Unilever 2004 Annual Report Download - page 12

Unilever Annual Report and Accounts 2004 09
Chairmen’s statement
(continued)
2004
2004 was clearly a very disappointing year for Unilever. Underlying
sales growth was 0.4%, with leading brands growth of 0.9%.
Operating margin BEIA was 15.2%, 0.6% lower than in 2003.
This reflects a decline in price, slightly higher advertising and
promotion expenditure and unrecovered overheads following
disposals. The impact of increased commodity costs in the year
was fully offset by procurement savings. In spite of lower operating
profit, earnings per share BEIA grew by 5%, boosted by lower tax
and financing costs. Net borrowing costs were reduced by 19% in
the year with both net debt and interest rates lower than last year.
The financing costs of pensions were also lower.
The fourth quarter saw a planned step-up in restructuring costs
with the start of the implementation of the overheads simplification
project, One Unilever, announced in mid-2004. In addition, a charge
of €650 million (€591 million at current exchange rates) was
taken for the impairment of goodwill for Slim•Fast. The weight
management category declined significantly in the second half of
2004 reflecting a declining interest by consumers in the more
extreme low-carb diet. Consumers as yet have not been attracted
back to the more conventional weight management programmes
such as Slim•Fast; recovery will therefore take longer than expected
and will be from a substantially smaller base. A €177 million
(€169 million at current exchange rates) provision was made for
the potential repayment of certain sales tax credits in Brazil.
Cash flow, however, was again strong, which together with the
weaker US dollar enabled net debt to be reduced to €9.7 billion
at current exchange rates. This has enabled an increased dividend
pay-out for 2004 and the announcement of a share buy-back
programme for 2005.
Board changes
At the Annual General Meetings in May four of our Directors will
be retiring. Clive Butler, Keki Dadiseth, and André van Heemstra
have all had long and distinguished careers as Unilever executives.
Clive has been a Director since 1992 and most recently served as
Corporate Development Director. Keki joined the Boards in 2000
and has been a Divisional Director for the HPC business since
2001. André has been Personnel Director since joining the Boards
in 2000.
Also retiring is Claudio Gonzalez, one of our Non-Executive
Directors. We would like to thank them all for their valuable
contribution during their years of service.
Ralph Kugler has been nominated for election as an Executive
Director at the Annual General Meetings in May. He is currently
Business President – Home and Personal Care – Europe.
Looking to the future
We expect a tough environment in 2005. Market growth will
continue to be constrained by a difficult retail environment in the
developed world and no let-up in the level of competitiveness we
face in developing and emerging markets.
Our overriding objective is to return the business to healthy
growth.
2005 is the 75th anniversary of the foundation of Unilever. With
the changes we have put in place, with a small and committed
leadership team, with dedicated and talented people, we are
confident that Unilever will deliver another 75 years of sustained
growth and increased shareholder value through serving the
needs of our consumers and customers around the globe.
We remain completely committed to delivering Total Shareholder
Return in the top third of our peer group. We will measure our
progress by Free Cash Flow generation and an improvement in
the Return on Invested Capital. We believe these are the best
measures of value creation: in addition, they allow us to retain
the flexibility to build the long-term health of your business in
changing circumstances.
2004 was a testing year but together we have come through it
as a strong team. We would like to thank all of our employees
around the world for their loyalty and effort. We are fortunate
in having such talented and diverse people. We know we can
count on their continued support and redoubled efforts in
2005 and beyond.
Antony Burgmans Patrick Cescau
Chairmen of Unilever