Mar 3, 2009 — We announced the acquisition of the Buavita brand of fruit-based vitality drinks in Indonesia, which was completed early in. January 2008.
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Disclaimer Notes to the Annual Report and Accounts This PDF version of the Unilever Annual Report and Accounts 2008 is an exact copy of the document provided to Unilever™s shareholders. Certain sections of the Unilever Annual Report and Accounts 2008 have been audited. Sections that have been audited are set out on pages 81 to 136, 140 to 141, 143 to 145 and 148 to 150. The auditable part of the report of the Remuneration Committee as set out on page 60 has also been audited. The maintenance and integrity of the Unilever website is the responsibility of the Directors; the work carried out by the auditors does not involve consideration of these matters. Accordingly, the auditors accept no responsibility for any changes that may have occurred to the ˜nancial statements since they were initially placed on the website. Legislation in the United Kingdom and the Netherlands governing the preparation and dissemination of ˜nancial statements may differ from legislation in other jurisdictions. Disclaimer Except where you are a shareholder, this material is provided for information purposes only and is not, in particular, intended to confer any legal rights on you. This Annual Report and Accounts does not constitute an invitation to invest in Unilever shares. Any decisions you make in reliance on this information are solely your responsibility. The information is given as of the dates speci˜ed, is not updated, and any forward-looking statements are made subject to the reservations speci˜ed on the ˜nal page of the Report. Unilever accepts no responsibility for any information on other websites that may be accessed from this site by hyperlinks.
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Unilever Annual Report and Accounts 2008 Adding Vitality to Life Annual Report and Accounts 2008 Unilever N.V. Weena 455, PO Box 760 3000 DK Rotterdam The Netherlands T +31 (0)10 217 4000 F +31 (0)10 217 4798 Commercial Register Rotterdam Number: 24051830 Unilever PLC Unilever House 100 Victoria Embankment London EC4Y 0DY United Kingdom T +44 (0)20 7822 5252 F +44 (0)20 7822 5951 Unilever PLC registered of˜ce Unilever PLC Port Sunlight Wirral Merseyside CH62 4ZD United Kingdom Registered in England and Wales Company Number: 41424 www.unilever.com
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Adding Vitality to Life Unilever™s mission is to add Vitality to Life. We meet everyday needs for nutrition, hygiene and personal care with brands that help people feel good, look good and get more out of life .Contents Report of the Directors 1 Our highlights 2 Our brands and operations 4 Chairman™s statement 6 Chief Executive Of˜cer™s review 8 Unilever Executive 9 Vitality 18 Board of Directors 20 About Unilever 20 Our business and our strategy 20 Key indicators 21 Organisation 22 Operating environment 22 Resources 24 Laws and regulation 25 Outlook and risks 29 Performance review 35 Financial Review 44 Corporate governance 59 Report of the Nomination Committee 60 Report of the Remuneration Committee 74 Report of the Audit Committee 75 Report of the Corporate Responsibility and Reputation Committee Financial statements 78 Statement of Directors™ responsibilities 79 Auditors™ reports 81 Consolidated income statement 81 Consolidated statement of recognised income and expense 82 Consolidated balance sheet 83 Consolidated cash ˚ow statement 84 Notes to the consolidated accounts 137 Financial record 140 Principal group companies and non-current investments 142 Company accounts Shareholder information 153 Analysis of shareholding 154 Exchange controls affecting security holders 155 Nature of the trading market 157 Dividend record 158 Financial calendar 158 Contact details 159 Website 159 Publications 159 Share registration 160 Index The Unilever Group Unilever N.V. (NV) is a public limited company registered in the Netherlands, which has listings of shares and depositary receipts for shares on Euronext Amsterdam and of New York Registry Shares on the New York Stock Exchange. Unilever PLC (PLC) is a public limited company registered in England and Wales which has shares listed on the London Stock Exchange and, as American Depositary Receipts, on the New York Stock Exchange. The two parent companies, NV and PLC, together with their group companies, operate as a single economic entity (the Unilever Group, also referred to as Unilever or the Group). NV and PLC and their group companies constitute a single reporting entity for the purposes of presenting consolidated accounts. Accordingly, the accounts of the Unilever Group are presented by both NV and PLC as their respective consolidated accounts. Basis of reporting Our accounting policies are based on International Financial Reporting Standards (IFRS) as adopted by the European Union (EU), and on United Kingdom and Dutch law. They are also in accordance with IFRS as issued by the International Accounting Standards Board (IASB). Certain measures used in our reporting are not de˜ned under IFRS or other generally accepted accounting principles. For further information about these measures, and the reasons why we believe they are important for an understanding of the performance of the business, please refer to the Performance Review on page 29 and the Financial Review on page 35. The brand names shown in this report are trademarks owned by or licensed to companies within the Unilever Group. Exchange rates Details of key exchange rates used in preparation of these accounts are given on page 139, together with Noon Buying Rates in New York for the equivalent dates. Forward-looking statements This document contains certain statements that are neither reported ˜nancial results nor other historical information. These statements are forward-looking statements, including within the meaning of the United States Private Securities Litigation Reform Act of 1995. For a description of factors that could affect future results, reference should be made to the full ‚Cautionary statement™ on the inside back cover.
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Operating margin (%)200817.7200713.1Turnover (• million) 200840 523200740 187Total recordable accident frequency rate per 100 000 hours*20080.210.262007* 2008 data are preliminary data. They will be independently assured and reported in the online Sustainable Development Report 2008 at www.unilever.com/sustainability CO2 from energy per tonne of production (kg)* 2008146.772007149.18* 2008 data are preliminary data. They will be independently assured and reported in the online Sustainable Development Report 2008 at www.unilever.com/sustainability Total waste per tonne of production (kg)* 20087.8920077.56* Preliminary ˜gures for 2008: these ˜gures will be audited in April 2009 Water per tonne of production (m 3)*20082.9620073.05* Preliminary ˜gures for 2008: these ˜gures will be audited in April 2009 * 2008 data is preliminary. It will be independently assured and reported in our online Sustainable Development Report 2008 at www.unilever.com/sustainability Environmental 10 years as sector leader of the Dow Jones Sustainability Indexes 2015: the year by which we are committed to sourcing all palm oil from certi˜ed sustainable sources c. 50% of the tea we sell in Western Europe is grown on Rainforest Alliance Certi˜edŽ farms 39% reduction in CO 2 emissions per tonne of production over the period 1995-2008* Financial 7.4% underlying sales growth th out of 21 Ordinary 3 1/9p share of PLC Social 22 000 products have had their nutritional profile assessed 19% reduction in total recordable accident frequenc y rate in 2008* Three quarters of the food products in our R&D pipeline bring speci˜c nutritional or health bene˜ts 16 million school meals delivered to 76 000 children in 2008 through our partnership with the World Food Programme Four million children reached by Signal / Pepsodent / Close Up toothpaste brands through school-based oral health programmes in 2008 120 million people reached by Lifebuoy brand™s handwashing programme in India since 2002 Our highlights Unilever Annual Report and Accounts 2008 1
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Western Europ eThe Americas Asia, Africa and Central & Eastern Eu ro pe Tu rnover by region • million (contribution to Group %) Underlying sales growth %14 471 (36%) 1.36.514.213 199(32%) 12 853 (32%) Report of the Directors Our brands and operations Our strong portfolio of foods, home and personal care brands is trusted by consumers the world over. 13 of our or more. Our top 25 brands account for over 70% of our sales. Operational achievements across categories chain and organisational ef˜ciencies American laundry, Boursin, Lawry™s and Bertolli olive oil cream in Russia and the planned acquisition of the TIGI hair salon brands third year running Regional highlights 2 Unilever Annual Report and Accounts 2008
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brands* ice creams Key facts 174 000 employees at the end of 2008 20 nationalities among our top tier managers Around 100 countries in which we operate invested in community programmes worldwide spent on R&D worldwide Around 270 manufacturing sites worldwide Savoury, dressings and spreads of 7.6% Ice cream and beverages of 5.9% Personal care of 6.6% Home care of 9.8% Category highlights * Some of our brands may be marketed under alternative names in certain countries. Unilever Annual Report and Accounts 2008 3
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Patrick Cescau On behalf of the Directors and everyone at Unilever, I want to express our appreciation to Patrick Cescau for his services to Unilever over the last 35 years. By any standards, Patrick™s career has been a remarkable one, culminating with his appointment in 2005 as Unilever™s ˜rst ever Chief Executive Of˜cer. Since that time he has helped to transform the company. Signi˜cant organisational change Œ particularly the implementation of ‚One Unilever™ Œ has been accompanied by a consistent improvement in business results and overall performance. Patrick leaves the business stronger than he found it, well placed to meet the challenges that lie ahead. Throughout his time in the business, Patrick also came to embody the qualities and values that help to make Unilever a special business: respect, humanity, integrity. It is for these reasons that he is liked and respected in equal measure, both inside the company and outside. We all wish Patrick a long and happy retirement. As part of the time that the Boards spent with the business during the year, we visited our laboratories in Bangalore and our customer innovation centre in New Jersey. The Boards reviewed the strategy at a two-day meeting in October. One of the striking things to emerge from our strategy session was the consistency of Unilever™s approach. While the strategy has evolved to take account of the changing external environment, its essential elements remain unchanged. The Group is still committed to growing competitively and will do so by developing its core assets of brands, technology, geographic spread and marketing excellence. Just as importantly its principles remain unchanged. The Group will deliver its results in a sustainable fashion Œ seeking to manage its social and environmental impacts in a manner which meets the needs of all its stakeholders. We are proposing to change to a simpler and more transparent dividend practice for the Unilever group from 2010 onwards. These changes will result in more frequent dividend payments through the payment of quarterly dividends to shareholders. They will also better align dividend payouts with the cash ˚ow generation of the business. Further details are included in the Looking forward, I remain con˜dent. Unilever entered 2009 with a realistic assessment of the challenges which it would have to face. Its plans were built on the assumption of a deep and prolonged global economic downturn. We are determined to emerge from this in good shape. Finally, on behalf of the Boards, I would like to extend my sincere thanks to all of Unilever™s 174 000 employees. They have had to cope with, and manage, a huge amount of change. They have done this in an exemplary and responsible fashion. Chairman Unilever Annual Report and Accounts 2008 5
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Report of the Directors Chief Executive Of˜cer™s review Taking this role is an honour and privilege, but equally a huge responsibility. These are tough times; and tough times demand the very best of all of us. That is the spirit in which I intend to take the business forward. Despite the fact that I have joined the Group at a time of unprecedented economic turmoil, my ˜rst message to you is a positive and reassuring one: your company is in good shape. The scale and the extent of the changes over the last four years have been a positive surprise to me. They have made Unilever stronger and more con˜dent, well placed to weather the storms currently blowing through all sectors of the economy. I want ˜rst, therefore, to acknowledge the hard work and dedication of Unilever employees all around the world. Thanks to their efforts, Unilever is a leaner, more focused business with a strong portfolio of leading brands. All this is vital given the intense nature of the competitive and economic environment. The transformation was led with a mixture of skill and determination by my predecessor, Patrick Cescau, and I want to take this opportunity to recognise Patrick™s accomplishments as change programme combined with steadily improving results. In short, the engine was replaced while the car kept running. Quite an achievement and I am grateful to Patrick for what he hands over. Last year saw an acceleration of Unilever™s transformation agenda. across all regions. During the last year we closed or sold a further 14 sites, bringing the total to 30 over the last two years. We are now on course to exceed our target Œ set in 2007 Œ of closing or streamlining 50 to 60 sites by 2010. All these projects are being handled with great sensitivity to the workforce. Together they are helping to provide Unilever with a modern, cost competitive supply chain, capable of meeting the demands of competing in the 21 st century. To further aid speed and ef˜ciency, we have brought all our logistical and supply chain operations in Europe together in one regional structure based in Switzerland. And we are currently embarked on a similar move in Asia by centralising our supply chain management for the region in Singapore. This included the sale of the North American laundry business. We also divested some smaller, non-strategic parts of our portfolio, including Boursin cheese, Lawry™s seasonings and the Bertolli olive oil businesses. These deals were all done at good prices, achieving signi˜cant value for the company. At the same time, the acquisition in 2008 of the leading Russian ice cream maker, Inmarko, ˜lled an important gap in a critical market for us. And we are in the process of obtaining a vital entry into the fast-growing salon sector of the hair care market with our planned acquisition of the TIGI hair product business. We are also alive to similar value-creating opportunities that may present themselves during the year. It is a great pleasure to report to you for the ˜rst time as Unilever™s Chief Executive Of˜cer. I am delighted to be a part of the team and to have the opportunity of leading this great company. Paul Polman Chief Executive Of˜cer
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Underpinning these strengths, Unilever exhibits a set of deeply ingrained values Œ based on trust and integrity Œ which date back to the days of its founders and which are so well captured in the concept of ‚doing well by doing good™. These values will never be compromised, no matter how dif˜cult the economic conditions become, and nor will the Group™s commitment to help tackle deep-seated global issues in such areas as nutrition and hygiene. In pursuit of these objectives we continue to work closely alongside agencies like the World Food Programme (WFP) and UNICEF. In 2008, our partnership with the WFP extended its scope to six countries and delivered 16 million meals to 76 000 schoolchildren. Given the increasing problems of resource scarcity around the world, it is also vital that we take a lead on the issue of sustainable consumption. That is why we have made a clear commitment to move to sustainable palm oil sourcing by 2015 and are working with Greenpeace and others to achieve this challenging objective. It was heartening to see the Group™s commitment to these issues publicly recognised and rewarded in 2008. For the tenth year running Unilever was named foods sector leader in the Dow Jones Sustainability Indexes Œ the only company ever to achieve such an accolade. And the award of Platinum standard in the UK™s Business in the Community Corporate Responsibility Index was further recognition of the Group™s willingness to act as an agent for social and environmental improvement. All these attributes, I believe, will not only help to sustain the Group during a period of economic dif˜culty, but are also the pillars of long-term competitive advantage and a high performing business. underestimate the challenges ahead. If we are to prosper, we will need to continue the programme of organisational change, further increasing our ability to move quickly and decisively in response to shifting market dynamics. But internal change must be accompanied by greater external focus: we have to put the consumer and the customer at the heart of everything we do. This external focus, coupled with speed and discipline, will be the key to success. These will be our guiding principles as we manage the business through a period of continuing turbulence and prepare for the future. We are also taking a number of additional steps: to a new level. The move to a ‚One Unilever™ R&D structure under the Group™s Chief R&D Of˜cer, Professor Geneviève Berger, will help us to win in the marketplace by focusing on fewer, bigger innovations Œ and rolling them out more swiftly around the world. Through the appointment of a Global Supply Chain Of˜cer, we are looking for even better ways to leverage our scale in global buying and thereby reduce the overall cost of raw materials. greater than the previous year. To drive the process even further we have appointed our ˜rst Chief Procurement Of˜cer. We expect a continued strong programme in 2009 and beyond. units are integrated into a single operating structure Œ became a reality across most of the Group™s key markets, bringing greater speed and simplicity to all our operations. These changes contributed to a good set of business results in 2008. We achieved strong underlying sales growth of 7.4%, broadly based across all our major product categories. Growth was driven by increased pricing as the Group moved quickly and decisively to offset the unprecedented rise in commodity costs. Supply chain and other organisational savings of more than of investment behind our brands, while at the same time delivering an underlying improvement in operating margin. By any standards, this represents solid progress and a good set of results. still a number of areas in which we need to improve. Our market share positions suggest we are not yet winning in enough of the positions and brand strength are two key determinants of long-term earnings capacity. So we need to do better. has been made but again there is still work to do. In order to invest behind our brands and win the battles for the hearts and minds of an increasingly value conscious consumer, we must eliminate all the costs that consumers are unwilling to pay for. Growing our volume base, while keeping closely focused on protecting our margins and cash ˚ow, will be our priority in 2009. The economic environment is unprecedented and will require ˚exibility and fast action. But Unilever has long experience of operating in dif˜cult markets and at times of great economic stress. It should be remembered that the Group was born in the era of the Great Depression of the 1930s. On each occasion since, it has learnt from the experience and emerged stronger and more resilient as a business. There are good reasons to believe we can do so again. For one thing, we possess a highly relevant and inspiring mission. Vitality Œ with its emphasis on helping people to feel good, look good and get more out of life Œ resonates with the hopes and aspirations of consumers the world over. Vitality is even more valid today as consumers face increasingly tough economic challenges. That is why we have made it the theme of this year™s report and why we want to extend the concept of vitality right the way through our products, our organisation and our engagement with societies at large. We have an excellent, balanced portfolio of strong brands more and we are not overly exposed to the premium sector at a time when this segment of the market is under increasing pressure. We have strong, well-established businesses in many of the world™s fastest growing markets and our global presence is building all the time. Add to this the Group™s simpli˜ed organisation and a sound and healthy ˜nancial structure and you can see why, we believe, Unilever is so well placed to win. Unilever Annual Report and Accounts 2008 7
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Report of the Directors Chief Executive Of˜cer™s review continued To re-ignite volume growth, we also need to concentrate on improving our capabilities in the marketplace Œ from leveraging the global scale of our supply chain to sharpening the focus we give to our more successful and fastest growing customers. And ˜nally, we will continue to develop the organisation itself, building a strong performance culture around the principles of clear accountability, a bias for action, speed of delivery and external focus. 2009 will be a challenging year. The depth and uncertainty of the current recession means that we must be able to respond quickly to rapidly changing market conditions. I am con˜dent that we have the tools and the organisation to do that. If we can, then we will emerge from the current dif˜culties stronger than ever, just as we have done many times before. Paul Polman Chief Executive Of˜cer value-conscious consumers everywhere. Our Bertolli restaurant-quality Italian dinners for two, for example, offer North American consumers an excellent alternative to eating out. And in South East Asia, our Knorr brand has been quick to introduce low-cost single units of stock and seasoning. bring about a step change in our approach to costs and cash ˚ow. Hence, we are accelerating our savings programmes and ourselves to be ever more ef˜cient and striving to be best-in-class in the management of working capital. In conclusion, 2008 was a good year for Unilever. In volatile markets and in the face of a severe economic downturn the Group™s performance stood up well. Our priority in 2009 will be to get sales volumes growing again, both sustainably and pro˜tably. That is why we are focusing on driving our costs down faster, so that we can reinvest in the on improving the size and quality of our innovations, and rolling them out further and faster around the world. In 2008, for Unilever Executive (UEx) Responsible for the performance of the Group, guided by the Chief Executive Of˜cer Left to right: Harish Manwani President, Asia, Africa and Central & Eastern Europe Jim Lawrence Sandy Ogg Chief HR Of˜cer Michael Polk President, Americas Vindi Banga Home & Personal Care Geneviève Berger Chief R&D Of˜cer Doug Baillie 8 Unilever Annual Report and Accounts 2008
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