statement C, will then amount to F1. 3,261,551,000. ECONOMIC BACKGROUND In most of Western Europe, and in North America, 1959 was a year of economic expansion. Industrial production rose, and over the world generally (outside the Communist countries) was about 10°/o higher than in 1958, a year of mild recession when industrial production had fallen by 3OlO. Increased production in 1959 was accompanied by greater exports and a greater demand for raw materials to replenish stocks run down during the recession, and world trade recovered rapidly. Towards the end of the year, when investment as well as consumption was rising, many Governments began to look to their defences against inflation. The primary producing countries shared in the economic recovery with a sharp increase in their commodity exports, though by the end of the year the general level of commodity prices had still only risen about half as much as it had fallen from the peak prices of 1957. 1959 was Europe’s first year of exchange convertibility since the War. The more important international currencies were stable, but fluctuations in some of the others presented the usual difficulties. In particular, the Brazilian cruzeiro depreciated rapidly, while Indonesia carried through a drastic reform of cur- rency and exchange in August. Unilever benefited from the fall in the standard rate of income tax in the United Kingdom. The tax rate was also reduced in the Republic of Ireland. Finland, Canada, the Philippines, the Belgian Congo and some of the French 9 African territories raised their taxes on profits. In Thailand and the Philippines distributed profits were taxed at a higher rate; in Indonesia they were taxed for the first time. ECONOMIC CO-OPERATION IN EUROPE At the beginning of 1959 the countries of the European Economic Com- munity introduced the first tariff reductions for their internal trade. It was en- couraging that a decision was taken to apply these reductions equally to imports from countries outside the Community, so far as compatible with the outer tariff planned for the Community as a whole. Similarly, at the beginning of 1959 a start was made towards abolishing quota restrictions, or at least increasing the quotas, but this feature was confined mostly to trade within the Community. After the failure of the negotiations for a comprehensive European free trade system, the (‘Outer Seven” formed a free trade area with the United Kingdom as the principal member. The European Free Trade Association Treaty was signed towards the end of 1959 and the first steps towards its implementation are to be taken on 1st July, 1960. Last year we said that we welcomed the institution of the European Econom- ic Community and we looked forward to some form of association between that Community and the British Commonwealth.