Unilever 2001 Annual Report Download - page 36

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Unilever Annual Report & Accounts and Form 20-F 2001
>33
Report of the Directors
> Economic conditions in developing countries:
About a third of Unilever’s sales come from the group of
developing and emerging economies. These markets are
also an important source of our growth. These economies
are more volatile than those in the developed world,
and there is a risk of downturns in effective consumer
demand that would reduce the sales of our products.
> Borrowings:
The Group had borrowings totalling 25 500 million
at the end of 2001. Any shortfalls in our cashflow
commitments to service these borrowings could
undermine our credit rating and overall investor
confidence. Market, interest rate and foreign exchange
risks to which the Group is exposed are described on
page 31.
> Price volatility of raw materials:
Unilever’s raw materials cover a wide range of agricultural
and mineral products that are subject to movements in
cyclical commodity prices. There may be times when
increases in these prices cannot be recovered fully in
selling prices due to competitor actions or weakness in
effective consumer demand.
> Reputation:
Unilever has a good corporate reputation and many of
our businesses have a high profile in their region. Unilever
products carrying our famous brand names are sold in
over 100 countries. Should we fail to meet high product
safety, social, environmental and ethical standards in all
our operations and activities, Unilever's corporate
reputation could be damaged, leading to the rejection
of our products by consumers, devaluation of our brands
and diversion of management time into rebuilding our
reputation. Examples of initiatives to manage key social
and environmental risks are mentioned on pages 8 and 9.
> Customer relationships:
Sales to large customers are significant in some of our
businesses. The loss of a small number of major
customers could have an adverse effect on the Group’s
business and results of operations.
In addition, as a multinational group, Unilever’s businesses
are exposed to varying degrees of risk and uncertainty
related to other factors including competitive pricing,
consumption levels, physical risks, legislative, fiscal, tax and
regulatory developments, terrorism and economic, political
and social conditions in the environments where we
operate. All of these risks could materially affect the Group’s
business, our turnover, operating profit, net profit, net assets
and liquidity. There may also be risks which are unknown to
Unilever or which are currently believed to be immaterial.
Total Shareholder Return
Total Shareholder Return (TSR) is a concept used to compare
the performance of different companies’ stocks and shares
over time. It combines share price appreciation and
dividends paid to show the total return to the shareholder.
The absolute level of the TSR will vary with stock markets,
but the relative position reflects the market perception of
overall performance relative to a reference group.
The Company calculates TSR over a three-year rolling period.
This period is sensitive enough to reflect changes but long
enough to smooth out short-term volatility. The return is
expressed in US dollars, based on the equivalent US dollar
share price for NV and PLC. US dollars were chosen to
facilitate comparison with companies in Unilever’s chosen
reference group.
Unilever’s TSR target is to be in the top third of a reference
group of 21 international consumer goods companies.
At the end of 2000 we were positioned 13th and during
2001 we fell to 15th, outside our target position which
remains the top third of our reference group.
In 2001 the following companies formed the peer group of
comparative companies:
Avon Kao
Beiersdorf Lion
Cadbury Schweppes L’Oréal
Clorox Nestlé
Coca-Cola Pepsico
Colgate Philip Morris
Danone Procter & Gamble
Eridania* Reckitt Benckiser
Gillette Sara Lee
Heinz Shiseido
*Eridania will be replaced by Orkla with effect from
1 January 2002.
Significant changes
Any important developments and post-balance sheet events
that have occurred since 31 December 2001 have been
noted in this Annual Report & Accounts and Form 20-F
2001. Otherwise, there have been no significant changes
since the year end.
Unilever’s position relative to the reference group
7
14
21
97 98 99 00 01
The reference group, including Unilever, consists of 21 companies.
Unilever's position is based on TSR over a three-year rolling period.
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