Unilever 2012 Annual Report Download - page 7

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Unilever Annual Report and Accounts 2012
HIEF
EXEUTIVE
OFFIER’S
REVIEW
1 Paul Polman∆
Chief Executive Officer
Unilever transformation on track
Our predcton that 2012 would be another
challengng year for the global economy
turned out to be accurate We saw
contnued volatlty n the world’s markets
resultng n commodty cost rses
sgnfcantly n excess of expectatons
The threat of the world’s largest economy
gong over a ‘fscal clff’ and the euro
crss added uncertanty and undermned
fragle consumer confdence
Overall it is a ‘bi-polar’ economic world –
one of sluggish growth in most developed
markets contrasted by still relatively
healthy consumption and growth in
emerging markets.
Simultaneously we are facing challenges
to the world’s social and environmental
equilibrium. Growing issues of inequality
and rising levels of unemployment –
especially among young people – place
added strains on social cohesion. But the
biggest challenge is the continuing threat
to ‘planetary boundaries’, resulting in
extreme weather patterns and growing
resource constraints. These have an
increasing impact on our business.
Volatility and uncertainty
– the new normal
We remain convinced that businesses
that both address the direct concerns of
citizens and the needs of the environment
will prosper over the long term. Companies
need to show leadership to rebuild citizens’
trust – currently at an all time low. This
thinking lies at the heart of the Unilever
Sustainable Living Plan (USLP) and our
Compass vision of doubling the business
while reducing our environmental footprint
and increasing our positive social impact.
As it becomes embedded, there is growing
evidence that it is also accelerating our
growth. It certainly contributed to another
strong year for Unilever in 2012.
Strong business performance in 2012
Turnover increased by 10.5%, taking
Unilever through the €50 billion barrier,
a significant milestone to becoming an
€80 billion company. We have grown by
nearly 30% in just four years. Growth was
broad based – across all our markets and
categories – and high quality, with a good
balance of price and volume. Emerging
markets continued to be the prime engine,
growing for the second consecutive year
by more than 11% and now accounting for
55% of total business.
Growth was ahead of our markets, with
approximately 60% of the business gaining
share. Personal Care and Home Care
showed double digit growth, in line with
our strategic priorities.
Despite commodity cost increases of over
€1.5 billion, and the heavy investments
made in supporting our brands, growth
was profitable, with 0.3% improvement
in core operating margin to 13.8%.
High impact innovations, rolled out
globally at speed, continue to be key
growth drivers. With the addition of
Magnum and Sunsilk last year, we now
have 14 brands with sales of more than
€1 billion a year, and these brands
accounted for almost 50% of Unilever’s
growth in 2012. We delivered on our
white space market strategy too. The
launch of TRESemmé in Brazil last year
was one of Unilever’s most successful
ever, adding almost €150 million
in turnover.
We continue to strengthen our portfolio,
thanks to strategic acquisitions since 2011
in Personal Care – including Sara Lee,
Alberto Culver and Kalina in Russia –
and disposal of several slower-growing
businesses, notably in Foods. This
combination added over 1% to turnover
growth in 2012.
The delivery of the Compass strategy
and the embedding of the USLP are not
only benefiting citizens and communities
but also shareholders who have seen a
Total Shareholder Return (TSR) of close
to 100% over the past four years.
The year ahead
We expect 2013 and beyond to be as
difficult and challenging. We believe this
further validates our Compass strategy
with the USLP at its heart. Re-establishing
trust with citizens and meeting the needs of
society will be the keys to ongoing success.
Our brands should be a force for good in
addressing global challenges – be it access
to water, hygiene and sanitation or
sustainable and nutritious food.
For example, the Lifebuoy handwashing
campaigns target one of the biggest
killers of children under five – diarrhoea.
Domestos is helping improve sanitation
in some of the most impoverished parts
of the world through a combination of
educational programmes and simply the
building of toilets. Pureit is bringing safe
drinking water to an increasing number
of people. Dove is addressing one of the
biggest issues facing adolescent girls
around the world, self-esteem. Through
our sustainable sourcing programmes,
Rainforest Alliance certification of Lipton
tea and Knorr’s Sustainability Partnership
Fund, we are helping to improve the
livelihoods of farmers and helping to
guarantee future supplies. As our ambitions
are high, working in partnership with others
is key to delivery.
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