Q2 Slides web.ppt

Unilever Q2 and First Half 2007 Results Group Chief Executive Patrick Cescau SVP Investor Relations John Rothenberg 2nd August 2007 Agenda • 2007 business performance • First half and second quarter results • Full year outlook • Accelerating change • Innovation • Shaping the portfolio • Margin improvement Safe harbour statement This presentation may contain forward-looking statements, including 'forward-looking statements' within the meaning of the United States Private Securities Litigation Reform Act of 1995. Words such as 'expects', 'anticipates', 'intends' or the negative of these terms and other similar expressions of future performance or results, including financial objectives to 2010, and their negatives are intended to identify such forward-looking statements. These forward-looking statements are based upon current expectations and assumptions regarding anticipated developments and other factors affecting the Group. They are not historical facts, nor are they guarantees of future performance. Because these forward-looking statements involve risks and uncertainties, there are important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements, including, among others, competitive pricing and activities, consumption levels, costs, the ability to maintain and manage key customer relationships and supply chain sources, currency values, interest rates, the ability to integrate acquisitions and complete planned divestitures, physical risks, environmental risks, the ability to manage regulatory, tax and legal matters and resolve pending matters within current estimates, legislative, fiscal and regulatory developments, political, economic and social conditions in the geographic markets where the Group operates and new or changed priorities of the Boards. Further details of potential risks and uncertainties affecting the Group are described in the Group's filings with the London Stock Exchange, Euronext Amsterdam and the US Securities and Exchange Commission, including the Annual Report & Accounts on Form 20-F. These forward-looking statements speak only as of the date of this presentation Highlights – first half year • Sustained sales growth and underlying improvement in operating margin • Broad-based growth across all regions and categories • Better innovation and in-market execution • Personal Care, D&E and Vitality driving performance • Positive margin development despite cost pressures Strong organic growth Q2 Turnover Change Acquisitions and disposals Currency effect Underlying sales growth €10.5bn 2.6% (0.7)% (2.3)% 5.8% H1 €20.1bn 1.3% (0.8)% (3.4)% 5.8% Volume Price 4.5% 1.3% 4.6% 1.1% Consistent growth Underlying sales growth 7% 6% 5% 4% 3% 2% 1% 0% Q1 20 05 * Q4 20 05 * Q2 20 05 Q3 20 05 Q1 20 06 Q2 20 06 Q3 20 06 Q4 20 06 Q1 20 07 Q2 20 07 Annualised growth rate * days adjusted Good growth in all regions Americas H1 USG +4.9% 28% 34% Asia/Africa H1 USG +11.3% 38% Europe H1 USG +2.6% Innovation driving category growth Home Care H1 USG +5.9% Ice Cream and Beverages H1 USG +5.9% 18% 20% 34% Savoury, Dressings and Spreads H1 USG +3.8% 28% Personal Care H1 USG +7.9% Savoury, Dressings and Spreads H1 USG +3.8% Ice Cream and Beverages H1 USG +5.9% Home Care H1 USG +5.9% Personal Care H1 USG +7.9% US Underlying operating margin improvement in first half 2006 Operating margin Including RDIs Change before these items 14.4% 2007 13.7% (1.0)% Change (0.7)% (1.0)% 0.3% Key drivers: A&P Savings Cost/price/mix 0.0% 2.0% (1.7)% Improvement sustained in Q2 2006 Operating margin Including RDIs Change before these items 14.0% (0.6)% 2007 13.7% (1.1)% Change (0.3)% (0.5)% 0.2% Key drivers: A&P Savings Cost/price/mix (0.1)% 2.1% (1.8)% Mitigating the impact of rising commodity costs Commodity cost impact on margin 180 160 140 120 bps 100 80 60 40 20 0 Actions taken 150 80 100 160 140 • • • • Price increases Reformulation Hedging Buying savings 2003 2004 2005 2006 H1 2007 2007 outlook ≥160 bps Drivers of EPS growth - First half % Operating profit Finance costs JVs Associates and noncurrent investments Tax rate EPS from continuing operations Discontinued operations EPS (3) 3 1 3 6 10 (1) 9 *restructuring, disposals and impairments % Underlying sales growth Currency and disposals RDIs* 6 (5) (6) (3) Operating margin pre-RDIs 2 Balance sheet and cash flow • Net debt €8.8bn • Share buy-back: €700m repurchased to end June • Pension liability reduced to €1.2bn • Cashflow from operating activities €1.7bn 2007 outlook • USG at upper end of 3-5% range • Underlying improvement in operating margin • Accelerated restructuring: €700m to €1bn • Possible disposal gains in H2 Accelerating Accelerating change change Progress to date • Growth consistently in 3-5% range • Market share gains in priority areas • Underlying improvement in 2007 operating margin • Continued strong cash flow generation Building on existing programmes • ‘One Unilever’ • c. €1bn p.a. savings during 2008 • Shared services/ outsourcing • Covering Finance, I.T., H.R : complete 2007-09 • Global buying • Savings averaging c. €400m p.a. 2005-07 • Strengthened Marketing & Customer Management • Programme roll-out 2006-08 Supported by ‘normal’ restructuring to deliver: • USG in 3-5% range • 2010 operating margin > 15% Building on our growth agenda • Growth remains our number one priority • Competitive • Profitable • Consistent • Reinforced by steps to accelerate performance • Raising the bar for innovation • More aggressive shaping of our portfolio • Cost and asset reduction to further enhance margin A platform for faster change • Growth strategy • Clear choices – where to build and where to exit • Global Categories • Improved innovation, ROI and reduce supply chain complexity • One Unilever • Access to further simplification and cost reduction Innovation Applying global concepts to local markets • Increasingly global platforms • Simpler interface between categories and operations • Better technology Shaping our portfolio Building leadership positions and high growth spaces • Organic portfolio development • Focusing resources in high potential areas • Acquisitions • In priority areas - Personal Care, D&E, Vitality • Disposals • In less attractive market positions • Brands that do not benefit from global leverage and are no longer essential to ‘go to market’ operations Disposal of non-strategic assets 2005 Unilever Cosmetics International Frozen pizzas (Europe) Cooking oils (UK, Ireland, South Africa) Karo corn syrup (Mexico) 2006 European Frozen Food Mora frozen snacks (Netherlands) Finesse and Aquanet hair brands (US, Canada) Plantations (India) €2.3bn of turnover disposed 2005-06 Realising value through disposals • Over €2bn of turnover earmarked for disposal • Includes €0.8bn North America Laundry • Mostly outright disposals, but other routes to value release also possible • Impact on USG: +40bps • Impact on operating margin: broadly neutral North America Laundry • Unilever North America Laundry business profitable but not growing • Recent developments in US Laundry market favour consolidation and make our business an attractive asset • Does not compromise our scale in North America or Unilever’s global ambitions in laundry Margin improvement • Simplification - Multi-country organisations • Further overhead savings • Supply chain efficiency and responsiveness Multi-country organisations Example - Unilever Benelux Unilever Netherlands €1.1bn Dedicated Management Team Savings c €50m Unilever Belgium €500m Dedicated Management Team €1.6bn Single Management Team Unilever Benelux Streamlined structures Simplification of the country/category matrix • From c.100 countries x 20 categories • To c.25 MCOs x 10 categories • Fewer interfaces between categories and operations • Less regional management infrastructure Overhead reduction – beyond One Unilever • The UK: • 50% reduction in top management (c. 40 roles) • c. 350 roles administrative roles in total • Up to €70m p.a. of overheads savings identified • Italy: • Sales and Admin from 1500 FTE’s (‘06) to 900 (’08) Supply chain efficiency and responsiveness • From 1999-2006: • 600bps reduction in fixed assets as % of turnover • 100+ sites closed or sold • Cap ex held between 2–2.5 %T/O • Future plans: • 50-60 sites closed or streamlined • Significant rationalisation of distribution networks • Investment in a more flexible, customer responsive supply chain Benefits • Aggregate savings c. €1.5bn p.a. by exit 2010 • Savings invested behind brands and accelerated margin improvement Accelerated restructuring Europe % spend Over heads Cash ROW Supply Chain Non Cash Growth and margins • 3-5% USG • Growth ahead of our markets • Portfolio growth potential improving over time • Accelerated improvement in operating margin • To exceed existing target of >15% by 2010