Unilever 2009 Annual Report Download - page 51

Financial Review 2008 (continued)
48 Unilever Annual Report and Accounts 2009
Report of the Directors About Unilever
Throughout the year we saw continued strong growth in India and
Indonesia, both countries where we have tremendous scale. In
these countries we benefited from portfolios which span higher
and lower price tiers and from extensive micro-marketing tailored
to faster-growing areas and channels. Our business in China also
grew well throughout the year.
In April we acquired Inmarko, the leading ice cream company
in Russia, and it performed strongly with both sales and profits
ahead of plan. We reshaped our portfolio in Côte d’Ivoire with the
completion of the disposal of our palm oil business and the
acquisition of soap brands in the same country.
On an underlying basis the operating margin was 0.2 percentage
points below the prior year reflecting increased investment in
building capabilities to drive growth and the sharp increases in
input costs partly offset by the benefits of savings programmes.
The Americas
€ 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)%
Operating margin before RDIs 15.4 % 15.4 %
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.
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. 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 the prior
year as overheads savings fully offset a lower gross margin from
the sharp input cost increases.
Western Europe
€ million € million
2008 2007
Turnover 12,853 13,327
Operating profit 2,521 1,563
Operating margin 19.6 % 11.7 %
Restructuring, business disposals and impairment
charges included in operating margin 2.8 % (4.4)%
Operating margin before RDIs 16.8 % 16.1 %
Underlying sales growth at constant rates 1.3 %
Effect of acquisitions (0.0)%
Effect of disposals (2.1)%
Effect of exchange rates (2.8)%
Turnover growth at current rates (3.6)%
Operating profit 2008 vs 2007
Change at current rates 61.3 %
Change at constant rates 63.6 %
Turnover at current rates of exchange fell by 3.6%, 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 61%, after including an adverse currency
movement of 2%. 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 growth was 1.3% for the year with pricing
contributing 3.8% and volume lower by 2.4%. Volume
consumption in our markets was lower.
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’, enabling faster decision
making and more efficient operations. The European supply chain
transformation included the announcement of restructuring plans
at twenty factories together with additional capital investments to
increase efficiency. The implementation of a harmonised IT system
across the region was completed. The portfolio was further
focused with the sale of the Boursin cheese and Bertolli olive oil
businesses.