Frozen Food Sale Boosts Unilever

08/02/07 Unilever has reported underlying sales growth of 3.8% in 2006 with an operating margin of 13.6%, up from 13.2% in 2005. Savings delivered ahead of plan, but commodity costs higher than expected. Further increase in advertising and promotions. Net profit from continuing operations up 10%. Net profit from total operations up by 26% including a profit of €1.2 billion from the sale of European frozen foods businesses in the fourth quarter.

In the fourth quarter an underlying sales growth of 3.4% against a strong comparator was reported. Operating margin of 10.9%, after charging €469 million of restructuring costs, partly offset by one-time gains of €266 million from changes in pension plans and healthcare plans. High investment in market research and development in support of another strong innovation programme for 2007.

Chief Executive Patrick Cescau said that the improved performance in 2006 shows that the wide-ranging changes made to the business over the last two years are working. “The work we have done in setting clear priorities and implementing change has made Unilever a stronger business, able to build on its local strengths and better exploit the power of being global. However, there is much more to be done and there are many exciting opportunities ahead of us”, he said.

“In 2007 we will continue to focus on our growth priorities in order to build sustainable advantage for our portfolio and a structural improvement in our growth rate in the long term; and we intend to go further, faster and deeper in our drive to improve margins”, Cescau added.

Cescau said that they expect the business and competitive environment in 2007 to be broadly unchanged, with consumer demand remaining modest in Europe but robust elsewhere. Prospects for home and personal care input costs are more favourable than in 2006 but there has been no let-up in the rise of foods commodity prices, he noted.

“Against this background, and with a strong innovation programme, we expect to deliver underlying sales growth in 2007 within our 3-5% longer term target range. Savings programmes are expected to drive an improvement in operating margin to over 13.6%, after charging restructuring costs of 0.5 to 1 percent of sales”, Cescau concluded.