Sara Lee 2009 Annual Report Download - page 34

Financial review
International Household and Body Care
Dollar Percent Dollar Percent
In millions 2009 2008 Change Change 2008 2007 Change Change
Net sales $2,025 $2,291 $(266) (11.6) % $2,291 $2,042 $249 12.2 %
Increase/(decrease) in net sales from
Changes in foreign currency exchange rates $«««««««– $«««226 $(226) $÷÷÷«– $÷(197) $197
Acquisition/dispositions ––– 2–2
Total $«««««««– $«««226 $(226) $÷÷÷«2 $÷(197) $199
Operating segment income $«««242 $«««315 $««(73) (23.1) % $÷«315 $÷«272 $÷43 15.7 %
Increase/(decrease) in operating segment income from
Changes in foreign currency exchange rates $«««««««– $«««««34 $««(34) $÷÷÷«– $÷÷(24) $÷24
Exit activities, asset and business dispositions (11) 1 (12) 1 – 1
Transformation/Accelerate charges (4) (8) 4 (8) (13) 5
Impairment charge ––– –(4)4
Curtailment gain 5–5 –––
Acquisition – – – (1) – (1)
Total $««««(10) $«««««27 $««(37) $÷÷÷(8) $÷÷(41) $÷33
Gross margin % 47.0 % 49.4 % (2.4) % 49.4 % 49.8 % (0.4) %
2009 versus 2008 Net sales decreased by $266 million, or 11.6%.
The impact of changes in foreign currency exchange rates, particularly
the British pound, European euro and Indian rupee, decreased
reported net sales by $226 million, or 9.6%. The remaining net sales
decrease of $40 million, or 2.0%, was primarily due to a decline in
unit volumes partially offset by the favorable impact of price increases.
Pricing actions increased net sales by approximately 1%. Unit volumes
decreased 3.2% for the four core categories: shoe care, body care,
air care and insecticides. The unit volume decline was the result
of lower volumes for air care products due to weakness in Western
Europe and the U.K. as a result of competitive pressures and a
deteriorating economic environment, as well as, volume declines
for shoe care products, due to weakness in the U.S. and Russia.
These volume declines were partially offset by an increase in unit
volumes for body care products, driven by growth in both deodorant
and bath and shower products. Insecticides volumes were virtually
flat as volume growth in Asia was offset by declines in Russia and
Western Europe.
Operating segment income decreased $73 million, or 23.1%.
Changes in foreign currency exchange rates decreased operating
segment income by $34 million, or 9.2%. The net change in exit
activities, asset and business dispositions and transformation/
Accelerate charges decreased operating segment income by $8 million.
Operating results were favorably impacted by a $5 million curtailment
gain related to postretirement benefit plan changes. The remaining
operating segment income decrease of $36 million, or 12.7%, was due
to lower unit volumes and higher raw material and manufacturing costs,
which were partially offset by lower media advertising and promotion
expense and savings from continuous improvement initiatives.
32 Sara Lee Corporation and Subsidiaries
2008 versus 2007 Net sales increased $249 million, or 12.2%.
The impact of changes in foreign currency exchange rates increased
reported net sales by $197 million, or 9.9%, primarily due to the
strengthening of the European euro, Indian rupee, Danish krone and
the British pound. The 2008 net sales includes $2 million from an
acquisition made after the start of 2007, which increased net sales
by 0.1%. The remaining net sales increase of $50 million, or 2.2%,
was due to higher unit volumes, partially offset by increased trade
promotions related to new product launches and competitive market
pressures. Unit volumes for the four core categories – shoe care,
body care, air care and insecticides – increased 4.6%, primarily
as a result of increased volumes in body care products driven by
promotional activities and air care products due to the continuing
success of new products, partially offset by a decline in insecticide
volumes due to unfavorable weather conditions in Europe.
Operating segment income increased $43 million, or 15.7%.
Changes in foreign currency exchange rates increased operating
segment income by $24 million, or 8.9%. The net change in exit
activities, asset and business dispositions, transformation charges
and an impairment charge increased operating segment income by
$10 million, or 3.8%. The 2008 results include $1 million of losses
from an acquisition made after the start of 2007. The remaining
operating segment income increase of $10 million, or 3.3%, was due
to the higher unit volumes and savings from continuous improvement
initiatives, partially offset by an increase in trade promotions, higher
SG&A costs due to higher labor costs, an $8 million charge for legal
matters and higher commodity and packaging costs.