Meeting everyday needs of people everywhere - Unilever

Financial review
The figures quoted in this review are in guilders, at current
rates of exchange, unless otherwise stated. The profit and
loss and cash flow information is translated at average
rates of exchange for the relevant year and the balance
sheet information at year-end rates of exchange.
Results - 1999
Turnover for the Group was 1% higher at
Fl. 90 296 million. Underlying volume growth of 1%
was partly offset by the slight strengthening of the
guilder against the basket of Unilever currencies.
Operating profit befor e exceptional items increased
by 7%, reflecting a further strengthening in underlying
margin of 0.6 percentage points of turnover to 11.2%.
Operating profit , however, fell by 2% after taking
exceptional charges of Fl. 594 million, compared to
net gains in 1998 of Fl. 276 million which included the
profit on the disposal of Plant Breeding International,
Cambridge, UK. The 1999 charge included Fl. 512 million
for restructuring. Under US GAAP, the operating profit
from continuing operations before and after exceptional
items increased by approximately 6% and 2% respectively,
reflecting different treatment of restructuring costs and
goodwill (see pages 106 and 107).
Income from fixed investments increased to
Fl. 114 million (1998: Fl. 82 million), reflecting improved
performance in our joint ventures in the US and Portugal,
and the profit on a number of small disposals.
Net interest costs were Fl. 30 million, compared with an
interest income in 1998 of Fl. 344 million. The swing is
due to a Fl. 11.2 billion reduction in net funds during the
year, following payment of Fl. 13 billion for the cash
element of the special dividend in June 1999. Net interest
cover for the year was more than 300 times, and over 30
times for the second half year.
The Group’s effective tax rate reduced to 32% compared
with 33% in 1998, mainly reflecting prior year tax credits.
Minority interests increased to Fl. 443 million (1998:
F l . 3 1 8 million) as a result of continued strong performance
in India, and a return to profitability in Nigeria.
Net profit after exceptional items fell by 6% (2% under
US GAAP, see pages 106 and 107) as a result of the
negative swing in exceptional items, and the impact on
net interest of the special dividend. Combined earnings
per shar e was unchanged at Fl. 5.80, as the reduction in
net income was offset by the reduction in the number of
shares following the share consolidation. Combined
earnings per shar e befor e exceptional items rose
by 9%.
Retur n on capital employed increased to 22% from
16% in 1998. This improvement is due to the more
efficient capital structure resulting from the payment
of the special dividend.
The payment of the special dividend has been responsible
for a reduction of the Weighted Average Cost of Capital
(WACC) of some 0.5%. WACC is calculated as the real
cost of equity multiplied by the market capitalisation, plus
the real after taxation interest cost of debt multiplied by
the market value of the net debt, divided by the sum of
the market values of debt and equity.
Results - 1998
Turnover for the Group at Fl. 89 112 million decreased
by 6% compared with 1997 which included the speciality
chemicals businesses disposed of during the year. In the
continuing operations (ie excluding the speciality
chemicals businesses in 1997), turnover fell by 2%, and
underlying volume growth of almost 2% was little more
than half the rate achieved in 1997. Productivity for the
continuing operations, based on sales per employee,
improved by 6% in 1998.
Operating profit before exceptional items for the
Group decreased by 7% in 1998 to Fl. 9 442 million.
However, for the continuing operations this represented
an increase of 7%. This increase reflected mainly a
significant improvement in margins in both North America
and Latin America.
Operating profit in the continuing operations increased
by 28% to Fl. 9 718 million. Exceptional items in 1998
produced a net benefit of Fl. 276 million in comparison
with a charge of Fl. 1 800 million in 1997. This
F l . 2 7 6 million includes restructuring costs of Fl. 585 million
mainly focused in Europe and Asia Pacific which were
more than offset by profits on business disposals which
arose principally on the disposal of Plant Breeding
International in Europe. Under US GAAP the increase in
operating profit from continuing operations before and
after exceptional items would have been approximately
5% and 30% respectively, reflecting different treatment
of restructuring cost, goodwill and profits on sale of the
specialty chemicals businesses (see pages 106 and 107).
Income from fixed investments in 1998 of Fl. 8 2 m i l l i o n
was in line with last year (1997: Fl. 85 million).