Unilever 2012 Annual Report Download - page 31

28 Unilever Annual Report and Accounts 2012Report of the Directors About Unilever
FINANIAL
REVIEW 2012
The virtuous circle of growth continues to work for us.
We delivered consistent and strong top-line growth, well-
balanced between volume and price and improved core
operating margin.
Delverng consstent top lne growth
and mproved proftablty
Delverng consstent top lne growthand mproved proftablty
Strong underlyng sales growth, led by sold volume growth
Growth of our markets remained positive in 2012. This was primarily driven by strong growth in
emerging markets which grew in volume and value terms, while developed markets remained largely
unchanged due to continued weak consumer confidence in Western Europe and North America.
Despite the challenging environment, we have delivered strong underlying sales growth of
6.9% (2011: 6.5%). We accelerated volume growth to 3.4% (2011: 1.6%), well balanced with a 3.3%
contribution from price (2011: 4.8%). All of our categories and each of our three geographical areas
reported positive growth.
As in the prior year, emerging markets were the key growth drivers with underlying sales up 11.4%.
We achieved double-digit growth in many countries, including Indonesia, China, Brazil and Vietnam.
In developed markets we managed to grow the business despite difficult markets: our underlying
sales were up 1.6%, split equally between volume and price.
Our focus on bigger and better innovation, rolled out faster to more markets is a key driver behind
our performance. The rollout of our brands to new markets, including the more recently acquired
brands, such as the launch of TRESemmé in Brazil also contributed strongly.
Amongst our categories, Home Care and Personal Care grew ahead of the markets, up 10.3% and
10.0% respectively; resulting in solid market share gains. In Home Care, we outperformed market
growth in laundry and household cleaning. In Personal Care, our hair care business garnered market
shares around the world, and skin care as well as deodorants reflected the success of innovations.
In Foods, underlying sales growth of 1.8% reflects a mixed performance, benefiting from the rollout
of new products and our marketing campaigns to introduce new uses of our products to consumers.
At the same time, declining markets in our spreads business and the impact of price rises we took
in 2011 to counter sharply increased raw material costs impacted growth momentum.
6.3% underlying sales growth in Refreshment reflects the continued success of the global rollout
of our ice cream brands and innovations, as well as improved growth momentum in tea, especially
in emerging markets.
Sold progress n core operatng margn
Despite further increases in input costs and adverse currency changes, gross margin improved
by 0.1% to 40.0% at constant exchange rates, reflecting disciplined cost management and our
increased focus on improving gross margin consistently.
Core operating margin was up 0.3% to 13.8%, driven by the progress in gross margin, continued
savings programmes and lower expenses for restructuring. Advertising and promotional expenses
increased by €470 million, at constant exchange rates.
Strong free cash flow generaton
Free cash flow of €4.3 billion was up by €1.2 billion, driven by higher operating profit and
improvement in working capital management.
Consistent management focus has resulted in negative working capital for 13 consecutive quarters
with further progress in all its components: inventories, trade receivables and trade payables.
Net capital expenditure of €2.1 billion was in line with last year, at 4.2% of turnover, reflecting
investment in the capacity required for our growing business.