Unilever 2002 Annual Report Download - page 40

Unilever Annual Report & Accounts and Form 20-F 2002
Financial review 37
Report of the Directors
goodwill amortisation and a tax rate on the net exceptional
charges of 39%. The underlying tax rate for normal trading
operations was in line with 2000.
Minority interests increased 11% to €239 million
(2000: €215 million) as a result of a strong performance
in India.
Net profit rose by 66% to €1 838 million. Combined
earnings per share were up 70%. Combined earnings per
share BEIA increased by 11%.
Return on capital employed increased slightly to 9% from
8% in 2000.
2002
Dividends and market capitalisation
Ordinary dividends paid and proposed on PLC ordinary
capital amounted to 16.04p per 1.4p share (2001:14.54p),
an increase of 10% per share. Ordinary dividends paid and
proposed on the NV ordinary capital amount to €1.70 per
€0.51 share (2001: €1.56), an increase of 9% per share.
The ratio of dividends to profit attributable to ordinary
shareholders was 79.5% (2001: 85.6%).
Unilever’s combined market capitalisation at 31 December
2002 was €59.9 billion (2001: €64.5 billion).
Balance sheet
The euro strengthened considerably against most other
Unilever currencies between the two balance sheet dates.
This resulted in an exchange loss on translation of opening
balances and of movements of €1 517 million. Significant
translation losses in Argentina and Brazil were partly offset
by the translation gain on the highly geared balance sheet
of our US business. Profit retained, after accounting for
dividends, the writeback of goodwill on disposal of
DiverseyLever and for the retranslation impact, decreased
by €640 million to €5 777 million.
Total capital and reserves decreased to €5 867 million
(2001: €6 993 million) reflecting the above movements in
profit retained together with a €551 million net increase in
shares held to meet employee share option plans.
Cash flow
Cash flow from operations increased by €386 million
to €7883 million. Strong underlying cashflows and
working capital improvements were partly offset by higher
restructuring outflows, and the impact of the strengthening
of the euro on the consolidated figures.
Capital expenditure of €1 313 million was 15% below 2001
levels and at 2.7% of turnover continues the reducing trend
of recent years.
Acquisition activity in the year was limited. The most
significant transaction was the purchase of an additional
9% share in the Bestfoods Robertsons businesses in Africa
and the Middle East. During the year cash proceeds of
€1834 million were received from the disposal of
35 businesses, notably DiverseyLever and Mazola.
Finance and liquidity
Unilever aims to be in the top third of a reference group
for Total Shareholder Return of 21 international consumer
goods companies, as explained on pages 40 and 41. The
Group’s financial strategy supports this objective and
provides the financial flexibility to meet its strategic and day-
to-day needs. The key elements of the financial strategy are:
•Appropriate access to equity and debt capital
•Sufficient flexibility for tactical acquisitions
•A1/P1 short-term credit rating
•Sufficient resilience against economic turmoil
•Optimal weighted average cost of capital, given the
constraints above
An EBITDA (BEI) net interest cover greater than 8 times is
consistent with this strategy. An interest cover below this
level is acceptable for a period following major acquisitions.
The definition and further details on the EBITDA (BEI) net
interest cover ratio are given on pages 114 and 115.
Other relevant disclosures are given in notes 14 and 15 on
pages 83 to 86.
Unilever concentrates cash in the parent and finance
companies in order to ensure maximum flexibility in
meeting changing business needs. Operating subsidiaries
are financed through the mix of retained earnings, third
party borrowings and loans from parent and group
financing companies that is most appropriate to the
particular country and business concerned.
Unilever maintains access to global debt markets through
an infrastructure of short-term debt programmes (principally
US domestic and euro commercial paper programmes)
and long-term debt programmes (principally a US Shelf
registration and euro-market Debt Issuance Programme).
Debt in the international markets is, in general, issued in
the name of NV, PLC or Unilever Capital Corporation. NV
and PLC will normally guarantee such debt where they are
not the issuer.
Unilever has committed credit facilities in place to support
its commercial paper programmes and for general corporate
purposes. The committed credit facilities in place at the end
of 2002 were: bilateral committed credit facilities of in
aggregate US $3 737 million, bilateral notes commitments
of in aggregate US $400 million and bilateral money market
commitments of in aggregate US $2 080 million. Further
details of these facilities are given in note 14 on page 84.
In 2002 a total of €3 195 million was raised through term
financing. The term financing mainly consisted of a
US $650 million 51/2year eurobond issued in June, a
€1billion 5-year eurobond issued in September and a
US $1 billion 30-year Global Bond issued in November.
In addition Unilever Thai Trading Limited (UTT) raised the