Unilever 2010 Annual Report Download - page 28

Unilever Annual Report and Accounts 2010 25
Report of the Directors About Unilever
Western Europe
€ million € million %
Increase/
2010 2009 (Decrease)
Turnover 12,015 12,076 (0.5)
Operating profit 1,917 1,250 53.4
Underlying operating margin (%) 16.1 14.4 1.7
Underlying sales growth at constant rates (%) (0.4) (1.9)
Underlying volume growth (%) 1.4 (0.1)
Effect of price changes (%) (1.8) (1.8)
Turnover at current rates of exchange fell by 0.5%. Operating
profit at current rates of exchange grew by 53.4%. Although
underlying margin improvement made an important contribution,
the most significant factor behind this substantial increase was
the profit achieved on the disposal of the Italian frozen foods
business in the fourth quarter.
Market conditions were difficult in most parts of the region
throughout 2010, with Greece, Ireland and Spain proving
especially challenging. Northern European markets were
morepositive, particularly the UK and France, with consumer
confidence remaining relatively stable despite the imminent onset
of austerity packages. Competition continued to be intense,
andin some markets and categories levels of price promotional
activity accelerated towards the end of the year. This trend was
particularly marked in the Home Care category.
Against this competitive background, underlying sales growth
ofnegative 0.4% represented robust performance. Particularly
encouraging was volume growth, which at 1.4% was a step up
from the slight decline seen in 2009. Key countries contributing to
this positive growth momentum were the UK, France, Italy and the
Netherlands, all of which grew volumes by 2% or more, in all cases
ahead of their respective markets. Volumes in Germany were
broadly flat, and in Greece, Spain and Ireland volumes were down,
reflecting the very difficult conditions in each of those markets.
Volume market share performance was positive for the region
asa whole, and for most major units with the exception of Spain.
Particularly strong progress was made in the Netherlands, where
over the year major share gains were seen in ice cream and
deodorants. In the UK strong gains were made in dressings,
teaand laundry, and in Germany performance was strong in
icecream, spreads and deodorants.
Underlying price growth was negative 1.8%, reflecting actions
taken to ensure market positions were protected against high
levels of price competition. Underlying operating margin for the
year was up sharply, by 170 basis points. This reflected the
success of costsaving initiatives, which reduced indirect costs
significantly. Advertising and promotions spend was also lower,
although investment levels remained competitive as reflected in
the improved volume and share performance.
Other key developments in the year focused on the sharpening
ofthe portfolio through acquisitions and disposals. The sale
ofthe Italian frozen foods business was completed in the fourth
quarter, as was the acquisition of the Personal Care business of
Sara Lee. In addition, smaller bolt-on acquisitions were
announced in the ice cream business in Denmark and Greece,
and have subsequently been completed.