RNS No 3727b
UNILEVER PLC
UNILEVER NV
7th August 1998
UNILEVER RECORDS #1.48 BILLION PRE-TAX PROFIT FOR HALF YEAR
SECOND QUARTER HALF YEAR
# millions # millions
1998 1997 1998 1997
7,408 7,930 -7% Turnover 14,480 15,109 -4%
7,408 7,281 +2% continuing operations 14,480 13,832 +5%
-- 649 -- discontinued operations -- 1,277 --
689 794 -13% Operating Profit 1,408 1,320 +7%
689 719 -4% continuing operations 1,408 1,156 +22%
-- 75 -- discontinued operations -- 164 --
Operating Profit BEI
690 716 -4% continuing operations 1,398 1,219 +15%
722 3,404 -79% Pre-Tax Profit 1,476 3,886 -62%
-- 2,658 profit on sale of chemicals -- 2,658
Net Profit
472 2,566 -82% at constant exchange rates 932 2,853 -67%
472 466 +1% excl profit on sale of chemicals 932 753 +24%
Net Profit
437 2,513 -83% at current exchange rates 863 2,809 -70%
437 473 -8% excl profit on sale of chemicals 863 769 12%
5.83p 33.61p -83% Earnings per share 11.50p 37.55p -70%
per 1.25p ordinary PLC share
OUTLOOK FOR 1998: Chairman Niall FitzGerald comments: "Our results, when
expressed at current rates of exchange, will continue to be influenced by
the economic difficulties in East Asia and the effects elsewhere.
However, our underlying business performance continues to be encouraging
with good progress in Europe and North America. We remain confident that
markets will be attractive enough to enable us to grow and make progress
in improving the underlying profitability in 1998."
BUSINESS PERFORMANCE FOR THE HALF-YEAR:
There has been no significant change in economic conditions in Europe and
North America and these economies continue to develop relatively
favourably. The difficulties in East Asian economies remain a concern in
the medium term and we have also seen signs of economic slowdown in a
number of countries in other developing and emerging markets. Our
operations, however, remain firmly based and our market positions have
improved.
Sales and profits were boosted by a half-year which, for reporting
purposes, was six days longer than the corresponding period last year;
there will be some reversal of this benefit in the second half year.
There was also a substantial increase in marketing investments, notably in
Europe and North America, which impacted the results in the period.
REGIONAL SUMMARY:
Europe: sales were 2% lower mainly reflecting the impact of business
disposals; underlying volume growth higher than in the same period last
year; market shares improved in most priority categories. Margins again
improved, notably in foods operations.
North America: sales grew by 4% despite disposals; operating profit grew
strongly despite higher marketing investments and operating margin
improved. Integration of the three mass-market home and personal care
businesses is progressing well.
Africa & Middle East: sales were up 16% and volume growth was ahead of
corresponding period; profits grew strongly. Overall operating margins
were well ahead of last year.
Asia & Pacific: sales increased 19% mostly due to price increases in
South East Asia. Slowdown in consumption, especially in Indonesia and
Thailand, reflects deteriorating economic environment. Active cost
reduction and product launch programmes maintained; market positions
remain strong.
Latin America: sales increased 9%, reflecting growth across region and
benefits of acquisitions; increased market shares in all priority
categories. Strong profit improvement in Brazil and Chile, and significant
portfolio changes made in 1997, resulted in good margin growth.
NET DEBT & GEARING:
Net funds at the half year of #2,986 million are somewhat lower than at
end 1997, mainly reflecting seasonally higher outflows on working capital
and payment of the final dividend. Net gearing remains zero.
Enc: copy of full announcement August 7 1998
Enquiries
Telephone: Press Office 0171 822 6805
E-mail: press-office.london@unilever.com
Internet: http://www.unilever.com
UNILEVER RESULTS
Second Quarter and Half Year 1998
The directors of Unilever announce the Group's unaudited consolidated
results for the second quarter and half year 1998.
HALF YEAR 1998
Financial Results
At constant rates of exchange, sales fell by 4% over the corresponding
period last year. However, excluding the disposal of Speciality
Chemicals, sales in continuing operations rose by 5%. On this basis,
operating profit before exceptional items increased by 15%. Exceptional
items were positive in the half year, as compared with a charge in 1997,
resulting in an operating profit after exceptional items 7% ahead.
Excluding the profit on disposal of the chemicals businesses in 1997,
profit before tax increased by 20% as a result of the positive swing in
interest costs. Net profit increased by 24% reflecting a lower tax rate.
At exchange rates current for each period, net profit increased by 12% in
sterling and 14% in US dollars, reflecting the relative strength of those
currencies, and increased by 22% in guilders.
Business Performance
There has been no significant change in economic conditions in Europe and
North America and these economies continue to develop relatively
favourably. The difficulties in East Asian economies remain a concern in
the medium term and we have also seen signs of economic slowdown in a
number of countries in other developing and emerging markets. Our
operations, however, remain firmly based and our market positions have
improved.
Sales and profits were boosted by a half year which, for reporting
purposes, was six days longer than the corresponding period last year;
there will be some reversal of this benefit in the second half year.
There was also a substantial increase in marketing investments, notably in
Europe and North America, which impacted the results in the period.
To explain the trends in the business performance, the following
commentary on the regions deals with the continuing businesses, and is
based on operating profit before exceptional items, at constant rates of
exchange.
In Europe, sales were 2% lower due to the impact of business disposals and
the pruning of non-priority categories. Underlying volume growth was
higher than in the same period last year, aided by the successful launch
of laundry tablets in a number of markets and continued strong growth in
several personal care categories. We also achieved satisfactory volume
growth in foods, especially in tea-based beverages, culinary and yellow
fats. Market shares improved in most of our priority categories. We
continue to benefit from restructuring and, despite substantially higher
marketing investments and increased raw material costs, we have again
improved margins, most notably in our foods operations.
In North America, sales grew by 4% despite disposals. Our foods business
had a better sales performance and we achieved good growth in our mass
personal care business, especially in hair care following a successful
product launch. Despite higher marketing investments operating profit grew
strongly; within this, there were good performances in home and personal
care, while the results in foods were flat. Overall operating margin has
improved over the corresponding period last year.
The integration of the Lipton Foods businesses has been completed and the
integration of the three mass-market home and personal care businesses is
progressing well.
In Africa and Middle East, sales were up 16%, with good growth in yellow
fats and all home and personal care categories. Volume growth was ahead
of the same period last year reflecting the focus on consumer goods
categories. Profits grew strongly as a result of good performances in
Arabia, Egypt and South Africa and a turnaround in Kenya. Higher commodity
prices also boosted sales and profits of our plantations operations.
Overall operating margins are well ahead of last year.
In Asia & Pacific, sales increased by 19%, mostly due to price increases
in a number of East Asian countries. In the course of the half year there
has been a slowdown in consumption in this sub-region, especially in
Indonesia and Thailand, reflecting the deteriorating economic environment.
However, we have maintained an active programme of cost reduction and
product launches and our market positions remain strong. Sales and
profits in India increased markedly resulting from significant marketing
initiatives and shares increased in all categories. Our new national
sales organisation in China is developing well, but the benefits, in
either sales or profit, are still some way off.
In Latin America, the sales increase of 9% reflects good growth across the
region, including the benefit of acquisitions, notwithstanding the
economic slowdown in Brazil. We achieved good underlying volume growth in
our established home and personal care categories and profits were up
strongly in personal care and foods, the latter benefiting from the good
contribution from Kibon and an improved performance in culinary. We have
increased market shares in all priority categories. There was strong
profit improvement in Brazil and Chile, and the significant portfolio
changes made in 1997 resulted in good margin growth.
SECOND QUARTER 1998
At constant rates of exchange, sales decreased by 7% over the
corresponding period last year. However, excluding the disposal of
Speciality Chemicals, sales in continuing operations rose by 2% and
operating profit, both before and after exceptional items fell by 4% as a
result of a substantial increase in marketing investment. Profit before
tax declined by 3%, excluding the profit on the disposal of the chemicals
businesses in the prior year's quarter. The lower tax rate for the
period left net profit broadly unchanged.
At exchange rates current for each period, net profit decreased by 8% in
sterling and 6% in US dollars, reflecting the relative strength of those
currencies, and decreased by 1% in guilders.
OUTLOOK FOR 1998
Our results, when expressed at current exchange rates, will continue to be
influenced by the economic difficulties in East Asia and the effects
elsewhere. However, our underlying business performance continues to be
encouraging with good progress in Europe and North America. We remain
confident that markets will be attractive enough to enable us to grow and
make progress in improving the underlying profitability in 1998.
Year 2000
The Year 2000 or millennium bug presents a major business challenge, which
is extensive because, apart from information systems, the task involves
correcting Information Technology infrastructure, factory and process
control facilities, and telecommunications networks for both voice and
data. The Group is addressing this threat as a critical corporate
priority, working both with internal processes and with Unilever's
business partners to ensure the smooth functioning of the supply chain.
Unilever has been planning for the Year 2000 issue since 1995 and expects
that overall compliance within Unilever will mostly be achieved by the end
of 1998. Covering Unilever in its broadest scale, in that it operates in
over 90 countries, and allowing for contingent costs related to problems
associated with customers and suppliers and the ongoing management and
remedial work associated with the bug during 1999 and 2000, the estimated
total costs of dealing with the millennium bug are about #300 million;
this covers costs from when the project started in 1995 through to
expected completion in 1999. The relevant costs for each year are charged
to operating costs as incurred.
European Monetary Union
1998 is a critical year in relation to the European Monetary Union, and
with the advent of a single currency on 1 January 1999, there will be a greater
price transparency across Europe. The Netherlands is participating; however, for
the time being, the United Kingdom is not. One of the consequences is that the
Dutch guilder will be replaced by the EURO by 2002; however, earlier adoption is
permitted. As a result, Unilever NV will publish supplementary information in
EURO's in 1999 and replace the guilder by the EURO as from the year 2000.
Unilever will begin to undertake EURO contracts for foreign exchange contracts
and deposits from January 1999.
Sale of Plant Breeding International
As previously announced, Unilever has agreed to sell Plant Breeding
International Cambridge Limited (PBIC) to Monsanto Company for #320
million cash. The profit on disposal of this business will be reported in
the Q3 results announcement.
Balance Sheet and Cash Flow
The main movement in the balance sheet at the half year compared to end
1997 is in working capital. This is mainly due to the seasonality of the
business.
Net funds at the half year of #2,986 million are somewhat lower than end
1997, mainly reflecting higher outflows on working capital and payment of
the final dividend. Net gearing remains zero.
Total Capital and Reserves increase by #644 million due to profits to the
half year, partly offset by currency movements.
Cash flow from operating activities at #1,058 million is in line with the
same period last year.
CONSOLIDATED PROFIT AND LOSS ACCOUNT - CONSTANT EXCHANGE RATES (unaudited)
In the profit and loss account given below, the results in both years have
been translated at constant exchange rates, being the annual average
exchange rates for 1997. This reporting convention facilitates
comparisons since the impact of exchange rate fluctuations is eliminated.
Second Quarter # millions Half Year
1998 1997 Incr./ 1998 1997 Incr./
(Decr.) (Decr.)
7,408 7,930 (7)% TURNOVER 14,480 15,109 (4)%
7,408 7,281 2 % Continuing operations 14,480 13,832 5 %
- 649 - Discontinued operations - 1,277 -
689 794 (13)% OPERATING PROFIT 1,408 1,320 7 %
689 719 (4)% Continuing operations 1,408 1,156 22 %
- 75 - Discontinued operations - 164 -
690 716 (4)% Operating Profit BEI - 1,398 1,219 15 %
Continuing Operations
- 2,658 Profit on sale of chemicals - 2,658
businesses
7 4 Income from fixed investments 12 8
26 (52) Interest (net) 56 (100)
722 3,404 (79)% PROFIT BEFORE TAXATION 1,476 3,886 (62)%
(210) (796) Taxation (479) (980)
512 2,608 (80%) PROFIT AFTER TAXATION 997 2,906 (66)%
(40) (42) Minority Interests (65) (53)
NET PROFIT AT CONSTANT 1997
472 2,566 (82)% EXCHANGE RATES 932 2,853 (67)%
472 466 1 % Net profit - excluding profit 932 753 24 %
on sale of Chemicals business
437 2,513 (83)% NET PROFIT AT EXCHANGE RATES 863 2,809 (70)%
CURRENT IN EACH PERIOD
Net profit - excluding profit
437 473 (8)% on sale of Chemicals business 863 769 12 %
COMBINED EARNINGS PER SHARE
5.83p 33.61p (83)% - per 1.25p of ordinary 11.50p 37.55p (70)%
capital
ADDITIONAL INFORMATION (unaudited)
CONSOLIDATED RESULTS BEFORE EXCEPTIONAL ITEMS
The undernoted analysis provides supplementary information on the
consolidated results for comparative purposes only. The results shown
exclude the exceptional items taken in operating profit and the profit on
sale of the international speciality chemicals businesses.
Second Quarter # millions Half Year
At constant exchange rates
1998 1997 Incr. 1998 1997 Incr./
(Decr.) (Decr.)
690 791 (13)% Operating Profit 1,398 1,383 1%
690 716 (4)% Operating Profit - 1,398 1,219 15%
Continuing operations*
723 743 (3)% Profit before tax 1,466 1,291 14%
(218) (260) Taxation (482) (469)
465 464 - % Net Profit 919 792 16%
* Continuing operations excludes the results of the Chemicals businesses
sold to Imperial Chemical Industries on 8 July, 1997.
CONDENSED BALANCE SHEET (unaudited)
# millions As at 4 As at 31
July December
1998 1997
Goodwill 139 -
Fixed assets 5,946 6,107
Stocks 3,393 3,111
Debtors 4,751 4,176
Trade & other creditors (5,964) (6,002)
8,265 7,392
Net debt / (funds) (2,986) (3,183)
Provisions for liabilities and 2,891 2,847
charges
Minority interests 300 312
Capital and reserves 8,060 7,416
8,265 7,392
CASH FLOW STATEMENT (unaudited)
Half Year
1998 1997
Cash flow from operating activities 1,058 1,088
Returns on investments and servicing of finance 21 (141)
Taxation (334) (290)
Capital expenditure and financial investment (426) (407)
Acquisitions and disposals (33) 25
Dividends paid on ordinary share capital (466) (394)
CASH INFLOW / (OUTFLOW) BEFORE MANAGEMENT (180) (119)
OF LIQUID RESOURCES AND FINANCING
Management of liquid resources (156) (746)
Financing 440 630
INCREASE / (DECREASE) IN CASH IN THE PERIOD 104 (235)
GEOGRAPHICAL ANALYSIS
Second # millions Half Year
Quarter
1998 1997 1998 1997
Turnover
3,498 3,614 Europe 6,652 6,760
1,397 1,406 North America 2,806 2,705
406 366 Africa and Middle East 806 696
1,256 1,077 Asia and Pacific 2,482 2,082
851 818 Latin America 1,734 1,589
7,408 7,281 Sub-total 14,480 13,832
- 649 Discontinued Operations - 1,277
7,408 7,930 TURNOVER 14,480 15,109
% % Operating profit - before
exceptional items % %
390 429 Europe 706 692
88 95 North America 193 148
46 33 Africa and Middle East 84 60
96 93 Asia and Pacific * 232 175
70 66 Latin America 183 144
690 716 Sub-total 1,398 1,219
- 75 Discontinued Operations - 164
(1) 3 Exceptional Items 10 (63)
689 794 OPERATING PROFIT 1,408 1,320
% % Operating margin - before % %
exceptional items
11.1 11.9 Europe 10.6 10.2
6.3 6.8 North America 6.9 5.5
11.2 9.0 Africa and Middle East 10.4 8.6
7.6 8.6 Asia and Pacific 9.3 8.4
8.3 8.1 Latin America 10.6 9.1
9.3 9.8 Sub-total 9.7 8.8
- 11.6 Discontinued Operations - 12.9
9.3 10.0 OPERATING MARGIN BEI 9.7 9.2
9.3 10.0 OPERATING MARGIN 9.7 8.7
* Note: At current average rates of exchange for the first half year, 1998
operating profit for those countries in South East Asia which have
experienced significant currency devaluation, reduces by approximately #52
million.
The results for Turkey formerly reported under the Africa and Middle East
region are reported within Europe from 1.1.98. Results for 1997 have been
restated on the same basis.
NOTES
Acquisitions and Discontinued Operations
In the first half of 1998 the effect on turnover and operating profit of
acquisitions made in the period in the continuing business was #41.4
million and #2.9 million respectively. In 1997, the speciality chemicals
businesses were discontinued as at the 8th July 1997. There were no
discontinued operations in the first half of 1998.
Balance Sheet
The condensed balance sheet as at 31 December 1997 has been extracted from
the full Group Accounts, on which the auditors gave an unqualified
opinion, and which have been delivered to the Registrar of Companies.
Exchange Rates
The results for 1998 and the comparative figures for 1997 have been
translated at constant average rates of exchange, being the annual average
rates for 1997. For our reporting currencies these were #1 = Fl. 3.18 =
US $1.64. In addition, the net profit, earnings per share and cash flow
statement have been translated at rates current in each period. For our
reporting currencies these were:
Second Quarter Half Year
1998 #1 = Fl. 3.33 = US $ 1.65 #1 = Fl. 3.36 = US $ 1.65
1997 #1 = Fl. 3.13 = US $ 1.63 #1 = Fl. 3.09 = US $ 1.63
In order to maintain our constant rate reporting conventions and to ensure
that trends in results in sterling, guilders and dollars are identical,
the results for the chemicals discontinued operations in first half l997
and the profit on disposal of the chemicals businesses have been restated
in all cases at average l997 exchange rates. In l997 the results of the
discontinued operations were accounted for at average rates prevailing up
to the date of disposal, and the profit on the sale of chemicals was
translated at the exchange rates prevailing on 8th July l997.
The balance sheet figures have been translated at period-end rates of
exchange. For our reporting currencies these were
#1 = Fl. 3.38 = US $1.65 at the half year 1998 (31 December 1997: #1 = Fl.
3.34 = US $1.65).
Change in Accounting Standards
With effect from 1.1.98 the UK Standard FRS 10 on goodwill is being
adopted. Goodwill on acquisitions after this date will be capitalised on
the Group Balance Sheet and amortised in operating profit over periods of
up to 20 years. Previously goodwill was written off to reserves on
acquisition. Goodwill will be amortised in results from the quarter
following the quarter in which it is acquired. There is no material
impact for this change in Q2 1998. Goodwill on acquisitions prior to
1.1.98 will not be capitalised nor will prior year results be restated for
this change.
Dates
The results of the third quarter and announcement of interim dividends for
1998 will be published on Friday 6 November 1998.
7 August 1998
Salient figures for the above results will be published in the Financial
Times and Daily Telegraph on Saturday 8 August 1998.
Internet: http://www.unilever.com
END
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