Unilever 2009 Annual Report Download - page 42

Unilever Annual Report and Accounts 2009 39
Western Europe
€ million € million
2009 2008
Turnover 12,076 12,853
Operating profit 1,250 2,521
Operating margin 10.4 % 19.6 %
Restructuring, business disposals and impairment
charges included in operating margin (4.0)% 2.8 %
Operating margin before RDIs 14.4 % 16.8 %
Underlying sales growth at constant rates (1.9)%
Effect of acquisitions 0.5 %
Effect of disposals (2.2)%
Effect of exchange rates (2.5)%
Turnover growth at current rates (6.0)%
Operating profit 2009 vs 2008
Change at current rates (50.4)%
Change at constant rates (49.9)%
Turnover at current rates of exchange fell by 6.0%, 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 50.4%, after including a small adverse currency
movement of 0.5%. This fall reflects in part the significant income
received from business disposals in 2008. The comments below
reflect the underlying performance of the business, removing the
impact of currency translation and all costs related to acquisitions
and disposals, restructuring and impairment.
Consumer confidence in Western Europe remained low
throughout 2009 with unemployment rising and varying degrees
of economic difficulty in many countries. Against this background
an underlying volume decline of 0.1% was encouraging, and
performance showed steadily improving momentum through the
year. Volume growth in the UK was particularly strong, and France
and Belgium also achieved positive volume growth for the year
overall. Conditions were most challenging in Southern Europe,
with Spain and Greece in particular experiencing difficult years.
Underlying sales growth was negative 1.9%, reflecting a price
decline of 1.8%. This downward trend was experienced in nearly
all major countries. This again reflected falling commodity costs.
We also corrected prices in categories or markets where consumer
value propositions were out of line.
Market share performance was however encouraging, with
differing performances by category but a slight increase overall in
volume share for the year as a whole and more significant gains in
the last quarter. Operating margin before RDIs for the year was
down by 2.4 percentage points. Significant drivers of this were a
substantial increase in marketing investment and the negative
impact of sterling weakness on the UK business.
Other key developments in 2009 included the region beginning
to fully leverage the power of a single IT system to improve
operational execution and drive efficiencies. We also announced
the acquisition of the personal care business of Sara Lee.
Finance and liquidity
Unilever aims to be in the top third of a reference group including
20 other international consumer goods companies for Total
Shareholder Return, as explained on page 46. The Group’s
financial strategy supports this objective and provides the financial
flexibility to meet strategic and day-to-day needs. The key
elements of the financial strategy are:
• appropriate access to equity and debt capital;
• sufficient flexibility for acquisitions that we fund out of current
cash flows;
• A+/A1 long-term credit rating;
• A1/P1 short-term credit rating;
• sufficient resilience against economic and financial turmoil; and
• optimal weighted average cost of capital, given the constraints
above.
Unilever aims to concentrate cash in the parent and finance
companies in order to ensure maximum flexibility in meeting
changing business needs. Operating subsidiaries are financed
through the mixture of retained earnings, third-party borrowings
and loans from parent and group financing companies that is most
appropriate to the particular country and business concerned.
Unilever maintains access to global debt markets through an
infrastructure of short-term debt programmes (principally US
domestic and euro commercial paper programmes) and long-term
debt programmes (principally a US Shelf registration and
euromarket Debt Issuance Programme). Debt in the international
markets is, in general, issued in the name of NV, PLC, Unilever
Finance International BV or Unilever Capital Corporation. NV and
PLC will normally guarantee such debt where they are not the
issuer.
Thanks to active financial management, Unilever’s financing
position has not been materially affected by the recent
unprecedented economic turmoil. We have tightened our
counterparty limits and monitored closely all our exposures. During
2009 we did not suffer any material counterparty exposure loss.
We have been proactive in managing our liquidity in a manner
appropriate to the recent environment and have been able to raise
debt at competitive rates.
Unilever has committed credit facilities in place to support
its commercial paper programmes and for general corporate
purposes. The undrawn committed credit facilities in place on
31 December 2009 were US $6,050 million, out of which bilateral
committed credit facilities totalled US $5,285 million and bilateral
money market commitments totalled US $765 million. Further
details regarding these facilities are given in note 15 on page 105.
On 12 February 2009 we issued a bond comprising two senior
notes: (a) US $750 million at 3.65% maturing in 5 years and
(b) US $750 million at 4.80% maturing in 10 years. On 19 March
2009 we issued senior notes of £350 million at 4.0% maturing in
December 2014. On 29 May 2009 we redeemed floating rate
notes of €750 million. On 11 June 2009 we issued fixed rate
notes on the Eurodollar market for US $450 million at 3.125%,
maturing in 2013. On 17 June 2009 we issued senior fixed rate
notes for £400 million at 4.75%, maturing in 2017.