Notes to the Annual Review 2007 This PDF version of the Unilever Annual We also announced agreements to acquire the Buavita vitality drinks brand in
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Disclaimer Notes to the Annual Review 2007 This PDF version of the Unilever Annual Review 2007 is an exact copy of the document provided to Unilever™s shareholders. It is a short form document that contains extracts and summaries only of the information given in the Unilever Annual Report and Accounts 2007 (fithe Full Reportfl). The Full Report should be referred to for a fuller understanding of the results and state of affairs of Unilever The Summary Financial Statement in the Unilever Annual Review 2007 has been examined by our auditors. The maintenance and integrity of the Unilever website are 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 Review 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 page 37 of this Annual Review. Unilever accepts no responsibility for any information on other websites that may be accessed from this site by hyperlinks.
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Unilever made good progress in 2007. Our underlying growth was 5.5% Œ the third consecutive year of accelerating sales growth. These results are a tribute to our success in implementing our strategy. We made big strides in each of our key priority areas Œ the fast-growing markets of Asia, Africa and Latin America; growth in personal care; and a higher proportion of our sales coming from Vitality products. The success of our One Unilever programme, the introduction of more multi-country organisations and other changes to our operating model have streamlined the business, simplified decision making and made Unilever a leaner, fitter, more responsive company. Growing as One Who we are Who we are 01 | Highlights of the year 01 | Financial highlights 02 | Global highlights 02 | Regional highlights 03 | Key facts 04 | Our global brands Chairman™s statement 06 | A message from Michael Treschow
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Highlights of the year How we performed 08 | Group Chief Executive’s review 12 | Global review 16 | Regional performance: Europe 18 | Regional performance: The Americas 20 | Regional performance: Asia Africa Governance and financial statements 22 | Board of Directors 24 | Summary Financial Statement 28 | Corporate governance 31 | Summary remuneration report Shareholder information 36 | Contact details 37 | Financial calendar and addresses Important note The two parent companies, Unilever N.V. (NV) and Unilever PLC (PLC), together with their group companies, operate effectively a s a single economic entity (the Unilever Group, also referred to as Unilever or the Group). This Annual Review therefore deals with the operations and the results of th e Unilever Group as a whole. The Unilever Annual Review (which contains the Summary Financial Statement) and Annual Report and Accounts are produced in Dutch and English . Forward-looking statements This document contains certain statements that are neither reported fi nancial results nor other historical information. These statements are forward-looking statements including within the meaning of the US Private Securities Litigation Reform Act of 1995. For a description of factors that coul d affect future results, reference should be made to the full ‘Cautionary statement’ on page 37. Financial highlights • Underlying sales growth of 5.5% • Operating margin of 13.1%, with an underlying improvement of 0.2 percentage points • Earnings per share from continuing operations up 12% • Total regular dividends to rise by 7% 40 187 2007 2006 39 642 Turnover (1)(2)(3) € million 27 416 2007 2006 27 028 £ million 13.1 2007 2006 13.6 Operating margin (1) %0.75 2007 2006 0.70 Dividends (3)(4) € per Ordinary €0.16 share of NV 51.11 2007 2006 47.66 pence per Ordinary 3 1/9p share of PLC (1) From continuing operations. (2) Sterling translated for convenience only. (3) For $ conversions, see the Summary Financial Statement on pages 25 and 26. (4) In addition, a one-off dividend of €0.26 per Ordinary NV share and 17.66p per Ordinary PLC share was paid in December 2006. 5 245 2007 2006 5 408 Operating profi t(1)(2)(3) € million 3 578 2007 2006 3 687 £ million 5.5 2007 2006 3.8 Underlying sales growth (1) %Unilever Annual Review 2007 1
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Regional highlights Who we are Highlights of the year continued The Americas Turnover of €13 442 million (33% of Group) Underlying sales growth of 4.1% Operating profit of €1 971 million Operating margin of 14.7% Sustained good performance in the US Increased momentum in Brazil and Mexico Our One Unilever programme simplified operations across the region • • ••• • • Global highlights • Widespread growth across regions and categories • Key driver is strategic focus on developing and emerging markets, personal care and Vitality • Increasing contribution from price in response to rising commodity costs • Strong cost savings programmes delivering €1 billion in the year • Substantial progress made with portfolio development and accelerated restructuring • Named International Supplier of the Year by Tesco for the second year running • Wal-Mart’s 2007 Supplier of the Year for Sustainable Engagement 2 Unilever Annual Review 2007
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Europe Turnover of €15 205 million (38% of Group) Underlying sales growth of 2.8% Operating profit of €1 678 million Operating margin of 11.0% Marked improvement in Western Europe Outstanding performance in Russia Improved growth in all major countries including UK, Germany, Italy and the Netherlands • • • • • • •Asia Africa Turnover of €11 540 million (29% of Group) Underlying sales growth of 11.1% Operating profit of €1 596 million Operating margin of 13.8% Strong growth reflecting vibrant markets and priority placed on building business in this region All major developing and emerging businesses growing strongly Continued good progress in China • • •••••Key facts 174 000 employees at the end of 2007 21nationalities among our top level group of 113 managers around 100 countries in which we operate over 81 000 employees given access to the web- enabled Learning Management System in the fi rst year €89m contributed to communities around the world in 2007 9 years as foods producers sector leader of the Dow Jones Sustainability Indexes €868m spent on R&D worldwide over 1/3reduction in CO 2 emissions from energy per tonne of product produced over 1995-2006 Unilever Annual Review 2007 3
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Becel/Flora Blue Band Dove Heartbrand ice creams Hellmann’s Knorr Lipton Lux Omo Rexona Sunsilk Surf Our €1 billion global brands Lux Sunsilk Dove Rexona Axe Pond’s Vaseline Lifebuoy Signal Personal care Surf Omo (Persil )Radiant (Rin)Comfort Cif Domestos Sunlight Home care • Turnover of €11 302 million • Underlying sales growth of 6.7% • Turnover of €7 297 million • Underlying sales growth of 6.1% Unilever Annual Review 2007 5
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Chairman’s statement A message from Michael Treschow Michael Treschow became the first independent Non-Executive Chairman of the Boards of Unilever in May 2007. When I joined Unilever in May 2007 I was aware that the Unilever Executive led by Patrick Cescau was driving a process of sweeping change aimed at transforming the Group. Since then I have visited a number of Unilever operations in Asia and Europe. I have met with many employees and learned a great deal about the brands which the Group sells and the technology which underpins them. I have also spoken to investors to get their perceptions of the business. All of these encounters have confi rmed the preconceptions which I had before joining the Group: Unilever is a business with an extraordinary portfolio of brands, talented people, deep roots in developing and emerging markets, a strong commitment to sustainability and a distinctive corporate culture. The Group’s strong performance in 2007, with higher growth and an improvement in underlying margin, is something about which the entire business can feel proud. It is also further validation that the strategy being pursued by Patrick and his team is the right one, and that this strategy is being executed very effectively. This strategy with its sharp focus on Vitality products, developing markets and faster growing product areas like personal care has dramatically changed the business. The structure is much leaner and simpler. It is enabling Unilever to maximise its considerable advantages of buying, manufacturing and marketing scale. Some of the restructuring which has taken place has led to a reduction in employee numbers. Decisions which have an impact on employees’ lives and livelihoods are never taken lightly. However, I have been impressed and reassured by the caring and responsible way in which the Group has executed these changes. The Boards in 2007 Corporate governance in Unilever has undergone radical change in the period since 2004. We continue to ensure that we meet the highest standards in all the markets in which we operate. The composition of the Boards themselves has also evolved. We have enriched their diversity and experience with three new Non-Executive Directors: Narayana Murthy, Hixonia Nyasulu and Genevieve Berger. Our mission 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. Michael Treschow Chairman 6 Unilever Annual Review 2007
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Narayana, co-founder and Chairman of Infosys Technologies Limited, brings a deep knowledge of emerging markets and expertise in IT as well as impressive business leadership skills. Hixonia is a highly experienced Non-Executive Director with Sasol Ltd. She is also an Advisory Board Member of JP Morgan South Africa and brings fi rst-hand experience of African markets. Genevieve contributes her impressive expertise in research and development; she is Professor of Biophysics and Medical Imaging at Paris University VI and Chairman of the Advisory Board ‘Health’ for the EU Commission for Research. All three joined our Corporate Responsibility and Reputation Committee when they took up their posts in May. Their appointment to this committee, now chaired by Lord Brittan, signals its growing importance and the Group’s commitment to keeping sustainability at the heart of its activities. Each of the newcomers was given an extensive programme of induction covering key issues facing the business. In September 2007 we also welcomed Jim Lawrence as our new Chief Financial Offi cer; he will be proposed for election as an Executive Director at the AGMs in May 2008. Jim, who came from General Mills, is a Non-Executive Director of British Airways and Avnet. He replaced Rudy Markham who retired in 2007 after a distinguished career spanning four decades. Whilst welcoming Jim, we will be saying goodbye to two Directors who are leaving. Kees van der Graaf after 32 years service in the business, most recently as President, Europe and Ralph Kugler, currently President, Home and Personal Care, who has served the business for 29 years. On behalf of the Boards I thank them both for the signifi cant contribution they have made to our business throughout their careers. During the year, we also said goodbye to Jean-Cyril Spinetta who stepped down as a member of the Boards and the Remuneration Committee. I would like to acknowledge his wise counsel and experience during his term as a Non-Executive Director. In our Board meetings, we have discussed a wide range of topics including the Group’s annual plan, performance in key markets such as Russia and China, organisation and talent, and the role of science and technology. We also reviewed and fully agreed the Unilever strategy and the new plans to accelerate change, including portfolio change and business restructuring. An important part of my role is consistently to evaluate the effectiveness of the Boards. In 2007 our Senior Independent Director and I conducted a formal assessment, including performance-related interviews with each Board member. The fi ndings were discussed by the Boards and will result in further improvements. I am proud that we have Boards that are properly equipped to give Patrick and his team all the support that they need. On a personal note, I fi nd this an exciting time to work for Unilever. The business is doing well and, with its wealth of talented people, its great global brands and its ambitious business plans, is on track to do even better. On behalf of the Boards, I would like to thank all the Group’s employees around the world for all that they have done in 2007. I look forward to serving the Unilever Group to the very best of my ability in the years ahead .Michael Treschow Chairman Kenya It was with great sadness that we learned in January 2008 of the deaths of nine of our employees on the Unilever tea plantation in Kericho. All of them were victims of the violence which followed the presidential elections. I have been heartened by the Group’s response to the tragedy. It made a donation of $1 million to the World Food Programme to assist with food aid in the country at large. In parallel the Lipton and PG Tips brands, which source much of their tea from Kenya, made available funds to help both the bereaved and the many other employees who lost their homes and possessions in the troubles. “ I am proud that we have Boards that are properly equipped to give Patrick and his team all the support that they need.” Unilever Annual Review 2007 7
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How we performed Group Chief Executive’s review 2007 was a good year for Unilever. We have grown consistently, achieving our best underlying sales growth in a decade. Despite a challenging cost environment, we also delivered an increase in underlying operating margin. I am pleased to report on a good year for Unilever – one in which we continued to grow competitively, consistently and profi tably. With a clear growth strategy and an organisational structure to support it, there is growing evidence of improved momentum in our business. In 2007 underlying sales grew by 5.5% – the third consecutive year of accelerating sales growth. At the same time, we achieved an underlying improvement in our operating margin, despite sharply rising commodity costs. Our growth was broad-based, across all our major regions and categories. In Europe we achieved growth of nearly 3% – up from 1% the year before. The benefi ts of all the structural changes we have made in this region over the past three years are now coming through both in terms of growth and underlying margin. Russia was the star performer – with growth in the high teens – but all our major European businesses grew in 2007. In the Americas full year growth was 4%. Brazil and Mexico showed an improving performance during the year, while the US grew solidly at 3%. In Asia Africa we recorded 11% growth. The performance refl ects not just the vibrancy of these markets but also the high priority which we place on building our business in this part of the world. Once again, India and China were important contributors to our success. The picture was equally strong across our categories, driven by some great innovations. “ With a clear growth strategy and an organisational structure to support it, there is growing evidence of improved momentum in our business.” Patrick Cescau Group Chief Executive 8 Unilever Annual Review 2007
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