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Ir Q2 2009 Roadshow Presentation
- 1. Q2 and FirstHalf 2009 Results ROADSHOW Contents Page Highlights 5 Business Performance 6 – 34 Our Portfolio 35 – 42 Developing & Emerging Markets 43 – 50 Innovation 51 - 72 1
- 2. Safe Harbour Statement Thisannouncement 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', 'believes' or the negative of these terms and other similar expressions of future performance or results, including any financial objectives, 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, the ability to complete planned restructuring activities, 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 announcement. 2
- 3. Highlights Quality of growthis good • Market share momentum in 60% of our business • Widespread growth across categories & countries • Underpinned by innovation and A&P support • Gross margin trend improving Business Environment will remain tough • Consumer confidence low and unemployment increasing • Competitors will raise their game Priorities for 2009 1. Restore volume growth 2. Protect cash and margin for the full year Business Performance 3
- 4. Q2 Highlights •Underlying sales growth +4.1% • Restored volume growth +2.0% • Step up in A&P investments +50bps • Underlying operating margin down 60bps, in line with expectations • Cash flow improved €1.6bn in H1 Unilever Volume and Price Trends 5.0% Volume 4.0% 3.0% 2.0% 1.0% 0.0% -1.0% -2.0% -3.0% -4.0% -5.0% Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 10.0% Price 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 4
- 5. Asia Africa CEE UVG 3.3% 1.3% • Most economies resilient and growing (0.9)% • Broad based volume growth Q1 Q2 H1 9.5% USG • Central Europe remains weak 8.8% 8.2% • Q2 Underlying margin up +130 bps Q1 Q2 H1 Americas UVG 1.6% • Consumer confidence remains weak 0.4% (1.0)% • Positive volume growth continues in Q1 Q2 H1 US consumer business 7.2% USG 5.9% • Good performance in Latin America 4.9% • Q2 Underlying margin up +10 bps Q1 Q2 H1 5
- 6. Western Europe UVG 1.0% (1.2)% • Markets remain challenging (3.7)% Q1 Q2 H1 • Positive volume trend in key countries USG • Q2 Underlying margin down (340) bps (1.1)% (1.9)% (2.8)% Q1 Q2 H1 H1 Underlying Sales Growth by Category 12 9.9 10 8 6 4.5 4.6 4 2 1.4 0 Savoury Ice Cream Home Care Personal Care Spreads Beverages Dressings 6
- 7. Q2 Operating Margin Q2 2008 Q2 2009 Change Operating margin 13.2% 12.6% (0.6)% Including RDIs* (2.0)% (2.0)% (0.0)% Operating margin before RDIs 15.2% 14.6% (0.6)% Key drivers: Gross margin (0.2)% Overheads 0.1% A&P (0.5)% Includes margin dilution from disposals of (0.3)% *Restructuring, disposals and one-off items Q2 Drivers of Operating Profit* 0.5 Price 0.3 Vol/Mix 0.1 Acq/Disp 0 €bn -0.1 A&P Underlying Profit -0.3 Costs Savings programme -0.5 *Excl RDIs, constant currency 7
- 8. H1 Operating Margin H1 2008 H1 2009 Change Operating margin 16.0% 12.8% (3.2)% Including RDIs* 0.9% (1.8)% (2.7)% Operating margin before RDIs 15.1% 14.6% (0.5)% Key drivers: Gross margin (1.0)% Overheads 0.2% A&P 0.3% Includes margin dilution from disposals of (0.3)% *Restructuring, disposals and one-off items H1 Drivers of Operating Profit* 0.8 Price Costs 0.6 0.4 0.2 Vol/Mix 0 €bn 0 Acq/Disp -0.2 A&P Underlying Profit -0.4 -0.6 Savings -0.8 programme *Excl RDIs, constant currency 8
- 9. Commodity Cost Development 900 Commodity Costs Currency* 800 700 600 500 bps 400 300 200 100 0 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 2009 • Commodity costs tailwinds in H2 • FY2009 commodity costs (including currency) up vs last year *Note: Before Q4 08 currency effects were insignificant Strong Savings Delivery • €0.6bn total savings delivered in H1 Local efficiency 0.1 Restructuring 0.2 Buying 0.3 On track to deliver c. €1bn in this year 9
- 10. H1 Drivers ofEPS Growth H1 2008 H1 2009 Change EPS (€) 0.79 0.53 (33)% Includes RDIs*, after tax 0.07 (0.10) EPS before RDIs* 0.72 0.63 (13)% Key drivers (%) Dilution from disposals (3) Pensions finance charge (6) Tax rate (before RDIs*) (3) *Restructuring, disposals and one-off items Reducing Cash Conversion Cycle Q2 2008 Q2 2009 Improvement Stock days 74 61 13 Debtor days 44 41 3 Creditor days (77) (77) 0 Total days 41 26 15 10
- 11. Balance Sheet andCash Flow • Strong cash flow delivery - up €1.6bn in H1 • Net debt €8.9bn • New bonds issued at attractive rates • Acquisitions: TiGi, Baltimor, Vietnam minorities Returning Cash to Shareholders > €7bn returned 07-08 4 Total cash amount (€bn) 3 2 1 0 2004 2005 2006 2007 2008 Dividends Share buyback One-off dividend • Dividend Policy: sustainable, attractive and growing dividends • Move to quarterly dividends • No plans for share buy-backs in 2009 11
- 12. Key Drivers ofBusiness Performance Cash and Costs Brands & Categories In Market Organisation Amplification Brands and Categories Stronger Claims Examples: US Soft Spreads Asia Pond’s Anti US Dove Body Wash Ageing Creams ‘No hydrogenated ‘Clinically proven to oils’ ‘Younger skin in 7 reverse dryness’ days’ Brands 12
- 13. Brands and Categories FasterRoll-Out to More Markets Examples: 17 Markets 33 Markets 37 Markets 56 Markets Brands and Categories Improving Product Quality Examples: Brands Amora - France Klondike - US DiG - Asia 13
- 14. Brands and Categories Playingthe Full Price Piano Example: Russia Tea Premium • Roll-out of fruit pyramid teas Brands • New advertising Mid-Tier campaign • Launch of herbal infusions Value Brands and Categories Focus on offering consumer value 14
- 15. In Market Amplification PositiveCustomer Service Trend 20 Number of Top 20 countries achieving service at the 2009 par target level 15 10 5 0 Jan-08 Jan-09 Aug Jun Feb Sep Feb Mar Apr Mar Apr May Nov May Jul Dec Oct In Market Amplification Customer Insight and Innovation Center The Customer Insight & Innovation Centre in the US will be showcased at our Investor Event in 23-24 November 2009 15
- 16. Cash and Costs Restructuring Well on Track Plan 2007-2010 Actual to date From 100 units Multi-country organisations 28 to 20-25 MCOs Factory closures / streamlining 50-60 Announced 70 Of which completed > 35 Headcount reduction 20,000 > 10,000 Restructuring savings €1.5bn €0.9bn Restructuring charges €3.0bn €2.1bn Organisation Change Programme Update 2005 2006 2007 2008 2009 2010 One CEO, New New New Governance, Non-Exec Board Board Chairman CFO CEO Global One One Brands & Category Innovation Team Category R&D Go-to- Customer One Unilever MCOs Focus Market Factory Cost Base Simplification Overhead Simplification 16
- 17. Organisation Aligning the Organisation Accountability & Responsibility Consistent Bias for Action Winning Organisation Consumer & Customer Focus Our Priorities • Reignite volume growth • Protect cash flow and margin 17
- 18. Our Portfolio Scale andgeographic reach Western Europe | €12.9bn | 32% The Americas | €13.2bn | 33% Asia Africa CEE | €14.4bn | 35% 2008 Unilever Turnover €40.5bn | 100% 18
- 19. Balanced category portfolio Savoury, Home Care Dressings & €7.2bn (18%) Spreads €14.2bn (35%) Ice Cream & Personal Care Beverages €11.4bn (28%) €7.7bn (19%) Strong Leadership Positions Savoury #1 Dressings #1 Tea #1 Ice Cream #1 Spreads #1 Deodorants #1 Mass Skin #1 Laundry #2 Daily Hair Care #2 Oral Care Local Strength Household Cleaning Local Strength 19
- 20. Big Global Brands 13 billion euro + brands Top 25 brands = ¾ of Unilever’s sales Selective Bolt-On Acquisitions Buavita Indonesia Inmarko Russia TIGI Global Wonderlight Sri Lanka Napoca Romania Baltimor Russia 20
- 21. Partnerships Starbucks Ice Cream Pepsi Lipton International Disposals completed in 2008 Including: Turnover €bn 0.1 Boursin Cheese Lawry’s Seasonings 0.1 0.7 NA Laundry Bertolli Olive Oil 0.4 Disposals completed with €1.6 billon turnover Average 1.8x sales multiple 21
- 22. Developing & Emerging Markets The D&E Opportunity D&E Population in 2008 (billions) Affluent 0.5 Aspiring 2.6 Striving 2.6 22
- 23. … Rapidly Evolvinginto a Diamond Billions of people in D&E countries 2008 2018 Change Have lots 0.5 0.9 + 0.4 Haves 2.6 3.2 + 0.6 Not yets 2.6 2.2 - 0.4 Source: Unilever estimates Market Development Opportunity Per Capita Consumption (US $ per year ) Detergents 22.9 Shampoo 7.5 6.7 16.6 5.4 12.1 2.2 1.9 1.0 1.1 1.4 0.3 India China Indonesia Brazil Germany USA India China Indonesia Brazil USA Germany Ice Cream 50.9 Skin care 36.6 34.6 26.9 10.9 2.8 5.0 0.2 0.9 3.2 0.8 0.3 India Indonesia China Brazil Germany USA India China Indonesia Brazil USA Germany Source : Euromonitor 23
- 24. Building Markets –Driving Penetration Shampoo sachets Re-closable multi-use Deo ministicks Mini cubes sachets Building Markets - Uptrading Functional Teas Pyramids Double Chamber Mid-market Teabags • Great potential for uptrading D&E Conversion Teabags • Tea has 20% share of volume vs. 12% value for total Beverages Branded Packet Tea Loose Leaf Tea conversion upgrading uptrading 24
- 25. Long-Term Strength inD&E Since 1990… 16 • Underlying sales growth 9% pa on average • Hard currency growth of 7% pa on average 14 • Volume growth 5% pa on average 12 • Volume and value growth in every year 10 8 6 4 2 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 -2 UVG UPG *1990-2002 LATAM and Asia. From 2003 all countries excl NA, WE, Japan and Australia. D&E Growth is Profitable 2008 Operating margin before RDIs* Unilever average * Restructuring, disposals and one-off items 25
- 26. Innovation Building R&D forCompetitive Advantage • More focus on big wins • Leverage our unique science across our portfolio • Accelerate delivery of breakthroughs • Build world class capabilities in critical areas 26
- 27. Science and TechnologyStrengths Spray Technology Skin Mildness Product Processing Deodorants and Moisturizing e.g. Ice Cream Hair Structured Science of Tea Technology Oils and Emulsions More focused R&D organisation • 6 Global R&D Centres Port Sunlight, UK Colworth, Vlaardingen, UK NL Trumbull, US Shanghai, China Bangalore, India • 40% of our R&D people are in Developing & Emerging markets, and building …. 27
- 28. Prioritising our bigwins Science & Unilever Big Wins Technology Prioritised ts Portfolio jec Pro sis ne Ge Consumer Needs Trends Brand Categories Leverage Technology Across Portfolio Home Care Personal Care Foods Genesis Project 1 Genesis Project 2 Consumer Benefit Genesis Project 3 Genesis Project 4 Focus Genesis Project 5 Genesis Project 6 Genesis Project 7 Genesis Project 8 Genesis 9 Genesis Project 10 Genesis Project 11 Technology Focus Genesis Project 12 Genesis Project 13 Science & Genesis Project 14 Genesis Project 15 Genesis Project 16 Genesis Project 17 28
- 29. Improving R&D capabilities •Crossover technologies driving differentiated innovation • Boosting open innovation • Strengthening clinicals • Exploiting patents across categories Fewer, bigger innovations • From 5000+ projects to 700 Number of category innovation projects 6000 5000 4000 3000 2000 1000 0 2005 2006 2007 2008 2009 • Average project size increased 10x 29
- 30. Knorr Stock Pots StockPots with new bouillon gel technology for natural tasty stock and soups Launched in China and across Europe Bertolli Frozen Meals New Bertolli Frozen Meals Restaurant Taste with your Homemade Touch 30
- 31. Heart Health “Goodness ofMargarine” Family Goodness brings better nutrition for family growth For better taste and with less fat Hellmann’s Light Delicious extra light mayonnaise with unique citrus fibre technology Now double-whisked to bring out the great taste! 31
- 32. Lipton New Lipton pyramidteas and infusions with chunky pieces of fruits, spices and large leaves for the great tea tasting experience A unique slimming tea twice as rich in catechins to help maintain your silhouette Magnum Temptation An unrivalled multi-sensorial experience using cold roller technology 32
- 33. Clear Complete antidandruff and scalp care regime Centrally developed, identically presented Axe Hair New Axe Hair launched in the US designed to create hair that guys want and girls love A complete line of shampoos, a conditioner, and styling products 33
- 34. Axe Instinct New Axe Instinct with the ‘scent of leather’ Dove Hair Minimising Deodorants Dove Hair Minimising Deodorants Look and Feel Hair Free for Longer 34
- 35. Dove Go Fresh Dove Go Fresh A fragrance-driven collection of products aimed at women in their 20s Rolled out to 55 markets in 2008 alone Dove NUTRIUM Technology Dove Body Wash with new NUTRIUM technology - US The most effective natural nourishment ever delivered in a body wash 35
- 36. Surf Surf – Cleaning & Fragrance at a Great Value Price Domestos 24HR The clinging power of new thicker formula makes it flush proof, protecting you and your family from germs 36