Meeting everyday needs of people everywhere - Unilever

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28 Unilever Annual Report on Form 20-F 1999 Report of the Directors Performance review by region and category – 1998 Europe Fl. million 1998 1998 1997 Change at current at constant at constant Continuing business rates rates rates Turnover 41 805 41 477 43 274 (4)% Operating profit 5 068 5 016 3 617 39% Operating profit before exceptional items 4 670 4 631 4 467 4% Exceptional items (net) 398 385 (850) Operating margin 12.1% 12.1% 8.4% Operating margin before exceptional items 11.2% 11.2% 10.3% In Western Europe our operating profits were ahead of 1997, with our margins rising by almost 1% of turnover. This reflected the benefits of restructuring, our focus on corporate categories and further reduction in non-core brands. However, our underlying volume was flat due to the effect on ice cream of a poor summer in Northern Europe. We had lower sales because of the impact of business disposals and reduction in non-core brands. In Home & Personal Care we had another very good year, with strong advances in sales, operating profits and margins. In Foods, despite a poor ice cream season, we maintained our strong position in the ice cream market. Our operating profits improved in tea, frozen foods and culinary. Overall margins in Foods were slightly ahead of 1997. Given the difficult circumstances caused by Russia’s economic crisis, our results in Central and Eastern Europe were creditable. Sales rose 4% and underlying volumes by 5%. Profits overall were slightly ahead of 1997 and we maintained operating margins. Growth in Central and Eastern Europe was mixed. The Czech business was very successful, but Poland was down on the previous year. We made good progress in restructuring our business in Turkey, which delivered a satisfactory underlying volume growth and much improved profitability. In Russia our business was far ahead of expectations at the end of t h e first half of 1998. This progress was cut short by the economic crisis which intensified in August and we responded quickly to the new situation. Our overall results were well below 1997. In Europe as a whole, the net benefit of exceptional items in 1998 was Fl. 385 million, compared with a charge of Fl. 850 million in 1997. Restructuring costs were focused primarily on our Foods business. They were more than o ffset by pro f i t sf rom the sale of Plant Bre e d i n g I n t e rn a t i o n a l .
29 Unilever Annual Report on Form 20-F 1999 Report of the Directors Performance review by region and category – 1998 North America Fl. million 1998 1998 1997 Change at current at constant at constant Continuing business rates rates rates Turnover 18 552 18 287 17 944 2% Operating profit 2 077 2 041 911 124% Operating profit before exceptional items 1 991 1 955 1 719 14% Exceptional items (net) 86 86 (808) Operating margin 11.2% 11.2% 5.1% Operating margin before exceptional items 10.7% 10.7% 9.6% Our business continued to benefit from high consumer confidence arising from the strength of the United States economy. Underlying volume growth was 3% and operating profits rose by 14%, after increased investment in marketing. In Foods, underlying volume growth was 5%; Home & Personal Care recorded a 2% growth in volumes, with mass market gains balancing lower sales of prestige products. Our overall margins improved by over 1% of turnover, mainly due to reduction in non-core brands and savings from restructuring. Our home care business, with a slight increase in sales, saw good progress in operating profits, which continued to benefit from past restructuring. In personal care, we had notable growth in hair care, deodorants, mass skin products and personal wash. Our prestige business recorded lower profits in North America. Calvin Klein fragrance sales fell, although demand for the new Contradiction range did compensate in part for lower sales of cK be and cK one. Elizabeth Arden made progress with the launch of Splendor and the favourable performance of White Diamonds, and returned to profit, although still not at acceptable levels. During the year, we completed the merger of Thomas J. Lipton and Van den Bergh Foods to form our new Lipton food businesses. Exceptional items in 1998 reflect profits on minor business disposals: the significant charge d u r i n g the previous year related to the merger of the Home & Personal Care businesses, completed in 1999. Africa and Middle East Fl. million 1998 1998 1997 Change at current at constant at constant Continuing business rates rates rates Turnover 4 911 5 276 4 773 11% Operating profit 490 551 444 24% Operating profit before exceptional items 493 554 454 22% Exceptional items (net) (3) (3) (10) Operating margin 10.0% 10.4% 9.3% Operating margin before exceptional items 10.0% 10.5% 9.5% Our businesses in this region made good progress in operating profits and margins. Underlying volumes grew by 7%. We achieved these strong results in an increasingly competitive market and against a tough economic and political background. In South Africa, our profits and margins advanced strongly, due to an improved mix of products and good cost control. Home care results were particularly good. Operations in Côte d’Ivoire again did well, benefiting from favourable economic conditions. There were encouraging signs of recovery in our Kenyan business, and in Nigeria we made good progress in stabilising the business and implementing a restructuring programme. Despite no GDP growth in the Middle East, our businesses in Saudi Arabia and the Gulf increased underlying volumes, and improved profits and margins. Egypt did particularly well in tea and personal care. Our tea and oil palm estates made a useful contribution to the region’s results, mainly reflecting world commodity prices. We bought an oil palm estate in Ghana to support our core business there.
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