1st Nov 2007 07:01
Unilever PLC01 November 2007 THIRD QUARTER AND NINE MONTH RESULTS 2007 AND INTERIM DIVIDENDS KEY FINANCIALS(unaudited) Third Quarter 2007 • million Nine Months 2007 Increase/(Decrease) Increase/(Decrease)Current Current Constant Current Current Constantrates rates rates rates rates rates Continuing operations:10 243 1 % 4 % Turnover 30 297 1 % 4 % 1 403 (7)% (4)% Operating profit 4 148 (5)% (1)% 1 370 21 % 24 % Pre-tax profit 4 114 9 % 11 % 1 069 37 % 40 % Net profit from continuing operations 3 274 17 % 20 % 1 068 31 % 34 % Net profit from total operations 3 349 15 % 18 % 0.35 44 % 47 % EPS from continuing operations (Euros) 1.07 20 % 23 % 0.35 38 % 40 % EPS from total operations (Euros) 1.10 17 % 20 % THIRD QUARTER RESULTS SUSTAIN MOMENTUM HIGHLIGHTS Financial Highlights • Underlying sales growth of 5.3% in the first nine months. Third quarter underlying sales growth of 4.5% (5.2% adjusted for systems change in the US which pulled sales forward into the second quarter). • Operating margin of 13.7% in the quarter and in the first nine months, with an underlying improvement of 0.2 percentage points and 0.3 percentage points respectively. • Earnings per share from continuing operations up 20% in the first nine months, with an increased contribution from joint ventures and associates, lower financing costs, and a lower tax rate. Operational Highlights • Growth momentum sustained across regions and categories, broadly in line with markets. • Further sharp rise in commodity costs offset by increased pricing and strong contribution from savings programmes. • Good progress in implementation of accelerated restructuring plans and portfolio development. Restructuring charges of €234 million charged to operating profit in the third quarter. Interim dividend • Interim dividend of €0.25 per NV share and 17.00p per PLC share. GROUP CHIEF EXECUTIVE COMMENT "The third quarter marks a continuation of the momentum established in the firsthalf of 2007. The focus on our growth priorities, together with stronger innovation, improvedspeed to market and better in-market execution, is delivering consistent andsustainable organic growth. At the same time, we have seen a third consecutive quarter of underlyingimprovement in operating margins, despite a significantly tougher costenvironment. Commodity pressures have increased sharply, but we havesuccessfully offset these through timely pricing action and continued deliveryfrom our savings programmes. We have made a strong start in implementing the accelerated change programmeannounced in August. In the third quarter, we have progressed the establishmentof several new multi-country organisations as well as significant supply chainrestructuring in Europe. We have also announced a number of portfolio changes,including the extension of our international Lipton ready-to-drink-tea jointventure with PepsiCo. Looking forward, I am confident that we will achieve our outlook for 2007, givenin August, and that our change programme leaves us well placed to deliver ourlonger term objectives." Patrick Cescau, Group Chief Executive 1 November 2007 ENQUIRIES Media: Media Relations Team Investors: Investor Relations TeamUK +44 20 7822 6805 [email protected] UK +44 20 7822 6830 [email protected] +31 10 217 4844 US +1 201 894 2615 [email protected]@unilever.com There will be a web cast of the results presentation available at:www.unilever.com/ourcompany/investorcentre/results/quarterlyresults/default.asp UNILEVER THIRD quarter results 2007 AND INTERIM DIVIDENDS In the following commentary we report underlying sales growth (USG) at constantexchange rates, excluding the effects of acquisitions and disposals. Turnoverincludes the impact of exchange rates and acquisitions and disposals. Unileveruses 'constant rate' and 'underlying' measures primarily for internalperformance analysis and targeting purposes. We also use the movements inUngeared Free Cash Flow and Return On Invested Capital to measure progressagainst our longer-term value creation goals. Unilever believes that suchmeasures provide additional information for shareholders on underlying businessperformance trends. Such measures are not defined under IFRS or US GAAP and arenot intended to be a substitute for GAAP measures of turnover, profit and cashflow. Further information about these measures is available on our website atwww.unilever.com/ourcompany/investorcentre. 1. SUMMARY OF BUSINESS PERFORMANCE FOR THE THIRD QUARTER Underlying sales grew by 4.5% in the third quarter. This sustained the positivemomentum of the first half year. But for the systems implementation in the US,which boosted the second quarter by 0.7% and reduced the third quarter by thesame amount, the third quarter underlying sales growth would have been 5.2%.The underlying sales growth for the first nine months was 5.3% with consistentperformance across all three quarters. There has been an increasingcontribution from pricing, to 2.1% in the third quarter, as we take increasesagainst sharply rising commodity costs. The steady underlying improvement in Europe has continued, with 1.9% growth inthe first nine months. The third quarter growth, at 0.7%, was lower, primarilydue to the effect of weather on ice cream sales, which reduced overall Europeangrowth in the quarter by about 2 percentage points. The Americas were up by4.2% in the first nine months, with solid growth of 3.6% in the US and 5.1%growth in Latin America. Asia Africa is showing consistent, broad-based growthacross countries and categories, up by 11.4% in the first nine months. All categories are showing good, volume-driven, growth in the first nine months. Savoury, dressings, spreads and home care performed particularly well in thethird quarter. In ice cream and beverages, there has been sustained stronggrowth in developing and emerging markets, but lower sales in Europe in thethird quarter. Personal care had a slower third quarter, after a strong startto the year, partly reflecting the different phasing of innovation and the USsystems implementation. Investment in advertising and promotions is being focused behind priorityinitiatives and has been increased broadly in line with sales in the first ninemonths. Material costs continue to increase sharply, but we have been able to more thancounter this over the first nine months through savings programmes and pricingactions. In the third quarter, the impact of higher commodity costs was 2.5percentage points of sales, but this was offset by price growth and an increasedlevel of savings. 2. FINANCIAL COMMENTARY 2.1 Turnover The underlying sales growth of 4.5% in the quarter and 5.3% in the first ninemonths was partly offset by the effects of disposals and exchange rates to leaveturnover ahead by 1.2% for the quarter and by 1.3% for the year to date. 2.2 Operating profit Operating profit was 6.6% lower in the quarter. The operating margin at 13.7%was 1.1 percentage points lower than a year ago because of a higher level ofrestructuring costs. Before the impact of restructuring, disposals andimpairments, the operating margin was 0.2 percentage points higher in thequarter. Advertising and promotions as a percentage of sales was 0.4 pointslower than last year. For the first nine months, operating profit was 4.6% lower than a year ago. Theoperating margin at 13.7% included a higher level of restructuring charges andless profit on disposals. Before these items the operating margin was 0.3percentage points higher than a year ago. 2.3 Finance costs and tax Costs of financing net borrowings were 4.3% lower than last year in the quarterwith the benefits of a lower level of net debt more than offsetting higherrates. For the first nine months, the cost of financing net borrowings was 19%lower. In the third quarter of last year, a provision of €300 million was taken inrelation to the 2005 conversion of preference shares issued in 1999. We areclose to making the final payments and, with fees, the overall cost is some €310million. The credit on pensions financing increased to €42 million in the third quarterand €109 million for the first nine months, reflecting an improved fundingposition of our schemes and higher expected equity returns. The tax rates of 22% in the quarter and 21% in the first nine months were lowerthan last year mainly reflecting the favourable settlement of tax audits and abetter country mix. We now expect a tax rate of around 23% for the full year2007. 2.4 Joint Ventures, associates and other income from non-current investments Our share in net profit from joint ventures has increased by around 50% in thequarter and by around 60% in the first nine months, mainly driven by continuingstrong growth in the partnerships between Lipton and PepsiCo for ready-to-drinktea. The combined share of net profit in associates and other income was slightlylower in the quarter but has increased to €88 million in the first nine months,from €30 million last year. This mainly reflects a gain in the first quarter inone of our venture capital funds. 2.5 Net profit and earnings per share Net profit from continuing operations grew by 37% in the quarter and by 17% inthe first nine months. EPS on the same basis grew by 44% and by 20%respectively. Net profit, including discontinued operations, increased by 31% in the quarterand by 15% in the first nine months, with earnings per share on this basis up by38% and 17%. 2.6 Dividends In accordance with policy, the interim dividend has been set at 35% of lastyear's total dividend, based on the stronger of the two reporting currenciesover the first nine months, which for this period was Sterling. The interimdividend, to be paid on 5 December 2007, is therefore fixed at 17.00p per 3 1/9pordinary share of Unilever PLC, an increase of 9% from last year. The interimdividend per €0.16 ordinary share of Unilever N.V., is set at €0.25, also anincrease of 9% from last year. The Unilever PLC shares will go ex-dividend on 7November 2007, and the Unilever N.V. shares will go ex-dividend on 2 November2007. 2.7 Share buy-backs By the end of September we had bought back shares to a value of €1.1 billion aspart of this year's planned €1.5 billion programme. 2.8 Cash flow In the first nine months of the year, cash flow from operating activities was€0.4 billion lower than in the same period of 2006. Cash flow from underlyingoperations was up but was more than offset by higher cash outflows onrestructuring programmes and by working capital, particularly in Europe,following a low position at the start of the year. Other investing activities include higher profits in joint ventures andassociates. The inflow on treasury stocks is largely from executive share option plans.Other financing activities were €0.3 billion higher and include compensationpayments to former holders of preference shares. 2.9 Balance sheet Improvements in the funding position of pension schemes are reflected in higherassets for schemes in surplus and lower liabilities for schemes in deficit.Deferred tax liabilities and assets have moved mainly in response to thepensions changes. The reduction in goodwill and intangible assets is due to the impact of a strongeuro on translating US dollar assets. Working capital has increased from a particularly low point at the start of theyear. Trade payables and other current liabilities include obligations topurchase shares under the buy-back programme. 2.10 Pensions The funding position of the group's main pension schemes has improved since thestart of the year with higher valuations of assets, contributions and reducedliabilities due to higher discount rates, net of slightly increased inflationassumptions. Since the start of 2007 the changes have been incorporated in thebalance sheet each quarter. The net liability for all schemes was €0.8 billion, a reduction from €3.1billion at the start of the year. This includes funded schemes in surplus witha net balance of €2.4 billion, funded schemes in deficit with a net balance of€0.9 billion and unfunded schemes of €2.3 billion. Some previously unfundedschemes are now partially funded. 3. OPERATIONAL REVIEW 3.1 Europe Third Quarter 2007 Nine Months 2007 % % % Underlying % Underlying 2007 2006 Change sales growth 2007 2006 Change sales growth 3 880 3 905 (0.6) 0.7 Turnover (• million) 11 465 11 385 0.7 1.9 13.0 15.1 Operating Margin (%) 13.7 15.0 Includes: (4.6) (1.1) - RDIs* (2.6) (0.6) * Restructuring, business disposals and impairments Growth The region has sustained its steady improvement with underlying sales growth of1.9% in the first nine months. Consumer demand is holding up across the regionand our business is benefiting from the 'One Unilever' programme and improvedinnovation. There have been positive contributions from Southern Europe (particularly Italy,Spain and Greece) and from Central and Eastern Europe (notably Russia andPoland). Our businesses in France and Germany have continued to improve. Inthe UK, performance has been mixed with market share gain in dressings anddeodorants, but share loss in hair care and laundry. The weather in Northern Europe hit ice cream sales in the third quarter reducingoverall growth in Europe by 2 percentage points to 0.7%. However, with a stronginnovation and marketing programme, we have gained market share in ice cream andafter a good start to the season, sales for the first nine months have beenbroadly in line with last year. Volumes grew by 2.5% for the year to date. We have been increasing prices in anumber of categories, but have also responded to a step-up in competitorpromotional activity in a number of markets. This, together with lower oliveoil prices led to a small overall reduction in pricing in the first nine months. Accelerating change There has already been substantial progress with portfolio development andrestructuring. We agreed to expand the successful international joint venturefor Lipton ready-to-drink tea with PepsiCo to include all countries in Europe,and plan to sell the Boursin brand. We have furthered moves to three newmulti-country organisations and have announced the streamlining or closure offactories in four countries. Innovation Innovations continue to be targeted at Vitality opportunities. We haveintroduced Lipton Linea slimming teas to France, Switzerland and Portugal andhave rolled-out Knorr Vie shots to Germany. Growth in Hellmann's has beenboosted by the new light mayonnaise with citrus fibre technology. In ice cream,a strong innovation programme this year has seen Frusi frozen yoghurt withwholegrain cereals and real fruit pieces, complementing fresh initiatives behindMagnum. Clear anti-dandruff shampoo has been launched in Russia, at the same time aslaunches in Asia and Latin America, with good initial results. The new Dove pro-age range of products specifically designed for the over 50's is building well in Europe as well as elsewhere. 'Small and mighty' concentrated liquid laundry detergents have been launched in six European countries this year. Profitability The operating margin, at 13.7% for the first nine months, was 1.3 percentagepoints lower than a year ago. This was entirely due to higher restructuring,disposal and impairment costs. Before these items, the operating margin was 0.7percentage points higher than a year ago. Savings programmes and a lower levelof advertising and promotions more than offset increases in materials and othercosts. 3.2 The Americas Third Quarter 2007 Nine Months 2007 % % % Underlying % Underlying 2007 2006 Change sales growth 2007 2006 Change sales growth 3 357 3 435 (2.3) 2.8 Turnover (• million) 10 108 10 331 (2.2) 4.2 14.8 15.9 Operating Margin (%) 14.7 15.5 Includes: (0.7) (0.7) - RDIs* (0.7) (0.2) * Restructuring, business disposals and impairments Growth Underlying sales grew by 4.2% in the first nine months, with a robustcontribution from the US at 3.6%. Pricing is coming through well, withincreases being taken in most countries and categories and totalling 2.1% forthe region for the year to date. Stocking-up by customers ahead of the implementation of a unified IT system (aspart of the 'One Unilever' programme) in the US boosted sales in the secondquarter and reduced sales in the third quarter by about €70 million. Thisreduced the third quarter growth for the Americas by about 2 percentage pointsto 2.8% but had no effect on the year to date. In the US, consumer demand in our markets has so far been fairly robust. Oursales have grown well in the first nine months in most categories. In the thirdquarter, there were particularly good performances by Skippy spreads, Bertollifrozen meals and Hellmann's mayonnaise. However, it was a weaker quarter inpersonal care with a different phasing of innovation this year and some shareloss in skin care in a very competitive market. In ice cream, sales are downfor the year to date as higher prices were offset by lower volume. Our business in Mexico has made further progress and grew well in the quarter.The improved performance was driven by Knorr savoury products, AdeS soy-baseddrinks and Hellmann's mayonnaise. Sales in Brazil grew only modestly in thefirst nine months in the face of increased competition from local manufacturersin spreads, tomato products and skin care. In hair care, we have takensignificant price increases in Seda which led to lower sales in the quarter witha sharp reduction in trade stocks and some share loss. There have been strongperformances overall in Canada, Argentina, Andina and Central America. Accelerating change During the quarter, we completed the creation of a joint venture withPerdigao to develop our heart health margarine Becel and the disposal of ourlocal Brazilian margarine brands. We announced the integration of the NorthAmerican ice cream operations into our US and Canadian businesses. Innovation In Latin America, Knorr has been building its health credentials with newvarieties of bouillons and improved soups. Hellmann's 'real' campaignhighlights its simple ingredients, naturally rich in Omega 3, and acholesterol-free mayonnaise has been launched in the US. In ice cream, we haveextended Breyers 'double churn' in the US to fat-free, light and no sugar addedversions, while innovations in Latin America address both Vitality and lowincome consumer opportunities. In the third quarter, cholesterol-loweringmini-drinks, already successful in Europe, were introduced to the US as PromiseActiv SuperShots. Innovation in personal care this year reflects the new more global approach.Clear anti-dandruff shampoo has recently been launched in Brazil, while the Dovepro-age range of skin, deodorants and shampoos has been introduced in the US at the same time as in Europe. Axe now comes in the same new 'telescoping' can asin Europe and the new variant Vice is available across the region. Profitability The operating margin, at 14.7% for the first nine months, was 0.8 percentagepoints lower than a year ago, mainly due to a higher level of restructuring,disposal and impairment costs. Before these items the margin was 0.3 percentagepoints lower than last year. With flat advertising and promotions, sharpincreases in material and other costs have not yet been fully offset by priceincreases and savings programmes. 3.3 Asia Africa Third Quarter 2007 Nine Months 2007 % % % Underlying % Underlying 2007 2006 Change sales growth 2007 2006 Change sales growth 3 006 2 782 8.1 11.7 Turnover (• million) 8 724 8 199 6.4 11.4 13.3 13.1 Operating Margin (%) 12.5 12.6 Includes: (0.6) (0.5) - RDIs* (0.6) 0.1 * Restructuring, business disposals and impairments Growth The region had another strong quarter, taking the growth for the first ninemonths to 11.4%. Demand remains buoyant in most countries and we are growing inline with our markets in home and personal care and gaining share in foods.Pricing is making an increasing contribution, with 3.2% for the year to date. Growth is broad-based by category and country. India has delivered consistentdouble-digit growth in the first three quarters. In laundry, hair care and tea,we have successfully implemented price increases to offset rising costs. Salesin China are up by close to 20% in the first nine months, with all categoriescontributing and tea, savoury, and hair care particularly strong. Growth in Indonesia has been driven by foods categories, off a small base, andby further building of our personal care brands. Thailand has continued toimprove through the year after a disappointing 2006. Japan had a good quarterdriven by innovation in tea and personal care and has shown modest growth forthe first nine months. Australia is also ahead for the year to date, butdeclined in the third quarter in competitive markets and against a toughercomparator. Turkey has been having a good year, particularly benefiting from a successfulcabinet placement programme in ice cream. Our business in South Africa hasenjoyed broad-based growth and has taken price increases, particularly inpersonal care. Accelerating change In the third quarter, we announced the acquisition of the Buavita brand offruit-based vitality drinks in Indonesia. We have also announced thereorganisation of our shareholdings in South Africa and Israel helping tofacilitate the 'One Unilever' organisation. Innovation The new, more global, approach to innovation is evident in this year'sprogramme. Clear anti-dandruff shampoo has been launched in China, Arabia,Egypt, Pakistan and the Phillipines. In Japan, we have followed up the launch ofAxe with the introduction of Dove pro-age in the third quarter. An improved range of Dove shower products has just been extended to North East Asia, while in India we have introduced a new variant of Lifebuoy soap and inthe third quarter launched the latest version of Axe. The 'Moo' range of ice creams containing super absorbent calcium for children'sdevelopment continues to be extended through the region. Knorr seasonings arebeing rejuvenated with premium ingredients, as in Europe, and in China we arelaunching a new form of Knorr bouillions for preparing thick soups. At the sametime, milk tea powders have been launched under the Lipton brand in South EastAsia. Profitability The operating margin of 12.5% for the first nine months was broadly in line withlast year. There was a net charge for restructuring, disposals and impairmentsthis year compared with a small profit last year. Before these items theoperating margin was 0.6 percentage points higher than a year ago. Theimprovement was driven by the benefits of volume growth, pricing actions and thedelivery of savings programmes. These more than offset higher input costs andan increased level of advertising and promotions. SAFE HARBOUR STATEMENT This announcement may contain forward-looking statements, including 'forward-looking statements' within the meaning of the United States PrivateSecurities Litigation Reform Act of 1995. Words such as 'expects', 'anticipates', 'intends' or the negative of these terms and other similarexpressions of future performance or results, including financial objectives to2010, and their negatives are intended to identify such forward-lookingstatements. These forward-looking statements are based upon currentexpectations and assumptions regarding anticipated developments and otherfactors affecting the Group. They are not historical facts, nor are theyguarantees of future performance. Because these forward-looking statementsinvolve risks and uncertainties, there are important factors that could causeactual results to differ materially from those expressed or implied by theseforward-looking statements, including, among others, competitive pricing andactivities, consumption levels, costs, the ability to maintain and manage keycustomer relationships and supply chain sources, currency values, interestrates, the ability to integrate acquisitions and complete planned divestitures,physical risks, environmental risks, the ability to manage regulatory, tax andlegal matters and resolve pending matters within current estimates, legislative,fiscal and regulatory developments, political, economic and social conditions inthe geographic markets where the Group operates and new or changed priorities ofthe Boards. Further details of potential risks and uncertainties affecting theGroup are described in the Group's filings with the London Stock Exchange,Euronext Amsterdam and the US Securities and Exchange Commission, including theAnnual Report on Form 20-F. These forward-looking statements speak only as ofthe date of this document. Except as required by any applicable law orregulation, the Group expressly disclaims any obligation or undertaking torelease publicly any updates or revisions to any forward-looking statementscontained herein to reflect any change in the Group's expectations with regardthereto or any change in events, conditions or circumstances on which any suchstatement is based. OTHER INFORMATION Supplementary information in US dollars and sterling is available on our websiteat: www.unilever.com/ourcompany/investorcentre. The results for the fourth quarter and for the year 2007 will be published on 7February 2008. CONDENSED INTERIM FINANCIAL STATEMENTS INCOME STATEMENT(unaudited) Third Quarter • million Nine Months 2007 2006 Increase/ 2007 2006 Increase/ (Decrease) (Decrease) Current Constant Current Constant rates rates rates rates Continuing operations: 10 243 10 122 1 % 4 % Turnover 30 297 29 915 1 % 4 % 1 403 1 501 (7)% (4)% Operating profit 4 148 4 346 (5)% (1)% After (charging)/crediting: (234) (74) Restructuring (475) (235) 16 (4) Business disposals and impairments 61 151 (64) (403) Net finance costs (204) (638) 50 33 Finance income 121 101 (161) (149) Finance costs (424) (473) 5 (300) Preference shares provision (10) (300) 42 13 Pensions and similar obligations 109 34 25 17 Share in net profit/(loss) of joint ventures 82 51 (1) (2) Share in net profit/(loss) of associates 50 4 7 15 Other income from non-current investments 38 26 1 370 1 128 21 % 24 % Profit before taxation 4 114 3 789 9 % 11 % (301) (349) Taxation (840) (1 002) 1 069 779 37 % 40 % Net profit from continuing operations 3 274 2 787 17 % 20 % (1) 33 Net profit/(loss) from discontinued operations 75 128 1 068 812 31 % 34 % Net profit for the period 3 349 2 915 15 % 18 % Attributable to: 58 75 Minority interests 182 202 1 010 737 37 % 39 % Shareholders' equity 3 167 2 713 17 % 19 % Combined earnings per share 0.35 0.25 44 % 47 % Continuing operations (Euros) 1.07 0.90 20 % 23 % 0.34 0.24 44 % 46 % Continuing operations - diluted (Euros) 1.04 0.87 19 % 22 % 0.00 0.00 Discontinued operations (Euros) 0.03 0.04 0.00 0.00 Discontinued operations - diluted (Euros)0.02 0.04 0.35 0.25 38 % 40 % Total operations (Euros) 1.10 0.94 17 % 20 % 0.34 0.24 37 % 40 % Total operations - diluted (Euros) 1.06 0.91 16 % 19 % STATEMENT OF RECOGNISED INCOME AND EXPENSE(unaudited)• million Nine Months 2007 2006 Fair value gains/(losses) on financial instruments net of tax 43 (551)Actuarial gains/(losses) on pension schemes net of tax 1 125 6Currency retranslation gains/(losses) net of tax (185) 323 Net income/(expense) recognised directly in equity 983 (222) Net profit for the period 3 349 2 915 Total recognised income and expense for the period 4 332 2 693 Attributable to: Minority interests 177 182 Shareholders' equity 4 155 2 511 CASH FLOW STATEMENT(unaudited) • million Nine Months 2007 2006 Operating activitiesCash flow from operating activities 3 463 3 830Income tax paid (871) (718) Net cash flow from operating activities 2 592 3 112 Investing activitiesInterest received 105 79Net capital expenditure (634) (660)Acquisitions and disposals 34 182Other investing activities 212 55 Net cash flow from/(used in) investing activities (283) (344) Financing activitiesDividends paid on ordinary share capital (1 518) (1 337)Interest and preference dividends paid (331) (400)Change in financial liabilities 1 387 (1 205)Share buy-back programmes (1 144) -Other movements on treasury stock 287 (5)Other financing activities (473) (178) Net cash flow from/(used in) financing activities (1 792) (3 125) Net increase/(decrease) in cash and cash equivalents 517 (357) Cash and cash equivalents at the beginning of the year 710 1 265 Effect of foreign exchange rate changes 28 317 Cash and cash equivalents at the end of period 1 255 1 225 BALANCE SHEET(unaudited)• million As at As at As at 30 September 31 December 30 September 2007 2006 2006 Non-current assetsGoodwill and intangible assets 16 769 17 206 17 527Property, plant and equipment 6 260 6 276 6 198Pension asset for funded schemes in surplus 2 396 1 697 1 128Deferred tax assets 960 1 266 1 373Other non-current assets 1 214 1 126 1 099 Total non-current assets 27 599 27 571 27 325 Current assetsInventories 4 120 3 796 3 930Trade and other current receivables 4 995 4 254 4 563Current tax assets 261 125 91Other financial assets 237 273 413Cash and cash equivalents 1 566 1 039 1 440Non-current assets held for sale 146 14 509 Total current assets 11 325 9 501 10 946 Current liabilitiesFinancial liabilities (5 095) (4 458) (5 860)Trade payables and other current liabilities (8 364) (7 838) (7 433)Current tax liabilities (595) (579) (441)Provisions (770) (1 009) (780)Liabilities associated with non-current assets held for sale (43) - (237) Total current liabilities (14 867) (13 884) (14 751) Net current assets/(liabilities) (3 542) (4 383) (3 805) Total assets less current liabilities 24 057 23 188 23 520 Non-current liabilitiesFinancial liabilities due after one year 4 944 4 377 5 160Pensions and post-retirement healthcare benefits liabilities: Funded schemes in deficit 874 1 379 2 051 Unfunded schemes 2 339 3 398 3 992Provisions 754 826 788Deferred tax liabilities 1 286 1 003 931Other non-current liabilities 471 533 482 Total non-current liabilities 10 668 11 516 13 404 EquityShareholders' equity 12 883 11 230 9 704Minority interests 506 442 412 Total equity 13 389 11 672 10 116 Total capital employed 24 057 23 188 23 520 NOTES TO THE FINANCIAL STATEMENTS(unaudited) 1 SEGMENTAL ANALYSIS BY GEOGRAPHY Continuing operations - Third Quarter• million Europe Americas Asia Africa Total Turnover 2006 3 905 3 435 2 782 10 122 2007 3 880 3 357 3 006 10 243Change (0.6)% (2.3)% 8.1% 1.2% Impact of: Exchange rates 0.2 % (4.6)% (2.9)% (2.3)% Acquisitions 0.0 % 0.1 % 0.0 % 0.0 % Disposals (1.5)% (0.5)% (0.4)% (0.9)% Underlying sales growth 0.7 % 2.8 % 11.7 % 4.5 % Price (0.6)% 4.1 % 3.2 % 2.1 % Volume 1.3 % (1.3)% 8.2 % 2.3 % Operating profit 2006 591 547 363 1 501 2007 504 498 401 1 403Change current rates (14.7)% (9.0)% 10.3 % (6.6)%Change constant rates (14.7)% (4.1)% 14.4 % (3.8)% Operating margin 2006 15.1 % 15.9 % 13.1 % 14.8 % 2007 13.0 % 14.8 % 13.3 % 13.7 % Includes restructuring, business disposals andimpairments 2006 (1.1)% (0.7)% (0.5)% (0.8)% 2007 (4.6)% (0.7)% (0.6)% (2.1)% Continuing operations - Nine Months• million Europe Americas Asia Africa Total Turnover 2006 11 385 10 331 8 199 29 915 2007 11 465 10 108 8 724 30 297Change 0.7 % (2.2)% 6.4 % 1.3 % Impact of: Exchange rates 0.3 % (5.7)% (4.1)% (3.0)% Acquisitions 0.1 % 0.1 % 0.1 % 0.1 % Disposals (1.6)% (0.5)% (0.5)% (0.9)% Underlying sales growth 1.9 % 4.2 % 11.4 % 5.3 % Price (0.5)% 2.1 % 3.2 % 1.4 % Volume 2.5 % 2.1 % 8.0 % 3.9 % Operating profit 2006 1 712 1 603 1 031 4 346 2007 1 571 1 486 1 091 4 148Change current rates (8.3)% (7.3)% 5.8 % (4.6)%Change constant rates (8.4)% (1.4)% 11.0 % (1.2)% Operating margin 2006 15.0 % 15.5 % 12.6 % 14.5 % 2007 13.7 % 14.7 % 12.5 % 13.7 % Includes restructuring, business disposals andimpairments 2006 (0.6)% (0.2)% 0.1 % (0.3)% 2007 (2.6)% (0.7)% (0.6)% (1.4)% 2 SEGMENTAL ANALYSIS BY PRODUCT AREA Continuing operations - Third Quarter • million Savoury, Ice cream Foods Personal Home care Home and Total dressings and care and Personal and spreads beverages other Care Turnover 2006 3 321 2 170 5 491 2 870 1 761 4 631 10 122 2007 3 464 2 096 5 560 2 861 1 822 4 683 10 243Change 4.3 % (3.4)% 1.3 % (0.3)% 3.5 % 1.1 % 1.2 % Impact of: Exchange rates (1.9)% (2.2)% (2.0)% (3.2)% (1.9)% (2.7)% (2.3)% Acquisitions 0.1 % 0.0 % 0.1 % 0.0 % 0.0 % 0.0 % 0.0 % Disposals (0.4)% (1.2)% (0.7)% (0.8)% (1.4)% (1.1)% (0.9)% Underlying sales growth 6.6 % (0.1)% 4.0 % 3.8 % 7.1 % 5.0 % 4.5 % Operating profit 2006 457 393 850 492 159 651 1 501 2007 489 341 830 457 116 573 1 403Change current rates 7.1 % (13.2)% (2.3)% (7.3)% (27.2)% (12.1)% (6.6)%Change constant rates 10.3 % (11.8)% 0.1 % (3.9)% (23.9)% (8.8)% (3.8)% Operating margin 2006 13.8 % 18.1 % 15.5 % 17.2 % 9.0 % 14.1 % 14.8 % 2007 14.1 % 16.2 % 14.9 % 16.0 % 6.3 % 12.2 % 13.7 % Continuing operations - Nine Months • million Savoury, Ice cream Foods Personal Home care Home and Total dressings and care and Personal and spreads beverages other Care Turnover 2006 10 058 6 162 16 220 8 336 5 359 13 695 29 915 2007 10 216 6 151 16 367 8 471 5 459 13 930 30 297Change 1.6 % (0.2)% 0.9 % 1.6 % 1.9 % 1.7 % 1.3 % Impact of: Exchange rates (2.6)% (2.8)% (2.7)% (3.7)% (3.0)% (3.4)% (3.0)% Acquisitions 0.1 % 0.1 % 0.1 % 0.1 % 0.0 % 0.0 % 0.1 % Disposals (0.5)% (1.1)% (0.8)% (1.0)% (1.2)% (1.1)% (0.9)% Underlying sales growth 4.7 % 3.8 % 4.4 % 6.5 % 6.3 % 6.4 % 5.3 % Operating profit 2006 1 494 937 2 431 1 442 473 1 915 4 346 2007 1 472 858 2 330 1 382 436 1 818 4 148Change current rates (1.5)% (8.5)% (4.2)% (4.2)% (7.7)% (5.0)% (4.6)%Change constant rates 1.7 % (6.0)% (1.3)% (0.4)% (3.4)% (1.1)% (1.2)% Operating margin 2006 14.9 % 15.2 % 15.0 % 17.3 % 8.8 % 14.0 % 14.5 % 2007 14.4 % 13.9 % 14.2 % 16.3 % 8.0 % 13.1 % 13.7 % 3 ACCOUNTING INFORMATION AND POLICIES The condensed interim financial statements have been prepared in accordance withInternational Financial Reporting Standards (IFRS) as adopted by the EU. Thebasis of preparation is consistent with the year ended 31 December 2006 exceptthat: • Finance lease creditors and funding-related derivatives have been reclassified in the balance sheet in order to facilitate the presentation of net debt. Comparatives for 31 December 2006 and 30 September 2006 have been restated accordingly; and • Line items relating to borrowings in the balance sheet have been renamed to financial liabilities to align with the requirements of IFRS 7 'Financial Instruments - Disclosures' which Unilever has adopted as at 1 January 2007. The condensed interim financial statements, which comply with IAS 34, are shownat current exchange rates, while percentage year-on-year changes are shown atboth current and constant exchange rates to facilitate comparison. The income statement on page 10, the statement of recognised income and expenseand the cash flow statement on page 11 and the movements in equity on page 17are translated at rates current in each period. The balance sheet on page 12 and the analysis of net debt on page 18 aretranslated at period-end rates of exchange. The financial statements attached do not constitute the full financialstatements within the meaning of Section 240 of the UK Companies Act 1985. Fullaccounts for Unilever for the year ended 31 December 2006 have been delivered tothe Registrar of Companies. The auditors' report on these accounts wasunqualified and did not contain a statement under Section 237(2) or Section 237(3) of the UK Companies Act 1985. 4 TAXATION The tax rate for the first nine months of 2007 was 21.1% compared with 26.8% forthe first nine months of 2006. The tax rate is calculated by dividing the taxcharge by pre-tax profit excluding the contribution of joint ventures andassociates. The tax charge for the first nine months of 2007 includes €112million (2006: €95 million) relating to United Kingdom taxation. 5 DISCONTINUED OPERATIONS Operating profit of discontinued operations (excluding profit/loss on disposals)was as follows: Third Quarter• million Europe Americas Asia Africa Total 2006 44 - - 44 2007 - - - - Nine Months• million Europe Americas Asia Africa Total 2006 163 - - 163 2007 - - - - The net cash flows attributable to the discontinued operations in respect ofoperating, investing and financing activities for the first nine months of 2007were •(3) million, €81 million and •nil million respectively (2006: €83 million,€13 million and •(1) million). 6 COMBINED EARNINGS PER SHARE The earnings per share information given below, including the comparativeamounts for 2006, is expressed in terms of the nominal share values which haveapplied since 22 May 2006 following the split of NV shares and the consolidationof PLC shares which were approved at the 2006 AGMs. The combined earnings per share calculations are based on the average number ofshare units representing the combined ordinary shares of NV and PLC in issueduring the period, less the average number of shares held as treasury stock. In calculating diluted earnings per share, a number of adjustments are made tothe number of shares, principally the following: (i) conversion into PLCordinary shares in the year 2038 of shares in a group company under thearrangements for the variation of the Leverhulme Trust and (ii) the exercise ofshare options by employees. Earnings per share for total operations for the nine months were calculated asfollows: 2007 2006 Combined EPS Thousands of units Average number of combined share units 2 880 727 2 882 122 • million Net profit attributable to shareholders' equity 3 167 2 713 Combined EPS (Euros) 1.10 0.94 Combined EPS - Diluted Thousands of units Adjusted average number of combined share units 2 979 792 2 968 519 Combined EPS - diluted (Euros) 1.06 0.91 Earnings per share in US Dollars and SterlingCombined EPS (Dollars) 1.48 1.17Combined EPS - diluted (Dollars) 1.43 1.14 Combined EPS (Pounds) 0.74 0.64Combined EPS - diluted (Pounds) 0.72 0.63 The numbers of shares included in the calculation of earnings per share is anaverage for the period. These numbers are influenced by the share buy-backprogramme that we have undertaken during 2007. During that period the followingmovements in shares have taken place: Millions Number of shares at 31 December 2006 (net of treasury stock) 2 889.9Net movements in shares under incentive schemes 20.8Share buy-back (51.2) Number of shares at 30 September 2007 2 859.5 7 DIVIDENDS The Boards have declared interim dividends in respect of 2007 on the ordinaryshares at the following rates which are equivalent in value at the rate ofexchange applied under the terms of the Equalisation Agreement between the twocompanies: Per Unilever N.V. ordinary share: €0.25 (2006: €0.23) Per Unilever PLC ordinary share: 17.00p (2006: 15.62p) The NV interim dividend will be payable as from 5 December 2007, to shareholdersregistered at close of business on 6 November 2007. The PLC interim dividend will be paid on 5 December 2007, to shareholdersregistered at close of business on 9 November 2007. The NV interim dividend, when converted at the Euro/Dollar European Central Bankrate of exchange on 31 October 2007, represents US $0.3612 per New York Shareof €0.16 (2006: US $0.2934) before deduction of Netherlands withholding tax.The New York shares of NV will go ex-dividend on 2 November 2007; US dollarchecks for the interim dividend, after deduction of Netherlands withholding taxat the appropriate rate, will be mailed on 4 December 2007, to holders of recordof New York shares at the close of business on 6 November 2007. The interimdividend will be payable on 5 December 2007. Each American Depositary Receipt of PLC represents one 3 1/9p ordinary share ofPLC. When converted at the Bank of England Sterling/Dollar rate of exchange on31 October 2007, the interim dividends for holders resident in the US willtherefore be US $0.3525 per American Depositary Receipt (2006: US $0.2983). The American Depositary Receipts of PLC will go ex-dividend on 7 November 2007;US dollar checks for the interim dividend will be mailed on 4 December 2007 toholders of record of American Depositary Receipts at the close of business on 9 November 2007. The interim dividend will be payable on 5 December 2007. 8 MOVEMENTS IN EQUITY • million Nine Months 2007 2006 Equity at 1 January 11 672 8 765Total recognised income and expense for the period 4 332 2 693Dividends (1 362) (1 268)Movement in treasury stock (1 218) 2Share-based payment credit 93 92Dividends paid to minority shareholders (169) (170)Currency retranslation gains/(losses) net of tax (9) (8)Other movements in equity 50 10 Equity at the end of the period 13 389 10 116 9 RECONCILIATION OF NET PROFIT TO CASH FLOW FROM OPERATING ACTIVITIES • million Nine Months 2007 2006 Net profit 3 349 2 915Taxation 847 1 052Share of net profit of joint ventures/associates and other income from non-current investments (170) (82)Net finance costs 204 643 Operating profit (continuing and discontinued operations) 4 230 4 528Depreciation, amortisation and impairment 712 678Changes in working capital (836) (704)Pensions and similar provisions less payments (509) (456)Restructuring and other provisions less payments (26) (112)Elimination of (profits)/losses on disposals (194) (210)Non-cash charge for share-based compensation 106 99Other adjustments (20) 7 Cash flow from operating activities 3 463 3 830 10 NET DEBT • million As at As at 30 September 31 December 2007 2006 Total financial liabilities (10 039) (8 835) Financial liabilities due within one year (5 095) (4 458)Financial liabilities due after one year (4 944) (4 377) Cash and cash equivalents as per balance sheet 1 566 1 039 Cash and cash equivalents as per cash flow statement 1 255 710Add bank overdrafts deducted therein 311 329 Financial assets 237 273 Net debt (8 236) (7 523) There was one repayment of 4.25% bonds during the quarter of €1.0 billion. During the quarter we continued to purchase shares under the share buy-backprogramme announced in March 2007. As at the end of September, shares to thevalue of €1.1 billion had been purchased under these arrangements. 11 ACQUISITIONS AND DISPOSALS On 14 September 2007, Unilever and PepsiCo announced they have agreed to expandtheir International partnership for the marketing and distribution ofready-to-drink tea products under the Lipton brand, the world's best-sellingtea. The new agreement adds 11 countries to the partnership's existing Liptonready-to-drink tea business. The business in these countries - eight in Europe(Germany, Italy, France, Netherlands, Switzerland, Austria, Belgium andPortugal) as well as Korea, Taiwan and South Africa - had combined systems salesof around €300 million in 2006. With effect from 1 October 2007, Unilever and Remgro Ltd. have reached agreementto reorganise their respective shareholdings in the Unilever businesses in SouthAfrica and Israel. In the reorganised shareholding Unilever will have amajority share in a single South African business and will fully own theUnilever Israel foods and home and personal care business. As a result of thistransaction, Unilever will in its fourth quarter results report a profit ofapproximately €200 million in respect thereof. 1 November 2007 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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