Unilever 2008 Annual Report Download - page 35

Performance Review continued
32 Unilever Annual Report and Accounts 2008
Report of the Directors
The Americas (continued)
Underlying sales grew by 6.5% for the year driven by pricing
actions taken to recover commodity cost increases. Trading
conditions deteriorated towards the end of the year, with a drop
in consumer confidence and purchasing power and a reduction of
trade inventories. Despite this more difficult environment
consumers continued to spend on our brands and underlying
sales growth was sustained, although volumes were lower.
Underlying sales growth in the US was 3.8% for the year. Our
sales were very much in line with the markets. While there was
some down-trading from branded products to private label
brands our own market shares held up well. Growth in Latin
America was around 12% for the year. All key countries
contributed well to this growth as we benefited from our
established brands and the breadth of our portfolio.
The move to a single head office for the US in Englewood Cliffs
was completed and the ice cream business was integrated. We
set up a new multi-country organisation made up of the US,
Canada, and the Caribbean. We believe this will enable us to
build scale, drive efficiencies and enhance our capabilities across
these countries during 2009. The reshaping of the portfolio
continued with the disposals of Lawry’s seasonings and spices and
the North American laundry business. We signed agreements with
Starbucks to include Tazo ready-to-drink tea in the Pepsi-Lipton
joint venture and for the manufacture, marketing and distribution
of Starbucks ice cream in the US and Canada.
The operating margin was boosted by profits on disposals. On an
underlying basis the operating margin was in line with last year as
overheads savings fully offset a lower gross margin from the sharp
input cost increases.
2007 compared with 2006
€ million € million
2007 2006
Turnover 13 442 13 779
Operating profit 1 971 2 178
Operating margin 14.7% 15.8%
Restructuring, business disposals, impairment charges
and one-time gain (2006) on US healthcare
plans included in operating margin (0.7)% 0.0%
%
Underlying sales growth at constant rates 4.1
Effect of acquisitions 0.1
Effect of disposals (0.6)
Effect of exchange rates (5.8)
Turnover growth at current rates (2.4)
%
Operating profit 2007 vs 2006
Change at current rates (9.5)
Change at constant rates (3.4)
Turnover at current rates of exchange fell by 2.4%, 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 9.5%, after including an adverse currency
movement of 6.1%. 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.
Underlying sales grew by 4.1% in the year, with an increasing
contribution from pricing which was up 2.6% for the year.
In the US, overall consumer demand held up well in our
categories. Market growth in home care and personal care slowed
somewhat in the second half of the year, but this was
compensated for by robust demand in foods. Our own sales in
the US grew solidly, up 3.2% for the year, despite lower sales of
ice cream.
Our business in Mexico made good progress in the second half of
the year and Brazil showed an improved performance in the
fourth quarter. Argentina, Andina and Central America performed
well throughout.
The operating margin, at 14.7% for the year, was 1.1 percentage
points lower than the previous year. Before the impact of
restructuring, disposals and one-off items, the margin was 0.4
percentage points lower than last year. This was due to an
increase in advertising and promotions and the impact of
substantial cost increases, which were not fully offset by price
increases and savings programmes.
The One Unilever programme simplified operations throughout
the region. Argentina, Mexico and Brazil all moved to single head
offices. Sales force integration took place in a number of
countries. A single SAP system was implemented in the US, with
Latin America already on one system.
We set up a joint venture with Perdigão to develop our heart-
health margarine Becel in Brazil and disposed of our local Brazilian
margarine brands.
New varieties of Knorr bouillons and soups in Latin America
further advanced the brand’s Vitality credentials. Hellmann’s
mayonnaise ‘real’ campaign highlighted its simple ingredients
which are naturally rich in omega-3, in both the US and Latin
America. In the US, we introduced Promise Activ SuperShots, a
Vitality shot with added natural plant sterols, ingredients that are
clinically proven to help actively remove cholesterol as part of a
diet low in saturated fat and cholesterol.
Innovation in personal care reflected the more global approach.
Clear anti-dandruff shampoo was successfully launched in Brazil,
while the Dove pro•age range of skin care, deodorants and
shampoos was introduced in the US at the same time as in
Europe. In laundry, the Dirt is Good platform continued to build
across Latin America, including a variant with built-in fabric
softener.