Unilever Presentation at CAGNY – Restoring Competitiveness and Growth Patrick Cescau and Rudy Markham 21St February 2006

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Unilever Presentation at CAGNY – Restoring Competitiveness and Growth Patrick Cescau and Rudy Markham 21St February 2006 Unilever Presentation at CAGNY – Restoring Competitiveness and Growth Patrick Cescau and Rudy Markham 21st February 2006 Patrick Cescau Slide 0 - Restoring competitiveness and growth Welcome everyone. For those of you who were able to join us at the reception last night, I hope you enjoyed the little taste of Unilever we were delighted to share with you. Rudy Markham, our CFO, and I will present for around 45 minutes and then we will take questions in the break-out afterwards. Slide 1 - Safe harbour First let’s start as always with the safe harbour statement. As usual, I’d like to point out that this discussion is subject to the usual disclaimer relating to forward looking statements and non-GAAP measures. This disclaimer is included here and will be posted with the text of this presentation on Unilever’s web-site. Slide 2 - Introducing Unilever Now onto a brief reminder of who Unilever is. Slide 3 - Brands people love Unilever brands help people to look good, feel good and get more out of life - 150 million times a day, in 150 countries. One in every two households in the world has a Unilever brand in their home. Slide 4 - Powerful category positions and global brands We have around 400 brands – including 12 one-billion Euro brands – and leading positions in Foods, Home Care and Personal Care categories. Slide 5 - Global reach and scale Unilever is a truly global company - the third largest consumer goods company in the world. Our turnover was €40 billion Euros – almost $50 billion dollars - in 2005, with well-balanced sales across the three main regions of the world. So far so good. Slide 6 - But … But … 1 In 2003 and 2004 Unilever’s performance did not live up to our potential. Our Path to Growth strategy delivered strong profitability, improved margins, capital efficiency and cash flows but not sustained growth. And we were losing market share. In 2005, we tackled the issues that were undermining our performance. We sharpened our choices and resource allocation, invested more behind our brands, improved important aspects of our execution and made major changes to our organisation. It has been a year of change for Unilever - a lot of change in a short time. Slide 7 - Re-introducing Unilever So today we are able to re-introduce you to a different Unilever. A Unilever that has not just the potential but also much more of the hardwiring we need to win. Slide 8 - Agenda We will talk about how we restored Unilever’s competitiveness and growth in 2005. About the momentum we have built for 2006. Our ambition for Unilever. And how we are turning ambition into action through our strategy and continuing change programme. So now over to Rudy to take you through our results for 2005. Rudy Markham Slide 9 - 2005 - Restoring competitiveness and growth Good morning everyone. Slide 10 - 2005 - the task As Patrick said, in 2005, we tackled the issues that were undermining our performance. Our strategy for unlocking Unilever’s full potential is simple - to focus on the three things that matter: 1. Making our portfolio work harder for us, with sharper priorities and resource allocation 2. Strengthening our execution capabilities, especially in marketing and customer management. 3. Creating a simpler, more agile ‘One Unilever’ organisation - aligned behind a single strategy, with the right people in the right jobs delivering better quality and speed of execution. 2 But at the start of 2005, our most pressing task was to restore our competitiveness in the market and get our business growing again. Slide 11 - Restore competitiveness and growth To do this, we put more firepower behind fewer priorities. We targeted for growth the market positions, innovations and brands with the best potential reward. We invested strongly behind them and accelerated our programmes to generate savings to help fund growth. Investing in our strengths delivered the results we were aiming for and showed what we can achieve when we prioritise tightly and execute with discipline. We got Personal Care back to growth levels that are up with the best at over 6%, with broad- based share gain and strong profitability. In developing and emerging markets, we delivered organic growth of nearly 9%, with strong performance across the year in all major countries and across Foods, Home Care and Personal Care. Across our entire portfolio, Vitality was the inspiration for innovation that helped to drive growth. Lipton tea, AdeS soy based fruit drinks, the Dove Campaign for Real Beauty, to name but a few examples. Personal Care, D&E, Vitality. In all three of these areas, we have achieved what we set out to achieve – good growth and strengthened market positions. We also made progress in Europe in 2005. A healthy European business matters to Unilever. It delivers a large proportion of our sales – 41% in 2005 – and is an important source of profit. Europe is also a key source of insight into new consumer trends, innovation and talent that can be leveraged around the world. Our issue is Western Europe. And the issue is growth, not profitability. Western Europe is a tough competitive environment for reasons you know well. Turning this business around is not just about making a few tweaks – we are making fundamental changes. For the consumer by making our products offer better value and improved performance. For our trade customers by increasing the value that we can both gain by doing business together. And to our organisation through substantial changes to the leadership in Europe and by pushing forward with the implementation of ‘One Unilever’. Many of these changes are a reflection of the larger change agenda that we are pursuing across Unilever. Patrick will say more about this later. 3 We have done a lot to address our issues in Europe and, as a result, we have delivered real improvement. • We have reduced underlying sales decline in 2005 to less than minus 1%, against minus 3% in 2004. • In the fourth quarter, we delivered positive like-for-like sales growth of around +2%. • We stabilised market shares in Foods, with an upward trend in recent months. HPC market shares were down slightly in the year but stable in the second half. So real improvement in a tough, highly competitive market. Slide 12 - Decisive action on the portfolio As well as working on the priorities I just talked about, we have also been taking decisive action on parts of our portfolio that no longer fit with our strategy. In the middle of 2005, we sold UCI for $800 million. We are very pleased with the value we gained. We have also decided to divest the major part of our European Frozen Foods business. We have made a considerable investment in European Frozen Foods over the past four years, restructuring it to deliver healthy profit levels. But we have not yet been able to grow the business which is key to future value creation. To do that would require significant management and financial resources and we believe we have better opportunities elsewhere. So 2005 was a year of significant change for Unilever. Let’s look at the key features of the year in financial terms. Slide 13 - Investment in A&P – quality and quantity Driving hard behind our growth priorities required a step up in investment. In 2005, we invested €500 million more in advertising and promotions than we did in 2004. An 11% increase in year-on-year A&P spend represents a significant investment in competitiveness. How we have spent this money is as important as what we spent. Around two thirds of the additional A&P was in advertising which is key to building long term brand equity. The investment was not ‘across the board’ but was carefully targeted. For example, A&P behind some of our Personal Care categories in key markets was up by as much as 30% or more. We have improved the efficiency and quality of our spend. Globally led innovation gives rise to globally inspired, cost-effective communication. And our A&P spend has been more consistently weighted through the year. 4 This does not mean that spend is even from quarter to quarter, as innovation activities and indeed competitive activity are not smoothly spread. But it does mean that we are keeping our foot on the gas across the whole of the business cycle. Slide 14 - Increased investment, focus on savings As well as stepping up A&P spend, we invested significantly to reduce prices in selected categories and markets to defend and build key competitive positions. And we faced a significant cost head-wind from higher commodity prices which added €600m to our input costs in 2005. Our response? A relentless focus on cost savings. In total, our savings programmes delivered well over €700 million Euros in 2005. Global procurement continues to deliver substantial savings, while our ‘One Unilever’ programme alone is well on the way to delivering €1 billion Euros of savings by the end of 2007. Slide 15 - Operating margin development Turning to the bottom line. Full year operating margin is 13.4%, up from 11.0% in 2004. Before the impact of restructuring, business disposals and impairments, operating margin would have been 80 basis points lower than in 2004. The key reason for this was the additional A&P investment – a 110 basis points margin impact versus 2004. Our savings were more than sufficient to cover the increased input costs and to fund part of the step-up in A&P. Slide 16 – Like for like sales growth Underlying sales growth in 2005 was 3.1%, significantly better than the flat sales we delivered in 2004 and in line with the growth of our markets.
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