Annual Review 1994 And Summary Financial Statement English Version in Childers Unilever Contents Directors’ Report Summary Financial Statement 1 Financial Highlights 33 Introduction 2 Chairmen’s Statement 33 Dividends 4 Business Overview 33 Statement from the Auditors 12 Review of Operations 34 Summary Consolidated Accounts 26 Financial Review 29 Organisation 36 Additional Information 30 Directors & Advisory Directors Financial Highlights 1994 1993 % Change % Change at constant atwrrent a* cOnSt.3nf exchange rates exchange rates exchange rates Results (Fl. million) Turnover 82 590 83 641 77 626 6 8 Operating profit 7 012 7 107 5 397 30 32 Operating profit before excepttonal items 7 294 6 763 6 8 Exceptional items (187) (1 366) Profit on ordinary activities before taxation 6 634 6 700 5 367 24 25 Net profit 4 339 4 362 3 612 20 21 Net profit before exceptional items 4 372 4 406 4 271 -~mpy~21 E Key ratios Operating margin before exceptional items (%) 8.7 8.7 Net profit margin before exceptional items (%) 5.3 5.5 Return on capital employed (%) 16.7 15.7 Net gearing (%) 22.7 24.8 Net interest cover (times) 12.2 12.8 Combined earnings per share Guilders per Fl. 4 of ordinary capital 15.52 12.90 20 Pence per 5p of ordinary capital 83.59 69.45 20 Ordinary dividends Guilders per Fl. 4 of ordinary capital 6.19 5.88 5 Pence per 5p of ordinary capital 26.81 25.03 7 Fluctuations in exchange rates can have a significant effect on Unilever’s reported results. In order to highlight the currency impact, key 1994 comparisons are expressed both at the rates of exchange for the current year (current exchange rates) and also at the same exchange rates as were used for 1993 (constant exchange rates). Methods of calculation Net profit before exceptional items excludes the after tax effect of Net gearing IS net debt (borrowings less cash and current Investments) exceptional items in operating profit and non-operating exceptional items expressed as a percentage of the sum of capital and reserves, mlnorlty Interests and net debt Operating margin before exceptional items is operating profit before exceptional items expressed as a percentage of turnover. Net interest cover IS profit before net Interest and taxation dlvlded by net Interest Net profit margin before exceptional items is net profit before exceptional items expressed as a percentage of turnover. Combined earnings per share are net proflt attributable to ordinary cap&l, divided by the average number of share units representlng the Return on capital employed is the sum of profit on ordinary activities after combined ordinary capital of N V and PLC In Issue during the year less taxation, plus interest, after tax, on borrowings due after more than one year, Internal and certain trust holdings expressed as a percentage of the average capital employed during the year. The two parent companies, Unilever N.V. (N.V.) and Unilever PLC (PLC), operate as nearly as is practicable as a single entity. This Annual Review therefore deals with the operations and results of the Unilever Group as a whole. Chairmen’s Statement 2 Chairmen’s Statement 1994 was a year of contrasting experiences. There was a marked improvement in volume and profit growth in North America, and in the Rest of the World progress continued to be very good. In Europe, on the other hand, the performance overall was disappointing. Although the economies of some European countries seemed to be reviving quite well, the same cannot yet be said for consumer confidence and that in general was reflected in our sales and Inrofit. The outcome for the year in total was recently, rising raw material costs. The a growth in net profit of 21% at constant restructuring process is by no means finished, exchange rates. However, exceptional and we anticipate that the future benefits will items in 1993 were significantly greater be reflected in margins. than average and, adjusting for that, the Operating profit in Europe was slightly underlying performance, before exceptional below last year, before exceptional items. In items, was a growth in earnings of 3%. The addition to the factors already mentioned. continued growth in earnings, in a year when the result was affected by the launch of there were particular problems in our biggest the I’owmrange of concentrated fabrics region, is testimony to the widespread detergents, which did not live up to regional and product strengths of Unilever, expectations. As is now well known, the Underlying volume growth was 2.5%. This original formulation contained a problem was an improvement on I993 and was led by which was not detected prior to the launch. strong growth in North America and the Rest As soon as the interaction with certain of the World. There are encouraging signs dyes was confirmed, the formulation was that after a long period ofrecession in many modified; but once the new technology was important markets, the prospects for growth subjected to public debate, consumers were are improving. The excellent performance understandably cautious and sales declined in 1994 of our speciality chemicals businesses in some countries. This wns a serious setback, worldwide is one reason for optimism, as is even though concentrated fabrics detergents the fact that in all regions the growth rate are a relatively small part of our detergents was improving as the year progressed. business. The lessons hdve been learned and internal processes reviewed. We will Throughout the 1990s we have undertaken not be deterred by this experience from a major programme of restructuring, mainly our quest for continued innovation and in Europe and North America. The driving new technologies. force which made restructuring so necessary was change, in market dynamics as well as in Following a major reassessment of corporate technologies. Considerable savings in costs stratecgy, we have increased focus on those have already been achieved, allowing margins product categories and regions which we to be maintained during a period of believe offer the greatest potential for declining real selling prices and, more profitable growth. They will have priority in the allocatioii of corporate I-csowCVS. The grcatrr part of‘ our filttlrc growtl~ is likely to come from regions outside Europe and North America. These I-egions arc gl-owing 1n1~h faslei- than the developed economies and we have long established bttsinrssrs and great management strengths on the ground. 27% of our sales are now in the Rest of the M’orld; in 1’390 it was 20%. ‘l‘h~ shar-e ol‘in~cstment has gown even f&u. ,\lthough investmenr in newly liberalised economies might involve some increase in r-isk, bve are sure that the greater risk would be to Fail to take the opportunities which are emer-ging. Looking ahead, MY be1iej.e that the sotmd prop*-ess now cstahlished in North America and in the Rest of’ the World is likely to continue. We cannot yet be sure when confidence in Europe will grow suflicientl) to boost consumer spending, but such signs as there now arc seem to be fzavourable Unilever’s employees have had a host of different and often difficult problems to solw this year and they have responded with a dedication and effort which is truly gratifying. M’e thank them all for their excellent support. > Sir Michael Perry Morris Tabaksblat Business Overview 4 Business Overview TLWllCWer Unilever’s results are published in the change. Virtually all the prqjccts have been (FL million) currencies of the two parent countries, initiated and the benefits arising from the namely the guilder and the pound sterling. restructuring are already beginning to come Fluctuations between the currencies can lend through, although the greater part will be to markedly different trends for the same realised in 1995 and 1996. In 1994, business. This is why WC normally comment exceptional items at constant exchange on performance at constant exchange rates rates have reverted to a more normal level (i.e. the same rates as in the prcccding year), of Fl. 187 million. thus eliminating one val iable over which In order to make the comparison with 1993 we have no control. We also use conrtant clearer, the comments which follow are based exchange rates for the management of on profit trends before exceptional items the business. In 1994, the year on year and at constant exchange rates, unless Operating profit performance in guilders and pounds at (FI mhm) otherwise stated. n Operatmg profIt current exchange rates happens to be the FZ Before exceptxxlal ,temz same and only marginally different from 1994 Results constant rates Turnover increased by 8% in 1994, of which In the 1993 operating profit there were 6% was due to increased volume. Adjusting exceptional items of Fl. 1 366 million which for the combined effect of acquisitions and largely consisted of restructuring costs aimed disposals, the underlying volume growth at strengthening Unilever’s competitive was 2.5%. position in a period of rapid technological Operating margin Turnover by Operating profit before exceptional f%J geographical area 1994 items by geographical area 1994 n Operating margin 1-3 Before except&d items Europe Europe 43 765 (42 279) 3 648 (3 714) North America North America 16 471 (I 5 848) 1 398 (1188) Rest of the World Rest of the World 22 354 (I 9 499) 2139(1861) Total 82 590 (77 626) Total 7 185 (6 763) 1993 ffgures ,n brackets 3 ffgures ,n brackets Operating profit before exceptional items by operation 1994 (FI. million at current exchange rates) Foods Foods 43 095 (39 981) 3 327 (3 309) Detergents Detergents 18248 (18138) 1406 (I 363) Personal Products Personal Products 12 043 (I 1076) 1340 (I 167) SpewaMy Chemicals Speclallty Chemicals 7194(6519) 919 (771) Other Operatons Other Operations 2 010 (1912) 193 (153) Total 82 590 (77 626) Total 7 185 (6763) 1993 hgures ,n brackets 7993 ffgures ,n brackets Opel atirig profit al50 inc rcdjed by 8%,, savings from previous restructuring had with the result that operatmg margin overall to bc used to limd lower selling prices.