Meeting everyday needs of people everywhere - Unilever

Financial review
Net interest income was Fl. 334 million compared to an
interest cost in 1997 of Fl. 230 million. Average net funds
for the year at constant rates were Fl. 11.0 billion.
The Group’s effective tax rate reduced to 33% compared
to 35% in 1997 when the impact of the disposal of the
speciality chemicals businesses is excluded. The reduction
is mainly due to one-off items and the benefit of prior
year tax credits.
Minority interests of Fl. 318 million were in line with
1997 with higher profits in India offset by increased losses
in China, and the impact in 1997 of the minority interests’
share in the profit on disposal of the speciality chemicals
businesses.
Net profit after exceptional items decreased by 41%
to Fl. 6 488 million (47% to Fl. 5 605 million under
US GAAP, pages 106 and 107). Excluding the profit on
the sale of the speciality chemicals businesses and loss
on the disposal of fixed assets in 1997, net profit
increased by 41%. The Fl. 2 076 million positive swing
in operating exceptional items referred to previously made
a significant contribution to this improvement; excluding
exceptional items, net income was 13% ahead of 1997
( a p p ro x i m a t e l y11% under US GAAP). Earnings per
shar e decreased by 41% from Fl. 9.78 to Fl. 5.80 due to
the speciality chemicals businesses disposal profit in 1997.
Return on capital employed , before the impact of the
special dividend (see below), decreased to 16% from 28%
in 1997, entirely due to the impact of the profit on sale
of speciality chemicals businesses in 1997. Average capital
employed excludes goodwill on acquisitions made before
1998, which are eliminated in reserves. As the special
dividend is accounted for on 31 December 1998, its
impact on average capital employed and the related
return on capital employed is not material in 1998. In a
full year the impact of the special dividend would increase
return on capital employed to approximately 24%.
Dividends and market capitalisation
Ordinary dividends paid and proposed on the NV
ordinary capital amount to Fl. 2.79 per Fl. 1.12 share
(1998: Fl. 2.51 per Fl. 1 share), an increase of 11% per
share. The ratio of dividends to profit attributable to
ordinary shareholders increased to 45.2% (1998: 42.1%).
Profit of the year retained was Fl. 3 319 million (1998:
Fl. 3 746 million before the special dividend).
U n i l e v e r ’s combined m a r k e t c a p i t a l i s a t i o n at 31 D e c e m b e r
1999 was Fl. 116.1 billion (1998: Fl. 1 7 1 . 3 b i l l i o n ) .
Balance sheet
The weakening of the guilder against the basket of
Unilever currencies between the two balance sheet dates
resulted in a Fl. 774 million gain on retranslation of net
assets. Profit retained, after accounting for dividends,
currency retranslation of opening balances and of
movements, and goodwill adjustments on the disposal
of businesses previously acquired, increased by
Fl. 4 239 million to Fl. 14 420 million. Total capital
and reserves increased to Fl. 17 105 million (1998:
Fl. 10 464 million). The issue of new 10 cents NV
p re f e rence shares, to NV shareholders who opted to take
the special dividend in this form, contributed Fl. 3 045 m i l l i o n .
Cash flow
Cash flow from operations increased by Fl. 2 512 million
to Fl. 12 460 million on the strength of lower working
capital outflows and improved results (before acquisitions
and disposals).
Capital expenditur e was in line with last year; financial
investments increased somewhat as a result of additional
share purchases to meet employee share option plans.
During the year 27 businesses were acquired for a cash
consideration of Fl. 1 064 million and 23 businesses
were disposed for cash proceeds of Fl. 270 million. In
December 1999 Unilever agreed to purchase the French
foods business Amora Maille for Fl. 1 540 million; this
acquisition is expected to be completed in the first half
of 2000.
Net funds at the end of the year were Fl. 1 508 million,
Fl. 11 227 million lower than at the end of 1998 with the
decrease reflecting the Fl. 13 billion cash payment in
respect of the special dividend. Gearing remained zero
at the end of 1999.
Finance and liquidity
During 1999 Unilever paid a special dividend of some
F l . 1 6 billion to ordinary shareholders, of which appro x i m a t e l y
Fl. 3 billion was taken up by NV shareholders in the form
of pre f e rence shares. After payment of the special dividend
the balance sheet remains very strong, and Unilever re t a i n s
its capability to raise funds in all major global debt markets
at the lowest costs available to corporate borro w e r s .
Group policy is to finance operating subsidiaries through
the mix of retained earnings, third party borrowings and
loans from parent and Group financing companies that
is most appropriate for the particular country and
business concerned.