Unilever 2004 Annual Report Download - page 23

20 Unilever Annual Report and Accounts 2004
Financial review
(continued)
Group turnover was €42 693 million (2002: €48 270 million). Our
share of turnover from joint ventures continued to fall in 2003 to
€249 million (2002: €490 million) as a result of increases in our
holding in former Bestfoods joint ventures in Asia and South
Africa and their consequent inclusion as subsidiaries.
Operating profit was up 9% at €5 529 million for the year (2002:
€5 091 million) and the operating margin increased to 12.9%
(2002: 10.4%), with a significant contribution from lower net
exceptional charges. Operating profit BEIA was 4% lower at
€6 772 million, compared with €7 054 million in 2002. Operating
margin BEIA improved strongly from 14.5% in 2002 to 15.8%
despite an increase in brand investment; this was achieved
through improved gross margins and lower overheads as a result
of the Path to Growth savings programmes. These improvements
were more than offset by the strengthening of the euro. Group
operating profit BEIA was €6 719 million (2002: €6 959 million).
Amortisation of goodwill and intangible assets was €1 143 million
compared with €1 261 million in 2002. The decrease was mainly
due to the strengthening of the euro in 2003.
Net exceptional charges included in operating profit for the year
were €100 million (2002: €702 million), which included €470
million of restructuring investment costs and a net credit for the
profit and losses on disposals of €370 million. The restructuring
costs primarily related to Path to Growth initiatives, and the
continued integration of Bestfoods. Associated costs of
€121 million were included within operating profit BEIA
for the year (2002: €191 million).
Group operating profit increased by 10% to €5 483 million.
Net interest cost, excluding pensions interest, fell to €847 million
from €1 173 million in 2002 as a result of the lower overall level
of net debt and the positive impact of currency movement on the
cost of our US dollar-based debt. The net interest cover for the
year was 6.7 times compared with 4.5 times in 2002. The
adjusted net interest cover on the basis of adjusted EBITDA was
9.5 times (2002: 7.0 times). The pension net interest charge for
the year was €166 million compared with a net interest credit of
€108 million in 2002. This change reflected a lower expected
return on pension assets for 2003 as a result of lower asset values
following the weak stock market performance in 2002.
The Group’s effective tax rate on profit was 33.6% for the year
(2002: 39.6%) and reflected the non-tax-deductibility of
Bestfoods goodwill amortisation. The underlying tax rate for the
year, before exceptional items and amortisation, was 29%
compared with 30% last year, with sustained benefits flowing
from the Path to Growth programme.
Minority interests decreased by 20% to €249 million (2002:
€312 million). This decrease was due to the one-off change in
fiscal policy, which positively affected local shareholders in India
in 2002.
Net profit rose by 29% to €2 762 million with lower exceptional
charges and the improvements in operating margin, interest and
tax more than offsetting the negative impact of exchange rates.
Combined earnings per share increased by 32% and combined
earnings per share BEIA increased by 2%.
Return on invested capital for the year was 12.5%, up from 9.8%
in 2002. The progress was the result of improved operating
margins arising from Bestfoods synergy benefits and additional
procurement and restructuring savings. Our capital base was also
reduced by further rationalisation and disposal of capital intensive
production facilities.
Acquisitions and disposals
Acquisitions
There were no material acquisitions during 2004.
On 18 February 2003, we announced an agreement to acquire
the remaining unheld shares in CPC/Aji Asia, a joint venture with
operations in six countries, from Ajinomoto Co. Inc., Japan, for a
total of US $381 million (€338 million). Under this agreement, the
remaining outstanding shares were purchased as planned in
March 2004. Unilever had full management control of the
business with effect from 25 March 2003.
On 14 October 2003, we announced the creation of Pepsi Lipton
International, a 50:50 joint venture between Unilever and Pepsico,
to market and distribute ready-to-drink tea in several international
markets outside North America. This business started trading on
1 January 2004, and the scope of the joint venture was expanded
to include some additional territories during the year.
Disposals
In 2004 we disposed of more than 20 businesses with total
turnover in excess of €700 million. Significant disposals included
the sale of certain household care brands in North America, our
edible oils business under the Capullo, Inca and Mazola brands in
Mexico, the Dalda brand in Pakistan and the sale of our European
frozen pizza and baguette business. Our chemicals business in
India (Hindustan Lever Chemicals) was merged with Tata
Chemicals. Our joint venture with Jerónimo Martins in Portugal
agreed to acquire our Bestfoods Portugal business.
In 2003, we disposed of 50 businesses with a total turnover of
approximately €1 130 million.