Unilever 2010 Annual Report Download - page 32

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Unilever Annual Report and Accounts 2010 29
Report of the Directors About Unilever
Dividends and market capitalisation
Dividends per share
Final dividends in respect of 2008 of €0.5100 per NV ordinary
share and £0.4019 per PLC ordinary share and interim dividends
in respect of 2009 of €0.2700 per NV ordinary share and
£0.2422 per PLC ordinary share were declared and paid in 2009.
Four quarterly interim dividends were declared and paid during
2010. These totalled €0.8190 per NV ordinary share and £0.7053
per PLC ordinary share.
Quarterly dividends of €0.2080 per NV ordinary share and
£0.1775 per PLC ordinary share were declared on 3 February
2011, to be payable in March 2011.
Unilever’s combined market capitalisation rose from €63.4 billion
at the end of 2009 to €64.8 billion at 31 December 2010.
Finance and liquidity
The Group’s financial strategy 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
uncertainty; 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
mostappropriate 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,
ingeneral, 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.
In this uncertain environment, we have continued to monitor closely
all our exposures and counterparty limits. We were comfortable to
run a cash balance which was at a higher level than was historically
the case.
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 2010 were US $6,050 million, of which bilateral
committed credit facilities totalled US $5,495 million and bilateral
money market commitments totalled US $555 million. Further
details regarding these facilities are given in note 15 on page 98.
On 1 November 2010 we redeemed the US $1,750 million bonds.
We did not issue new notes during 2010.
The main source of liquidity continues to be cash generated from
operations. Unilever is satisfied that its financing arrangements
are adequate to meet its working capital needs for the
foreseeable future.
The currency distribution of total financial liabilities (excluding the
currency leg of currency derivatives relating to intra-group loans)
at the end of 2010 was as follows: 31% in US dollars (2009:
36%) 28% in euros (2009: 28%) and 22% in sterling (2009:
18%), with the remainder spread across a number of currencies.
Unilever manages interest rate and currency exposures of its net debt
position. Taking into account the various cross-currency swaps and
other derivatives, 82% of Unilever’s net debt was in US dollars (2009:
89%) and 57% in sterling (2009: 44%), partly offset by financial
asset balances in euros amounting to 70% of net debt (2009: 59%)
and with the remainder spread over a large number of other
currencies.
Treasury
Unilever Treasury’s role is to ensure that appropriate financing
isavailable for all value-creating investments. Additionally,
Treasury delivers financial services to allow operating companies
to manage their financial transactions and exposures in an
efficient, timely and low-cost manner.
Unilever Treasury operates as a service centre and is governed
byplans approved by the Boards. In addition to guidelines
andexposure limits, a system of authorities and extensive
independent reporting covers all major areas of activity.
Performance is monitored closely. Reviews are undertaken
periodically by the corporate internal audit function.
The key financial instruments used by Unilever are short-term
andlong-term borrowings, cash and cash equivalents, and
certain straightforward derivative instruments, principally
comprising interest rate swaps and foreign exchange contracts.
The accounting for derivative instruments is discussed in note 15
on page 100. The use of leveraged instruments is not permitted.
Unilever Treasury manages a variety of market risks, including the
effects of changes in foreign exchange rates, interest rates and
liquidity. Further details of the management of these risks are
given in note 15 on pages 98 to 100, which are incorporated and
repeated here by reference.
Acquisitions and disposals
During 2010 Unilever has continued to shape the portfolio
through M&A activities.
The most significant were the acquisition of Sara Lee’s personal
care business, which completed on 6 December 2010, and the
definitive agreement to acquire the Alberto Culver Company,
which was announced on 27 September 2010. This remains
subject to regulatory approval.
Details of other acquisitions and disposals during 2008, 2009 and
2010 can be found in note 26 on page 118.