Unilever 2008 Annual Report Download - page 34

Unilever Annual Report and Accounts 2008 31
Report of the Directors
Performance Review continued
Western Europe (continued)
We made good progress in simplifying the business including the
integration of the separate units in each country and the
formation of ‘multi-country organisations’. This has enabled faster
decision making and more efficient operations. The European
supply chain transformation is progressing well; so far, we have
announced restructuring plans at twenty factories together with
additional capital investments to increase efficiency. The
implementation of a harmonised IT system across the region is
now complete. The portfolio has been further focused with the
sale of the Boursin cheese and Bertolli olive oil businesses.
The UK and the Netherlands, where the change programme is
most advanced, performed well during 2008. In France, Spain and
Germany markets were difficult, with branded products losing
ground to private label. Across the region there was strong
innovation-led growth in deodorants and oral care and price-
driven growth in spreads and dressings.
The operating margin benefited from profits on disposals. On an
underlying basis there was an improvement of 0.7 percentage
points. Gross margins were lower as a result of the
unprecedented increases in commodity costs, but this was more
than offset by lower overhead costs and the benefits of spending
efficiency programmes.
2007 compared with 2006
€ million € million
2007 2006
Turnover 13 327 13 322
Operating profit 1 563 1 787
Operating margin 11.7% 13.4%
Restructuring, business disposals, impairment charges
and one-time gain (2006) on UK pension
plans included in operating margin (4.4)% (1.4)%
%
Underlying sales growth at constant rates 1.8
Effect of acquisitions 0.0
Effect of disposals (1.7)
Effect of exchange rates (0.1)
Turnover growth at current rates 0.0
%
Operating profit 2007 vs 2006
Change at current rates (12.5)
Change at constant rates (12.2)
Turnover at current rates of exchange was at a similar level to
2006, after the impact of acquisitions, disposals and exchange
rate changes as set out in the table above. Operating profit at
current rates of exchange fell by 12.5%, after including an
adverse currency movement of 0.3%. The underlying
performance of the business after eliminating these exchange
translation effects and the impact of acquisitions and disposals is
discussed below at constant exchange rates.
The region sustained its improving trend in 2007 with underlying
sales growth of 1.8% for the year. The improvement was driven
by relentless focus on better in-market execution, rejuvenation of
the quality and value of our core products, and an introduction of
new innovations. Consumer demand in our categories was steady
throughout the year.
Overall we saw improving trends almost everywhere. All major
countries grew in the year, including the UK, Germany, Italy
and the Netherlands. In France sales were slightly up in a
challenging market.
The operating margin, at 11.7%, reflected a higher net charge for
restructuring, disposals and one-off items compared with 2006.
Before these items, the operating margin showed an underlying
improvement of 1.3 percentage points, driven by lower overheads
as a result of the One Unilever programme and reduced
advertising and promotions costs.
We made substantial progress with portfolio development
and restructuring.
We formed four new multi-country organisations and announced
the streamlining or closure of ten factories.
We continued to target innovations mainly at Vitality
opportunities. In ice cream, we introduced Frusì frozen yoghurt
with wholegrain cereals and real fruit pieces and low calorie Solero
smoothies. Lipton Linea slimming teas were launched in France,
Switzerland and Portugal. Growth in Hellmann’s was boosted by
new extra light mayonnaise with citrus fibre technology.
The new Dove pro•age range of products built well in Western
Europe as well as elsewhere, and Dove Summer Glow self-tanning
and body lotions became available in most countries. Small &
Mighty concentrated liquid laundry detergents were launched in
several countries.
The Americas
2008 compared with 2007
€ million € million
2008 2007
Turnover 13 199 13 442
Operating profit 2 945 1 971
Operating margin 22.3% 14.7%
Restructuring, business disposals, and impairment
charges included in operating margin 6.9% (0.7)%
%
Underlying sales growth at constant rates 6.5
Effect of acquisitions 0.1
Effect of disposals (2.9)
Effect of exchange rates (5.1)
Turnover growth at current rates (1.8)
%
Operating profit 2008 vs 2007
Change at current rates 49.4
Change at constant rates 58.5
Turnover at current rates of exchange fell by 1.8%, after the
impact of acquisitions, disposals and exchange rate changes as
set out in the table above. Operating profit at current rates of
exchange rose by 49%, after including an adverse currency
movement of 9%. The underlying performance of the business
after eliminating these exchange translation effects and the
impact of acquisitions and disposals is discussed below at
constant exchange rates.