Form 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR
15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of March, 2013.
Commission File Number 001-04547
UNILEVER N.V.
(Translation of registrants name into English)
WEENA 455, 3013 AL, P.O. BOX 760, 3000 DK, ROTTERDAM, THE NETHERLANDS
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of
Form 20-F or Form 40-F.
Form 20-F þ Form 40-F ¨
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by
Regulation S-T Rule 101(b)(1): ¨
Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted
solely to provide an attached annual report to security holders.
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by
Regulation S-T Rule 101(b)(7): ¨
Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrants home country), or under the rules of the home country exchange on which the registrants securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrants security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.
Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes ¨ No þ
If Yes is marked, indicate below the file number assigned to the registrant in connection with
Rule 12g3-2(b): 82- .
Cautionary statement
This document 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 will, aim, expects, anticipates, intends, looks, believes, vision, or the negative of these terms and other similar expressions of future performance or results, 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. Among other risks and uncertainties, the material or principal factors which cause actual results to differ materially are: Unilevers global brands not meeting consumer preferences; increasing competitive pressures; Unilevers investment choices in its portfolio management; inability to find sustainable solutions to support long-term growth; customer relationships; the recruitment and retention of talented employees; disruptions in our supply chain; the cost of raw materials and commodities; secure and reliable IT infrastructure; successful execution of acquisitions, divestitures and business transformation projects; economic and political risks and natural disasters; the debt crisis in Europe; financial risks; failure to meet high product safety and ethical standards; and managing regulatory, tax and legal matters. Further details of potential risks and uncertainties affecting the Group are described in the Groups filings with the London Stock Exchange, Euronext Amsterdam and the US Securities and Exchange Commission, including the Groups Annual Report on Form 20-F for the year ended 31 December 2012 and the Annual Report and Accounts 2012. These forward-looking statements speak only as of the date of this announcement. Except as required by any applicable law or regulation, the Group expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Groups expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.
ANNUAL REPORT
AND ACCOUNTS 2012
MAKING SUSTAINABLE LIVING COMMONPLACE
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BOARD OF DIRECTORS
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The Unilever Group Unilever N.V. (NV) is a public limited company registered in the Netherlands. It has listings of shares and depositary receipts for shares on Euronext Amsterdam and of New York Registry Shares on the New York Stock Exchange. Unilever PLC (PLC) is a public limited company registered in England and Wales. It has shares listed on the London Stock Exchange and, as American Depositary Receipts, on the New York Stock Exchange.
The two parent companies, NV and PLC, together with their group companies, operate as a single economic entity (the Unilever Group, also referred to as Unilever or the Group). NV and PLC and their group companies, regardless of legal ownership, constitute a single reporting entity for the purposes of presenting consolidated financial statements. Accordingly, the accounts of the Unilever Group are presented by both NV and PLC as their respective consolidated financial statements. The same people sit on the Boards of NV and PLC and other officers are officers of both companies. Any references to the Board in this document mean the Boards of NV and PLC.
Names are listed in alphabetical order with the exception of the Chairman, Vice-Chairman, Chief Executive Officer and Chief Financial Officer.
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UNILEVER LEADERSHIP EXECUTIVE (ULE) |
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2 Doug Baillie Chief Human Resources Officer 3 David Blanchard Chief Category Research & Development Officer 4 Professor Geneviève Berger Chief Science Officer 5 Kevin Havelock Refreshment 6 Jean-Marc HuëtD Chief Financial Officer 7 Alan Jope North Asia 8 Kees Kruythoff North America 9 Dave Lewis Personal Care 10 Harish Manwani Chief Operating Officer 11 Antoine de Saint-Affrique Foods 12 Pier Luigi Sigismondi Chief Supply Chain Officer 13 Ritva Sotamaa Chief Legal Officer 14 Keith Weed Chief Marketing and Communication Officer 15 Jan Zijderveld Europe
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Unilever Annual Report and Accounts 2012 | Report of the Directors About Unilever 5 |
KEY FINANCIAL INDICATORS*
KEY NON-FINANCIAL INDICATORS
Basis of reporting: our accounting policies are in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU) and as issued by the International Accounting Standards Board (IASB), as well as United Kingdom and Dutch law. Certain measures used in our reporting are not defined under lFRS or other generally accepted accounting principles. For further information about these measures, and the reasons why we believe they are important for an understanding of the performance of the business, please refer to our commentary on non-GAAP measures on pages 34 and 35.
* | Further details of our key financial indicators can be found in our Financial review starting on page 28. |
| These key non-financial indicators form part of the Unilever Sustainable Living Plan. 2012 data is preliminary. Some of these KPIs will be independently assured in 2013. See our Unilever Sustainable Living Plan: Progress Report 2012 and our online Unilever Sustainable Living Report for 2012 at www.unilever.com/sustainable-living, to be published in April 2013. |
¯ | Measured January-September 2012. In 2012 we moved to full volume-based (tonnes sold) reporting for this target. This number is not comparable to previously reported numbers measured by product (stock keeping unit). |
| NAMET refers to North Africa, Middle East and Turkey; AMET refers to Africa, Middle East and Turkey; and RUB refers to Russia, Ukraine and Belarus. |
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STRATEGY
A VIRTUOUS CIRCLE OF GROWTH
Unilever Annual Report and Accounts 2012 | Report of the Directors About Unilever 9 |
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SUSTAINABLE LIVING PLAN |
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Some 25%
of premium segment in Russia achieved by Carte dOr in just over six months from launch
IN 2012 WE WERE MARKET LEADER IN LIQUID LAUNDRY DETERGENT SALES IN EMERGING MARKETS, WITH MARKET SHARE OF OVER 25%
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In 2012 we were market leader in liquid laundry detergent sales in emerging markets, increasing our market share by over 10 percentage points since 2010. Consumers are increasingly convinced of the benefits of liquids like Omo and Surf which not only offer a better wash experience but, especially when concentrated, create lower greenhouse gas emissions in their manufacture and
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distribution than powders. And liquids are good for our business great performance combined with premium prices and lower material and transport costs, especially for concentrates, mean higher gross margins.
More at: www.unilever.com/omo |
Unilever Annual Report and Accounts 2012 | Report of the Directors About Unilever 15 |
For the last three years, we have worked on A Better Future Begins at Home, a joint shopper programme with retailer Tesco, to encourage sustainable behaviour. It combines advice with promotions around our brands, all carrying a strong sustainability message. By rewarding shoppers for making more sustainable choices, it is educating them in how small actions can make a big difference both to the environment and to their wallet. So far the programme has been implemented in nine markets from the UK to China. As well as growing our sales, it has delivered benefits ranging from consumers recycling more to people planting trees in the local community.
Taking care of our customers We believe that customer satisfaction is the single most important measure of success for us in this area. And customers are more satisfied with us than ever. In 2012, Unilever was named supplier of the year in the drug store channel, in Boots and Superdrug (UK), Rite Aid (US), Shoppers DrugMart (Canada) and Farmacias Benavides (Mexico). Meanwhile, in emerging markets in Asia, Africa and the Middle East, we were rated the number one supplier in seven markets. In Brazil and Argentina, our most important markets in Latin America, we are frequently evaluated in the top three, while in the UK Unilever was named supplier of the year by almost all our customers.
11%
growth through drug stores
Rated No.1
supplier across seven markets in Asia,
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As well as working with our customers on joint initiatives, we are also working with them to help drive sales of our products through our Perfect Stores programme. This is a repeatable model which ensures the right products are available in stores and are marketed clearly to shoppers. Pilot studies in India and Argentina show that outlets enrolled for the Perfect Stores programme grow on average 4% more than other outlets.
In 2012, we supported the development of another 2 million Perfect Stores and extended our programme to more than 30 new markets. This means that at the end of 2012 we had 5 million Perfect Stores in 75 markets and we aim to have 20 million. Next, we will roll out
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the next generation of the programme, Perfect Store 2.0, aimed at improving the way we market our brands to shoppers, improving shelf stand-out and ensuring we give shoppers more reasons to choose our brands in-store.
Improving the retail experience Meanwhile, were helping our customers improve the retail experience in Perfect Stores using hand-held technology and the power of analytics, suggesting salesmen for store-specific orders and promotions, plus tips on displays. We also empowered thousands of our Shakti entrepreneurs with mobile phones to book sales orders. We will continue to innovate and grow sustainably with our customers, whether theyre a small-scale distributor in rural India or a global retailer. | ||
Almost 80,000 entrepreneurs, including 48,000 women, in over 135,000 villages across India have now joined our rural selling operation, Shakti. We improved the programme in 2012 by part funding mobile phones for a number of these sales people, equipping them with a simple application to drive sales. This low cost but very effective mobile technology helps them sell the
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right products, saving time during sales calls while increasing sales and earnings. Shakti is just one example of the progress we are making towards our USLP goal of improving the livelihoods of people across our value chain.
More at: www.unilever.com/sustainable-living
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Unilever Annual Report and Accounts 2012 | Report of the Directors About Unilever 19 |
WINNING THROUGH CONTINUOUS IMPROVEMENT continued
Local relevance with low-cost business models One of Unilevers particular strengths is our ability to combine global scale with locally tailored solutions. We have identified several levers to improve our gross margin over the long term, one of which is the application of low-cost business models to parts of the business such as laundry. We expect a significant profitability uplift once these measures are implemented, enabling us to invest back into the business, maintaining and accelerating the momentum of the virtuous circle of growth.
Working in partnership with our suppliers Our scale also helps us to meet our ambitious targets for sustainable sourcing. In 2012, we sourced around one third of all agricultural raw materials sustainably, including 100% of our palm oil, our largest agricultural raw material, three years ahead of schedule. Elsewhere, 39% of all the tea we source comes from farms certified by the Rainforest Alliance. Sourcing sustainably means that farmers can improve their living conditions and earn an income they can live on. It also helps maintain and improve soil fertility, enhance water quality and availability, and protect biodiversity.
However, we cannot achieve our sustainable growth agenda alone. We work in partnership with our suppliers to support the growth and innovation we need. Through our Partner to Win programme, we work with more than 150 strategic suppliers by sharing strategies and growth plans. This enables us to build capacity and create new technologies. Our suppliers are also key to generating new ideas and are partnering with us on over 65% of the deliverables in our medium and long-term innovation projects.
Improving eco-efficiency We are also focusing on improving sustainability in our manufacturing network. Thanks to programmes to reduce, reuse, recycle and recover, over half our manufacturing sites now send zero non-hazardous waste to landfill. We sourced 26% of our energy used in manufacturing from renewables, and reduced our C02 emissions from energy by 838,000 tonnes in the period 2008 to 2012. These efforts have contributed towards the recognition by the Dow Jones Sustainability Indexes, which named Unilever a global super-sector leader in 2012. |
To meet our growth ambition we need to reach more consumers. We continue to work hard to ensure our products are always available wherever the consumer is shopping.
To reach different kinds of consumers we have developed segmented supply chains across categories, portfolios, geographies and channels to deliver the right service at the right cost. For example, in Indonesia, Ponds is a premium brand thats often sold by small specialist retailers with little space to showcase the entire range and as a result they have a tendency to run out of stock. Following a successful trial, we now offer a daily delivery service, extending the roll-out to Greater Jakarta experiencing sales growth of more than 80%.
We have been increasing on-shelf availability (OSA), getting more products more quickly on to shelves. In 2012, stores in our OSA programme reduced empty shelves by 13%.
In 2012, our customers rated us higher than ever before. According to the global Advantage Group Survey, we improved in 70% of our key markets and are in the top third in ten out of 14 of our key markets.
We are also working hard to increase product quality reducing both complaints and
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incidents. Consumer complaints were down by 29% in 2012 versus 2009, while product incidents were down by 75%. In addition, we are making and designing better products. In 2012, 57% of our products scored higher than our competitors in blind tests, compared to just 21% in 2009.
Our ability to deliver quality products, innovate, and make better decisions quickly is critical to our sustainable growth agenda. For example, we have almost halved the time it takes to launch key innovations into the market place. New capabilities and centralised processes are making it possible to almost halve the time it takes to build new factories. Unilevers Global Engineering Services uses cookie cutter templates for factories, design and suppliers, helping us to deliver consistent high quality products wherever in the world they are made, as well as improving our speed to market.
We are also investing for growth and are building world-class factories, enabling us to cater to the substantial volume growth so far. As well as increasing capacity and flexibility, our new plants create competitiveness through manufacturing excellence and by using sustainable technologies.
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Over half of our 252 manufacturing sites across the world, from Costa Rica to Japan, send no non-hazardous waste to landfill, up from 74 at the start of the year. 100% of our sites send zero waste to landfill in 18 countries, the equivalent of removing over 1 million household bins of waste every year. This has been achieved by eliminating waste in the factories. | We also reduced, reused, recycled and recovered waste. For example, in Russia, Unilever recycles tea bags to make animal bedding or wallpaper.
More at: www.unilever.com/sustainable-living | |||
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Sustainable, profitable growth can only be achieved if the right people are working in an organisation that is fit to win, underpinned by a
culture in which performance is always aligned with values. We are increasingly an agile, flexible and diverse business with people who are motivated by doing good while doing well. We are building capability and leadership among our peopleand
we are attracting some of the best talent in the market place.
To double the size of our business, we need to support the talented people we already employ so they can be
the best they can be. We also need to attract the best people in the market place.
Employer of choice
This year, we were voted the number one FMCG (fast-moving consumer goods] employer of choice among graduates in 20 countries. Potential employees in markets as diverse as Russia and Vietnam
Brazil and Bangladesh, or Indonesia and the UK think that we are the most attractive employer in our sector.
We achieved this top ranking in several countries for the very
first time, including Mexico, Germany and Spain -while in ndia we were employer of choice, not just in our sector, but across the entire employment market.
We are leveraging
our partnership with One Young World, an annual global summit where young ambassadors collaborate on projects to change the world for the better. This year it allowed us to introduce Unilever and its commitment to making sustainability commonplace
to 1,200 delegates from 183 countries.
Employer brand
We have focused on ensuring that our
standing as an employer-what we call our employer brandhas our commitment to sustainability at the core. We have built an employer brand development tool which leverages best practice, and adapted our recruitment models to reach
the best people wherever they are in the world.
Our digital presence is a vital factor in this. Sustained investment and innovation in our social media interactions have
seen us become the highest ranked FMCG company on Linked Ins global In Demand ndex. Our Facebook global careers page has attracted more than 110,000 Tikes, with the highest numbers in India, Brazil Egypt and Indonesia of any global
careers page. It is the second largest Facebook page dedicated to careers.
No.1 FMCG employer of choice among graduates in
20 ^^\0 countries
WINNING WITH PEOPLE continued
Leadership for the future We are committed to the growth of our people throughout their careers, and to ensuring that leadership skills in particular are developed at every level of management. Our new Four Acres Learning and Leadership Centre in Singapore, scheduled to open in mid-2013, is physical proof of this commitment. Like our long-standing Four Acres Centre in Kingston, UK, the facility will run a global curriculum to drive excellence and commitment to leadership development and sustainability.
We now have programmes for existing and future leaders at all levels. These are designed in a blended approach of leaders teaching leaders, senior executive sponsorship, academic rigour and application through job experience, mentors and coaches.
A diverse business for a diverse world Two billion people use our products every day and, if we are to meet their needs, we need to reflect their diversity in our own workplaces. Through better recruitment, family-friendly working conditions, a |
culture of accountability, and initiatives like employee networks and mentoring, our business is becoming increasingly gender-balanced. By the end of 2012, 41% of our management headcount were women, compared to 39% at the end of 2011. After a decade of steady improvement, achieving an increase of more than 1% in a single year shows progress but we recognise there is still a long way to go.
We are working hard to improve further and it is encouraging that we have received external recognition for our efforts. For example, we were: awarded the prestigious 2013 Catalyst Award; awarded Company of the Year in the Vodafone European Diversity Awards 2012; named Top Employer by workingmums.co.uk; winners of Japanese magazine Toyo Keizais Female Management Appointment Award for 2012; named among the 2012 Working Mother 100 Best Companies in the US; and our US business was given a 100% rating in the Human Rights Campaigns Corporate Equality Index. |
Ours has always been a business based on values. We aim to ensure that integrity, responsibility, respect and pioneering spirit underpin our activities. In the last two years we have found new ways to express those values through the Unilever Sustainable Living Plan (USLP).
Engaged employees We have been encouraged by what our people are telling us about our culture. Our Global People Survey (GPS) measures the level of engagement of all employees. Over 114,000 eligible employees participated in the 2012 survey, representing an 87% response rate. Our engagement score of 75%, up from 73% in the 2010 GPS, is now in line with the scores of high-performing employers in our class.
Other key aspects of the survey also showed good progress: scores rose by 5% for people management, and by 4% for performance culture, bias for action and diversity. We believe that the USLP and our values are significant factors in keeping employees fully engaged in our business and therefore driving performance.
Everyday heroes Our values are exemplified every day by thousands of employees, without whom our business could not meet its ambitions for sustainable growth. But even amidst all this good work, some actions stand out. This year we honoured six employees nominated by their colleagues as Unilever heroes one of the ways in which we recognise significant contributions to society and our business. | ||
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REVIEW 2012 |
The virtuous circle of growth continues to work for us. We delivered consistent and strong top-line growth, well-balanced between volume and price and improved core operating margin. |
Strong underlying sales growth, led by solid volume growth Growth of our markets remained positive in 2012. This was primarily driven by strong growth in emerging markets which grew in volume and value terms, while developed markets remained largely unchanged due to continued weak consumer confidence in Western Europe and North America.
Despite the challenging environment, we have delivered strong underlying sales growth of 6.9% (2011: 6.5%). We accelerated volume growth to 3.4% (2011: 1.6%), well balanced with a 3.3% contribution from price (2011: 4.8%). All of our categories and each of our three geographical areas reported positive growth.
As in the prior year, emerging markets were the key growth drivers with underlying sales up 11.4%. We achieved double-digit growth in many countries, including Indonesia, China, Brazil and Vietnam. In developed markets we managed to grow the business despite difficult markets: our underlying sales were up 1.6%, split equally between volume and price.
Our focus on bigger and better innovation, rolled out faster to more markets is a key driver behind our performance. The rollout of our brands to new markets, including the more recently acquired brands, such as the launch of TRESemmé in Brazil also contributed strongly.
Amongst our categories, Home Care and Personal Care grew ahead of the markets, up 10.3% and 10.0% respectively; resulting in solid market share gains. In Home Care, we outperformed market growth in laundry and household cleaning. In Personal Care, our hair care business garnered market shares around the world, and skin care as well as deodorants reflected the success of innovations.
In Foods, underlying sales growth of 1.8% reflects a mixed performance, benefiting from the rollout of new products and our marketing campaigns to introduce new uses of our products to consumers. At the same time, declining markets in our spreads business and the impact of price rises we took in 2011 to counter sharply increased raw material costs impacted growth momentum.
6.3% underlying sales growth in Refreshment reflects the continued success of the global rollout of our ice cream brands and innovations, as well as improved growth momentum in tea, especially in emerging markets.
Solid progress in core operating margin Despite further increases in input costs and adverse currency changes, gross margin improved by 0.1% to 40.0% at constant exchange rates, reflecting disciplined cost management and our increased focus on improving gross margin consistently.
Core operating margin was up 0.3% to 13.8%, driven by the progress in gross margin, continued savings programmes and lower expenses for restructuring. Advertising and promotional expenses increased by 470 million, at constant exchange rates.
Strong free cash flow generation Free cash flow of 4.3 billion was up by 1.2 billion, driven by higher operating profit and improvement in working capital management.
Consistent management focus has resulted in negative working capital for 13 consecutive quarters with further progress in all its components: inventories, trade receivables and trade payables.
Net capital expenditure of 2.1 billion was in line with last year, at 4.2% of turnover, reflecting investment in the capacity required for our growing business. |
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Unilever Annual Report and Accounts 2012 | Report of the Directors About Unilever 29 |
FINANCIAL REVIEW 2012 continued
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Unilever Group
Turnover million 2012 |
USG % 2012 |
UVG % 2012 |
Turnover million 2011 |
USG % 2011 |
UVG % 2011 |
Turnover million 2010 |
USG % 2010 |
UVG % 2010 |
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Unilever Total |
51,324 | 6.9 | 3.4 | 46,467 | 6.5 | 1.6 | 44,262 | 4.1 | 5.8 | |||||||||||||||||||||||||||
Developed markets |
22,993 | 1.6 | 0.8 | 21,470 | 0.8 | (1.6 | ) | 20,990 | 0.4 | 2.0 | ||||||||||||||||||||||||||
Emerging markets |
28,331 | 11.4 | 5.7 | 24,997 | 11.5 | 4.4 | 23,272 | 7.9 | 9.7 |
Unilever Annual Report and Accounts 2012 |
Report of the Directors About Unilever 31 |
FINANCIAL REVIEW 2012 continued
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Unilever Annual Report and Accounts 2012 | Report of the Directors About Unilever 33 |
FINANCIAL REVIEW 2012 continued
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Unilever Annual Report and Accounts 2012 | Report of the Directors About Unilever 35 |
The following discussion of the risk outlook and our principal risk management activities includes forward-looking statements that reflect Unilevers view of the operating risk environment. The actual results could differ materially from those projected. See the Cautionary statement on the inside back cover.
Outlook
Market conditions for our business were challenging in 2012 and we do not anticipate this changing significantly in 2013.
Economic pressures are expected to continue. We expect consumer markets to remain flat to slightly down in developed markets. In emerging markets consumer demand remains robust but there is nonetheless the risk of modest slowdown in key markets such as China, India and Brazil. Currency markets remain volatile and uncertain. Although we have seen rather more stable conditions in key commodity markets in 2012 we remain watchful for further periods of volatility in 2013. A worsening economic scenario could be triggered by a major Eurozone crisis prompted by countries leaving the euro or by a break-up of the euro leading to significant contraction in financial markets, followed by a severe recession in Europe and knock-on effects globally. Terrorist activity and political unrest may also result in business interruptions and a decreased demand for our products.
The competitive environment for our business is likely to remain intense in 2013. Our competitors, both global and local, will continue to shift resources into emerging markets. We expect continued high levels of competitive challenge to our many category leadership positions. Some of this may be price based, but we also expect strong innovation based competition. With the improvements we have been making to our business we are well prepared for these challenges.
In a period of significant uncertainty and downside risk, we believe Unilevers operational and financial flexibility, and speed of response to a fast changing environment are vital assets. We will continue to focus on our long term strategic priority of driving volume growth ahead of our markets whilst providing a steady improvement in core operating margin and strong cash flow. We are well placed in emerging markets and we expect these markets to continue to drive growth. Our portfolio strategy defines the role of our categories and our 2013 outlook fully reflects the choices made. This gives us confidence that Unilever is fit to win, whatever the circumstances.
Principal risk factors
Our business is subject to risks and uncertainties. The risks that we regard as the most relevant to our business are identified below. We have also commented on certain mitigating actions that we believe help us to manage these risks. However, we may not be successful in deploying some or all of these mitigating actions. If the circumstances in these risks occur or are not successfully mitigated, our cashflow, operating results, financial position, business and reputation could be materially adversely affected. In addition risks and uncertainties could cause actual results to vary from those described below, which may include forward-looking statements, or could impact on our ability to meet our targets or be detrimental to our profitability or reputation.
Description of risk
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What we are doing to manage the risk
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Consumer Preference
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As a branded goods business, Unilevers success depends on the value and relevance of our brands and products to consumers across the world and on our ability to innovate.
Consumer tastes, preferences and behaviours are constantly changing and Unilevers ability to respond to these changes and to continue to differentiate our brands and products is vital to our business.
We are dependent on creating innovative products that continue to meet the needs of our consumers. If we are unable to innovate effectively, Unilevers sales or margins could be materially adversely affected. |
We continuously monitor external market trends and collate consumer, customer and shopper insight in order to develop category and brand strategies.
Our Research and Development function actively searches for ways in which to translate the trends in consumer preference and taste into new technologies for incorporation into future products.
Our innovation management process deploys the necessary tools, technologies and resources to convert category strategies into projects and category plans, develop products and relevant brand communication and successfully roll out new products to our consumers.
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Description of risk
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What we are doing to manage the risk
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Competition
The activities of our competitors may adversely impact our business.
Unilever operates globally in competitive markets where other local, regional and global companies are targeting the same consumer base.
Our retail customers frequently compete with us through private label offerings.
Industry consolidation amongst our direct competitors and in the retail trade can bring about significant shifts in the competitive landscape. Increased competition and actions by competitors or customers could lead to downward pressure on prices and/or a decline in Unilevers market share in the affected category, which could adversely affect Unilevers results and hinder its growth potential.
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Our strategy focuses on investing in markets and segments which we identify as attractive because we have already built, or are confident that we can build, competitive advantage.
We continue to monitor developments in our markets across the world and to direct our resources accordingly to respond to competitive threats and opportunities. |
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Portfolio Management
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Unilevers strategic investment choices will determine the long-term growth and profits of our business.
Unilevers growth and profitability are determined by our portfolio of categories, geographies and channels and how these evolve over time. If Unilever does not make optimal strategic investment decisions then opportunities for growth and improved margin could be missed.
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Our Compass strategy and our business plans are designed to ensure that resources are prioritised towards those categories and markets having the greatest long term potential for Unilever.
Our acquisition activity is driven by our portfolio strategy with a clear, defined evaluation process. |
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Sustainability
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The success of our business depends on finding sustainable solutions to support long-term growth.
Unilevers vision to double the size of our business while reducing our environmental footprint and increasing our positive social impact will require more sustainable ways of doing business. This means reducing our environmental footprint while increasing the positive social benefits of Unilevers activities. We are dependent on the efforts of partners and various certification bodies to achieve our sustainability goals. There can be no assurance that sustainable business solutions will be developed and failure to do so could limit Unilevers growth and profit potential and damage our corporate reputation. |
The Unilever Sustainable Living Plan sets clear long-term commitments for health and well-being, environmental impact and enhancing livelihoods. These are underpinned by specific targets in areas such as sustainable sourcing, water usage, waste generation and disposal and greenhouse gas emissions. These targets are being integrated into Unilevers day-to-day business operations.
The Unilever Sustainable Development Group, comprising five external specialists in corporate responsibility and sustainability, monitors the execution of this strategy.
Progress towards the Unilever Sustainable Living Plan is monitored by the Unilever Leadership Executive and the Boards.
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Customer Relationships
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Successful customer relationships are vital to our business and continued growth.
Maintaining strong relationships with our customers is necessary for our brands to be well presented to our consumers and available for purchase at all times.
The strength of our customer relationships also affects our ability to obtain pricing and secure favourable trade terms. Unilever may not be able to maintain strong relationships with customers and failure to do so could negatively impact the terms of business with the affected customers and reduce the availability of our products to consumers.
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We build and maintain trading relationships across a broad spectrum of channels ranging from centrally managed multinational customers through to small traders accessed via distributors in many developing countries.
We develop joint business plans with all our key customers that include detailed investment plans and customer service objectives and we regularly monitor progress.
We have developed capabilities for customer sales and outlet design which enable us to find new ways to improve customer performance and enhance our customer relationships.
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People
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A skilled workforce is essential for the continued success of our business.
Our ability to attract, develop and retain the right number of appropriately qualified people is critical if we are to compete and grow effectively. |
Resource committees have been established and implemented throughout our business. These committees have responsibility for identifying future skills and capability needs, developing career paths and identifying the key talent and leaders of the future.
We have an integrated management development process which includes regular performance reviews underpinned by a common set of leadership behaviours, skills and competencies.
|
Unilever Annual Report and Accounts 2012 |
Report of the Directors About Unilever 37 |
RISKS continued
Description of risk
|
What we are doing to manage the risk
|
|||||||
This is especially true in our key emerging markets where there can be a high level of competition for a limited talent pool. The loss of management or other key personnel or the inability to identify, attract and retain qualified personnel could make it difficult to manage the business and could adversely affect operations and financial results.
|
We have targeted programmes to attract and retain top talent and we actively monitor our performance in retaining talent within Unilever. |
|||||||
Supply Chain
|
||||||||
Our business depends on securing high quality materials, efficient manufacturing and the timely distribution of products to our customers.
Our supply chain network is exposed to potentially adverse events such as physical disruptions, environmental and industrial accidents or bankruptcy of a key supplier which could impact our ability to deliver orders to our customers.
The quality and safety of our products are of paramount importance for our brands and our reputation. Nevertheless, the risk that raw materials are accidentally or maliciously contaminated throughout the supply chain or that other product defects occur due to human error or equipment failure cannot be fully excluded. Such incidents can impact on both results and the reputation of our business.
The cost of our products can be significantly affected by the cost of the underlying commodities and materials from which they are made. Fluctuations in these costs cannot always be passed on to the consumer through pricing. |
We have contingency plans designed to enable us to secure alternative key material supplies at short notice, to transfer or share production between manufacturing sites and to use substitute materials in our product formulations and recipes.
These contingency plans also extend to an ability to intervene directly to support a key supplier should it for any reason find itself in difficulty or be at risk of negatively affecting a Unilever product.
We have policies and procedures designed to ensure the health and safety of our employees and the products in our facilities and to deal with major incidents or crises including business continuity and disaster recovery.
Our product quality controls are extensive and are regularly tested to ensure that they are effective. All of our key suppliers are periodically reviewed to ensure they meet the rigorous quality standards that our products demand.
Commodity price risk is actively managed through forward-buying of traded commodities and other hedging mechanisms. Trends are monitored and modelled regularly and integrated into our forecasting process.
|
|||||||
Systems and Information
|
||||||||
Unilevers operations are increasingly dependent on IT systems and the management of information.
We interact electronically with customers, suppliers and consumers in ways which place ever greater emphasis on the need for secure and reliable IT systems and infrastructure and careful management of the information that is in our possession.
Disruption of our IT systems could inhibit our business operations in a number of ways, including disruption to sales, production and cash flows, ultimately impacting our results.
There is also a threat from unauthorised access and misuse of sensitive information. Unilevers information systems could be subject to unauthorised access which disrupts Unilevers business and/or leads to loss of assets.
|
Hardware that runs and manages core operating data is fully backed up with separate contingency systems to provide real time back-up operations should they ever be required.
We maintain a global system for the control and reporting of access to our critical IT systems. This is supported by an annual programme of testing of access controls.
We have policies covering the protection of both business and personal information, as well as the use of IT systems and applications by our employees. Our employees are trained to understand these requirements.
We have standardised ways of hosting information on our public web-sites and have systems in place to monitor compliance with appropriate privacy laws and regulations, and with our own policies. |
|||||||
Business Transformation
|
||||||||
Successful execution of business transformation projects is key to delivering their intended business benefits and avoiding disruption to other business activities.
Unilever is continually engaged in major change projects, including acquisitions and disposals and outsourcing, to drive continuous improvement in our business and to strengthen our portfolio and capabilities.
Failure to execute such transactions or change projects successfully, or performance issues with third party outsourced providers on which we are dependent, could result in under-delivery of the expected benefits. Furthermore, disruption may be caused in other parts of the business. |
All acquisitions, disposals and global restructuring projects are sponsored by a Unilever Leadership Executive member. Regular progress updates are provided to the Unilever Leadership Executive.
Sound project disciplines are used in all merger, acquisitions, restructuring and outsourcing projects and these projects are resourced by dedicated and appropriately qualified personnel. The performance of third party outsourced providers is kept under constant review, with potential disruption limited to the time and cost required to instal alternative providers.
Unilever also monitors the volume of change programmes underway in an effort to stagger the impact on current operations and to ensure minimal disruption.
|
38 Report of the Directors About Unilever | Unilever Annual Report and Accounts 2012 |
Description of risk
|
What we are doing to manage the risk
|
|||||||
External economic and political risks,
|
||||||||
Unilever operates across the globe and is exposed to a range of external economic and political risks and natural disasters that may affect the execution of our strategy or the running of our operations.
Adverse economic conditions may result in reduced consumer demand for our products, and may affect one or more countries within a region, or may extend globally.
Government actions such as fiscal stimulus, changes to taxation and price controls can impact on the growth and profitability of our local operations.
Social and political upheavals and natural disasters can disrupt sales and operations.
In 2012, more than half of Unilevers turnover came from emerging markets including Brazil, India, Indonesia, Turkey, South Africa, China, Mexico and Russia. These markets offer greater growth opportunities but also expose Unilever to economic, political and social volatility in these markets. |
The breadth of Unilevers portfolio and our geographic reach help to mitigate our exposure to any particular localised risk to an extent. Our flexible business model allows us to adapt our portfolio and respond quickly to develop new offerings that suit consumers and customers changing needs during economic downturns.
We regularly update our forecast of business results and cash flows and, where necessary, rebalance investment priorities.
We have continuity planning designed to deal with crisis management in the event of political and social events and natural disasters.
We believe that many years of exposure to emerging markets has given us experience operating and developing our business successfully during periods of economic, political or social change. |
|||||||
Eurozone risk
|
||||||||
Issues arising out of the debt crisis in Europe could have a material adverse effect on Unilevers business in a number of ways.
Uncertainty, lack of confidence and any further deterioration in the situation could lead to lower growth and further recession in Europe and elsewhere.
Our operations would be affected if Eurozone countries were to leave the euro. In particular: our European supply chain would face economic and operational challenges; our customers and suppliers may be adversely affected, leading to heightened counterparty credit risk; and our investment in the country concerned could be impaired and may be subject to exchange controls and translation risks going forward. |
Unilever is committed to maintaining its operations in all European countries.
We have conducted scenario planning in respect of a Eurozone break-up, or of countries leaving the Eurozone, and this has been reviewed by the Boards.
We are taking measures designed to minimise the impact of the potential scenarios whilst continuing to trade as normal, including: developing contingency plans in respect of our supply chain operations; exercising additional caution with our counterparty exposures; taking prudent balance sheet measures in relation to high risk countries; and strengthening our short term liquidity positions. |
|||||||
Financial
|
||||||||
Unilever is exposed to a variety of external financial risks.
Changes to the relative value of currencies can fluctuate widely and could have a significant impact on business results. Further, because Unilever consolidates its financial statements in euros it is subject to exchange risks associated with the translation of the underlying net assets and earnings of its foreign subsidiaries.
We are also subject to the imposition of exchange controls by individual countries which could limit our ability to import materials paid in foreign currency or to remit dividends to the parent company.
Currency rates, along with demand cycles, can also result in significant swings in the prices of the raw materials needed to produce our goods.
|
Currency exposures are managed within prescribed limits and by the use of forward foreign exchange contracts. Further, operating companies borrow in local currency except where inhibited by local regulations, lack of local liquidity or local market conditions. We also hedge some of our exposures through the use of foreign currency borrowing or forward exchange contracts.
Our interest rate management approach aims to achieve an optimal balance between fixed and floating rate interest exposures on expected net debt.
We seek to manage our liquidity requirements by maintaining access to global debt markets through short-term and long-term debt programmes. In addition, we have high committed credit facilities for general corporate purposes.
|
Unilever Annual Report and Accounts 2012 |
Report of the Directors About Unilever 39 |
RISKS continued
Description of risk
|
What we are doing to manage the risk
|
|||||||
Unilever may face liquidity risk, i.e. difficulty in meeting its obligations, associated with its financial liabilities. A material and sustained shortfall in our cash flow could undermine Unilevers credit rating, impair investor confidence and also restrict Unilevers ability to raise funds.
We are exposed to market interest rate fluctuations on our floating rate debt. Increases in benchmark interest rates could increase the interest cost of our floating rate debt and increase the cost of future borrowings.
In times of financial market volatility, we are also potentially exposed to counterparty risks with banks, suppliers and customers.
Certain businesses have defined benefit pension plans, most now closed to new employees, which are exposed to movements in interest rates, fluctuating values of underlying investments and increased life expectancy. Changes in any or all of these inputs could potentially increase the cost to Unilever of funding the schemes and therefore have an adverse impact on profitability and cash flow.
|
Group Treasury regularly monitors exposure to our banks, tightening counter party limits where appropriate. Unilever actively manages its banking exposures on a daily basis.
We regularly assess and monitor counterparty risk in our customers and take appropriate action to manage our exposures.
Our pension investment standards require us to invest across a range of equities, bonds, property, alternative assets and cash such that the failure of any single investment will not have a material impact on the overall value of assets.
The majority of our assets, including those held in our pooled investment vehicle, Univest, are managed by external fund managers and are regularly monitored by pension trustees and central pensions and investment teams.
Further information on financial instruments and capital and treasury risk management is included in note 16 on pages 116 to 120.
|
|||||||
Ethical
|
||||||||
Acting in an ethical manner, consistent with the expectations of customers, consumers and other stakeholders is essential for the protection of the reputation of Unilever and its brands.
Unilevers brands and reputation are valuable assets and the way in which we operate, contribute to society and engage with the world around us is always under scrutiny both internally and externally. Despite the commitment of Unilever to ethical business and the steps we take to adhere to this commitment, there remains a risk that activities or events cause us to fall short of our desired standard, resulting in damage to Unilevers corporate reputation and business results.
|
Our Code of Business Principles (the Code) and our Code Policies govern the behaviour of our employees, suppliers, distributors and other third parties who work with us.
Our processes for identifying and resolving cases of unethical practice are clearly defined and regularly communicated throughout Unilever. Data relating to instances of unethical practice is reviewed by the Unilever Leadership Executive and by relevant Board committees and helps to determine the allocation of resources for future policy development, training and awareness initiatives. |
|||||||
Legal, Regulatory and Other
|
||||||||
Compliance with laws and regulations is an essential part of Unilevers business operations.
Unilever is subject to local, regional and global laws and regulations in such diverse areas as product safety, product claims, trademarks, copyright, patents, competition, employee health and safety, the environment, corporate governance, listing and disclosure, employment and taxes.
Failure to comply with laws and regulations could expose Unilever to civil and/or criminal actions leading to damages, fines and criminal sanctions against us and/or our employees with possible consequences for our corporate reputation.
Changes to laws and regulations could have a material impact on the cost of doing business.
Unilever is also exposed to varying degrees of risk and uncertainty related to other factors including environmental, political, social and fiscal risks. All these risks could materially affect Unilevers business. There may be other risks which are unknown to Unilever or which are currently believed to be immaterial.
|
The Code of Business Principles sets out our commitment to complying with the laws and regulations of the countries in which we operate. In specialist areas the relevant teams at global, regional or local level are responsible for setting detailed standards and ensuring that all employees are aware of and comply with regulations and laws specific and relevant to their roles.
Our legal specialists are heavily involved in monitoring and reviewing our practices to provide reasonable assurance that we remain aware of and in line with all relevant laws and legal obligations.
Various mitigating processes exist within Unilever operating systems that are designed to help mitigate other areas of risk including terrorism, fiscal and other forms of regulatory change or economic instability. |
40 Report of the Directors About Unilever | Unilever Annual Report and Accounts 2012 |
Unilever Annual Report and Accounts 2012 | Report of the Directors About Unilever 41 |
|
|
|
| |||
Michael Treschow |
Kees Storm | Paul Polman |
Jean-Marc Huët | |||
Chairman |
Vice-Chairman and Senior Independent | Chief Executive Officer |
Chief Financial Officer | |||
Director | Executive Director |
Executive Director | ||||
|
|
|
| |||
Nationality Swedish Age 69 |
Nationality Dutch Age 70 | Nationality Dutch Age 56 |
Nationality Dutch Age 43 | |||
Appointed Chairman May 2007 |
Appointed May 2006 |
Appointed CEO January 2009 |
Appointed CFO February 2010 | |||
Committee membership: Nominating |
Committee membership: | Appointed Director October 2008 |
Appointed Director May 2010 | |||
& Corporate Governance, Compensation |
Audit, Nominating & Corporate | Key areas of prior experience: |
Key areas of prior experience: | |||
& Management Resources |
Governance, Compensation | Finance, consumer, sales/marketing |
Finance, consumer | |||
Key areas of prior experience: |
& Management Resources | Current external appointments: |
Current external appointments: | |||
Consumer, science & technology |
Key areas of prior experience: Finance | Non-executive director, The Dow |
Non-executive director, Delta | |||
Current external appointments: |
Current external appointments: |
Chemical Company. President, |
Topco Limited | |||
Non-executive director, ABB Group. Chairman, Dometic group. | Chairman, supervisory board, and audit | Kilimanjaro Blind Trust. Vice-chairman, |
Previous relevant experience: | |||
Board member, Knut and Alice |
committee member, KLM Royal Dutch | executive committee, World Business |
Executive vice president and chief | |||
Wallenberg Foundation. Member of the |
Airlines N.V. Member, supervisory | Council for Sustainable Development |
financial officer, Bristol-Myers Squibb | |||
European Advisory, Eli Lilly and Company |
board, AEGON N.V. Chairman and audit | Previous relevant experience: |
Company 2008-2009. Non-executive | |||
Previous relevant experience: |
committee member, Anheuser-Busch | Procter & Gamble Co. 1979-2001, group |
director, Mead Johnson Nutrition 2009. | |||
Chairman, Telefonaktiebolaget L M |
InBev S.A. Board member and audit | president Europe and officer, Procter & |
Chief financial officer, Royal Numico | |||
Ericsson 2002-2011. Chairman, AB |
committee member, Baxter | Gamble Co. 2001-2006. Chief financial |
NV 2003-2007. Investment Banking, | |||
Electrolux 2004-2007, Confederation |
International, Inc. Vice-chairman, | officer, Nestlé S.A. 2006-2008. Director, |
Goldman Sachs International 1993-2003. | |||
of Swedish Enterprise 2004-2007. CEO, |
supervisory board, Pon Holdings B.V. | Alcon Inc 2006-2008. Executive vice |
Clement Trading 1991-1993 | |||
AB Electrolux 1997-2002, Atlas Copco |
Previous relevant experience: |
president and zone director for the |
||||
1991-1997 |
Chairman, executive board, AEGON | Americas 2008 |
||||
N.V. 1993-2002 | ||||||
|
|
|
| |||
Louise Fresco |
Ann Fudge | Charles E Golden |
Byron E Grote | |||
Non-Executive Director |
Non-Executive Director | Non-Executive Director |
Non-Executive Director | |||
|
|
|
| |||
Nationality Dutch Age 61 |
Nationality American Age 61 | Nationality American Age 66 |
Nationality American/British Age 64 | |||
Appointed May 2009 |
Appointed May 2009 | Appointed May 2006 |
Appointed May 2006 | |||
Committee membership: |
Committee membership: Nominating | Committee membership: Audit |
Committee membership: | |||
Corporate Responsibility |
& Corporate Governance, Compensation | Key areas of prior experience: Finance |
Audit (Chairman) | |||
Key areas of prior experience: |
& Management Resources | Current external appointments: |
Key areas of prior experience: Finance | |||
Science/technology, academia |
Key areas of prior experience: | Non-executive director Indiana |
Current external appointments: | |||
Current external appointments: |
Consumer, sales/marketing | University Health, Hill-Rom Holdings, |
Executive vice president, Corporate | |||
Professor of international |
Current external appointments: | Eaton Corporation and the Lilly |
Business Activities, BP p.l.c. | |||
development and sustainability |
Non-executive director, Infosys, | Endowment. Member of finance |
Previous relevant experience: Chief | |||
at the University of Amsterdam. |
Novartis AG, General Electric Co. | committee, Indianapolis Museum |
financial officer, BP p.l.c. 2002-2011. | |||
Supervisory director, RABO Bank. |
Chairman, US Programs Advisory | of Art |
Member, UK Business Government | |||
Member, Social and Economic |
Panel of Gates Foundation. Honorary | Previous relevant experience: |
Forum on Tax and Globalisation 2008- | |||
Council of the Netherlands (SER) |
director of Catalyst. Member, Foreign | Executive vice-president, chief |
2010. Vice-chairman, UK Governments | |||
Previous relevant experience: Director |
Affairs Policy Board, U.S. State | financial officer and director, |
Public Services Productivity Panel | |||
of research (1997-1999) and assistant |
Department. Member, finance | Eli Lilly and Company 1996-2006 |
1998-2000 | |||
director-general for agriculture (2000- |
committee of Harvard University | |||||
2006), the Agriculture Department |
Previous relevant experience: | |||||
of the UNs Food and Agriculture |
Non-executive director, Buzzient Inc. | |||||
Organisation (FAO), president of the |
2010-2013. Chairman & CEO, Young & | |||||
Advisory Council, Research on Nature |
Rubicam 2003-2006. Various positions | |||||
and Environment, vice-chair, Council |
at General Mills 1977-1986, Kraft General | |||||
of the United Nations University |
Foods 1986-2001 | |||||
|
|
|
| |||
Sunil Bharti Mittal |
Hixonia Nyasulu | Sir Malcolm Rifkind |
Paul Walsh | |||
Non-Executive Director |
Non-Executive Director | Non-Executive Director |
Non-Executive Director | |||
|
|
|
| |||
Nationality Indian Age 55 |
Nationality South African Age 58 | Nationality British Age 66 |
Nationality British Age 57 | |||
Appointed May 2011 |
Appointed May 2007 | Appointed May 2010 |
Appointed May 2009 | |||
Committee membership: None |
Committee membership: | Committee membership: Corporate |
Committee membership: Nominating | |||
Key areas of prior experience: |
Corporate Responsibility | Responsibility (Chairman) |
& Corporate Governance (Chairman), | |||
Science/technology, sales/marketing |
Key areas of prior experience: | Key areas of prior experience: |
Compensation & Management | |||
Current external appointments: |
Sales/marketing | Government, legal and |
Resources (Chairman) | |||
Founder, chairman and group CEO, |
Current external appointments: | regulatory affairs |
Key areas of prior experience: Finance, | |||
Bharti Enterprises. Prime Ministers |
Director, Barloworld Ltd. | Current external appointments: |
consumer, sales/marketing | |||
Council on Trade & Industry (India). |
Member, advisory board of | Non-executive director, Adam |
Current external appointments: | |||
Member, Board of SoftBank, Carnegie |
JP Morgan S.A. Beneficiary, | Smith International and Continental |
Chief executive officer and director, | |||
Endowment, International |
Sequel Property Investments | Farmers Group plc |
Diageo PLC. Non-executive director, | |||
Telecommunication Union, Harvard |
Previous relevant experience: | Previous relevant experience: |
FedEx Corporation Inc. and Avanti | |||
Universitys Global Advisory Council, |
Chairman, Sasol Ltd, Ithala | A Queens Counsel. Served in |
Communications Group PLC. | |||
Harvard Business Schools Deans |
Development Finance Corporation. | Cabinets of Margaret Thatcher |
Ambassador, Business Ambassador | |||
Advisory Board. Commissioner of |
Deputy chairman, Nedbank Limited. | and John Major, last position |
Network, adviser to the Department of | |||
Broadband Commission at ITU. |
Non-executive director, AVI Ltd | being that of Foreign Secretary |
Energy and Climate Change. Member, | |||
Previous relevant experience: |
International Business Leaders Forum. | |||||
Non-executive director, Standard |
Previous relevant experience: | |||||
Chartered Bank PLC; president, |
Chief operating officer, Diageo plc | |||||
Confederation of Indian Industry |
2000. CEO, The Pilsbury Company. | |||||
Non-executive director, Centrica plc | ||||||
|
|
|
|
42 Report of the Directors Governance | Unilever Annual Report and Accounts 2012 |
For Paul Polman and Jean-Marc Huët see page 42
|
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| |||
Doug Baillie |
Professor Geneviève Berger | David Blanchard |
Kevin Havelock | |||
Chief HR Officer |
Chief Science Officer | Chief Category R&D Officer |
Refreshment | |||
|
|
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| |||
Nationality British Age 57 |
Nationality French Age 58 | Nationality British Age 48 |
Nationality British Age 55 | |||
Appointed Chief HR Officer in |
Appointed to ULE July 2008 | Appointed to ULE February 2013. |
Appointed to ULE November 2011. | |||
February 2011 |
Previous posts include: Non-executive | Joined Unilever 1986 |
Joined Unilever 1985 | |||
Appointed to ULE as President |
director, Smith & Nephew plc 2010- | Previous Unilever posts include: |
Previous Unilever posts include: | |||
of Western Europe in May 2008. |
2012. Chairman of the Health Advisory | Senior Vice President for Unilever |
Chairman, Unilever Arabia and | |||
Joined Unilever 1978 |
Board for the European Commission; | Research & Development. Chairman |
President Unilever USA | |||
Previous Unilever posts include: |
Professor at the University of Paris | of Unilever Canada Inc. SVP Marketing |
||||
CEO Hindustan Unilever Limited; |
and La Pitié-Salpêtriére Teaching | Operations Foods America. VP R&D |
||||
Group-Vice President South Asia 2006; |
Hospital; and director general of | for Global Dressings. Director of |
||||
Group Vice-President Africa, Middle |
the French Centre National de la | Product Development for Margarine |
||||
East & Turkey 2005; President Africa |
Recherche Scientifique | and Spreads |
||||
Regional Group 2004; National Manager |
Current external appointments: | |||||
Unilever South Africa 2000 |
Non-executive director, | |||||
Current external appointments: |
AstraZeneca PLC | |||||
Board member, Synergos |
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|
|
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| |||
Alan Jope |
Kees Kruythoff | Dave Lewis |
Harish Manwani | |||
North Asia |
North America | Personal Care |
Chief Operating Officer | |||
|
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| |||
Nationality British Age 48 |
Nationality Dutch Age 44 | Nationality British Age 47 |
Nationality Indian Age 59 | |||
Appointed to ULE November 2011. |
Appointed to ULE November 2011. | Appointed to ULE May 2010. |
Appointed Chief Operating Officer in | |||
Joined Unilever 1985 |
Joined Unilever 1993 | Joined Unilever 1987 |
September 2011 | |||
Previous Unilever posts include: |
Previous Unilever posts include: | Previous Unilever posts include: |
Appointed to ULE April 2005 as | |||
Chairman of Unilever Greater China; |
Executive vice president Brazil 2008; | President, Americas; Chairman, |
President Asia Africa. Joined Unilever | |||
Global Category Leader for SCC and |
Chairman of Unilever Foods South | Unilever UK and Ireland; Managing |
1976. Non-Executive Chairman, | |||
Dressings; Chief operating officer and |
Africa 2004; and a member of the board | Director, UK home and personal care |
Hindustan Unilever | |||
subsequently president of Unilevers |
of Unilever Bestfoods Asia 2002 | business; Senior Vice President for |
Previous Unilever posts include: | |||
combined Home and Personal Care |
Current external appointments: | Home and Personal Care, Central and |
President Asia, Africa, Central & Eastern | |||
business in North America; and vice |
Member of the Worldwide board of | Eastern Europe; Managing Director and |
Europe 2008; and Group President, Home | |||
president, Personal Care Thailand |
directors, Enactus; Board member, USA | innovation leader, Indonesia/South East |
and Personal Care, North America 2004 | |||
Current external appointments: |
Grocery Manufacturing Association. | Asia; Marketing Director and innovation |
Current external appointments: | |||
Member of the advisory board for |
leader, Homecare South America |
Member of executive board, Indian School | ||||
China, Enactus |
Current external appointments: Non- |
of Business; non-executive director, | ||||
executive director, British Sky |
Whirlpool Corporation; board member, | |||||
Broadcasting Group PLC |
Singapore Economic Development | |||||
Board; board member, The Human | ||||||
Capital Leadership Institute | ||||||
|
|
|
| |||
Antoine de Saint-Affrique |
Pier Luigi Sigismondi | Ritva Sotamaa |
Keith Weed | |||
Foods |
Chief Supply Chain Officer | Chief Legal Officer |
Chief Marketing and Communication Officer | |||
|
|
|
| |||
Nationality French Age 48 |
Nationality Italian Age 47 | Nationality Finnish Age 49 |
Nationality British Age 51 | |||
Appointed to ULE November 2011. |
Appointed to ULE September 2009 | Appointed to ULE February 2013 |
Appointed to ULE April 2010. | |||
First joined Unilever 1989 until 1997; |
Previous posts include: Nestlé S.A. | Previous posts include: General |
Joined Unilever 1983 | |||
re-joined Unilever 2000 |
in 2002. Moved to Nestlé Mexico in 2005 | Counsel for Siemens AG Siemens |
Previous Unilever posts include: | |||
Previous Unilever posts include: |
as Vice-President of Operations and | Healthcare; various posts at General |
Executive Vice President for Global | |||
Executive Vice President Skin category; |
R&D. Prior to Nestlé S.A. he was Vice | Electric - GE Healthcare (the most recent |
Home Care & Hygiene; Chairman of | |||
Executive Vice President Unilever Central |
President of Operations for A T Kearney | being General Counsel, GE Healthcare |
Lever Fabergé; SVP Hair and Oral Care | |||
& Eastern Europe. Vice President |
Current external appointments: Board | Systems); General Counsel, |
Current external appointments: Non- | |||
Marketing for Liebig Maille Amora, |
member, GS1 | Instrumentarium Corporation |
executive director, Sun Products | |||
Danone Group/PAI 1997-2000 |
Corporation; board member, Business | |||||
Current external appointments: French |
in the Community International Board, | |||||
State Foreign Trade Adviser, Comité |
World Economic Forum Consumer | |||||
National des Conseillers du Commerce |
Industry Board | |||||
Extérieur de la France; non-executive |
||||||
director, Essilor International |
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| |||
Jan Zijderveld |
||||||
Europe |
||||||
|
||||||
Nationality Dutch Age 48 |
||||||
Appointed to ULE February 2011. |
||||||
Joined Unilever 1988 |
||||||
Previous Unilever posts include: |
||||||
Executive Vice President South East Asia |
||||||
and Australasia; Chairman of Unilever |
||||||
Middle East North Africa; Chairman of |
||||||
Nordic ice cream business; Marketing |
||||||
Director Italy; European Olive Oil |
||||||
Category Director; and General Manager |
||||||
Sauces and Dressings Europe |
||||||
Current external appointments: |
||||||
Board member, AIM, FoodDrinkEurope, |
||||||
Pepsi/Unilever Lipton JV; board member |
||||||
and co-chair, ECR Europe (Efficient |
||||||
Consumer Response); member, Groupe |
||||||
dOuchy; member, Dutch Advisory |
||||||
Council, INSEAD |
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|
Unilever Annual Report and Accounts 2012 | Report of the Directors Governance 43 |
44 Report of the Directors Governance | Unilever Annual Report and Accounts 2012 |
Unilever Annual Report and Accounts 2012 | Report of the Directors Governance 45 |
CORPORATE GOVERNANCE continued
46 Report of the Directors Governance | Unilever Annual Report and Accounts 2012 |
Unilever Annual Report and Accounts 2012 | Report of the Directors Governance 47 |
CORPORATE GOVERNANCE continued
Date
|
Action |
Progress |
||||||
2012 evaluation (internal) | Shape the meeting agendas to enable Directors to bring more of their personal experience and insight to the discussions | 2013 agendas structured around strategic priorities and operational topic areas rather than being weighted towards category and geographical performance | ||||||
Directors to receive more regular feedback from the Chairman on their personal contributions | The comprehensive personal and Board evaluations performed at year end are to be supplemented by a mid-year discussion between the Chairman and each Director | |||||||
Enhance the ways of working for the Committees | Information flows from management have been defined and priorities for each Committee agreed for the year | |||||||
Further interaction between Non-Executive Directors and Senior Executives around site visits or otherwise | Time to be built into personal and Board agendas throughout the year for Non-Executive Directors to interact with Senior Executives | |||||||
Greater periodic review by the Board of historic decisions taken and actions agreed
|
More frequent periodic reviews of historic decisions taken and actions agreed to be built into the agendas
|
|||||||
2011 evaluation (external) |
Build some sessions into the agenda during which the Directors can share experiences on a specific topic |
Strategic discussions have been expanded to include blue sky thinking around topics influenced by Unilevers strategy including e-commerce, Eurozone and looking ahead to 2020 |
||||||
Build into the end of each Board meeting agenda a five-minute session during which actions taken can be reviewed and feedback given on the Meeting
|
Meetings are now concluded with a summary by the Chairman of key decisions and actions taken | |||||||
2010 evaluation (internal) |
Increase Board representation from China and India |
Sunil Bharti Mittal from India was appointed to the Boards following shareholder approval at the AGMs in May 2011, and two Non-Executive Directors from China are being proposed at the 2013 AGMs |
||||||
Consider using electronic methods of receiving Board meeting materials | Unilever now uses an online tool for dissemination of Board meeting materials with no hard copy meeting packs now being produced | |||||||
Meetings to focus more on gaining knowledge/experience from the Directors rather than simply providing them with information | Presentations are now shorter to allow more time for feedback from Directors and discussion between Directors | |||||||
Continue to hold important educational sessions | Board knowledge sessions are built into the meeting timetable and held at least three times each year
|
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Unilever Annual Report and Accounts 2012 | Report of the Directors Governance 49 |
CORPORATE GOVERNANCE continued
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Unilever Annual Report and Accounts 2012 | Report of the Directors Governance 51 |
CORPORATE GOVERNANCE continued
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Unilever Annual Report and Accounts 2012 | Report of the Directors Governance 53 |
CORPORATE GOVERNANCE continued
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Unilever Annual Report and Accounts 2012 | Report of the Directors Governance 55 |
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Unilever Annual Report and Accounts 2012 | Report of the Directors Governance 57 |
REPORT OF THE CORPORATE RESPONSIBILITY COMMITTEE
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Unilever Annual Report and Accounts 2012 | Report of the Directors Governance 59 |
REPORT OF THE NOMINATING AND CORPORATE GOVERNANCE COMMITTEE
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Unilever Annual Report and Accounts 2012 | Report of the Directors Governance 61 |
DIRECTORS REMUNERATION REPORT
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Unilever Annual Report and Accounts 2012 | Report of the Directors Governance 63 |
DIRECTORS REMUNERATION REPORT continued
The following section sets out Unilevers 2013 remuneration policy which remains unchanged from previous years.
Element |
Purpose and link to strategy
|
Operation |
Opportunity |
Performance metrics |
Changes made to policy
|
Supporting information | ||||||||||||||||||||||
Base salary | Supports the recruitment and retention of Executive Directors of the calibre required to implement our strategy. | Set by the Boards on the recommendation of the Committee and generally reviewed once a year against three reference points:
(i) peers in other global companies of a similar financial size (market capitalisation and turnover) and complexity to Unilever, taking into consideration factors such as the number of employees, human capital complexity and international nature of the business*;
(ii) the individuals skills, experience and performance; and
(iii) pay and conditions across the wider organisation.
Base salaries may be reviewed more often than annually in exceptional circumstances.
Base salary changes are usually effective from 1 January. |
Unilevers policy is to set the reference point for all Executive Director salaries at around median against an appropriate peer group and then to set individual base salary levels at an appropriate level relative to that reference point by taking into consideration the individuals skills, experience and performance.
The Boards, on the proposal of the Committee, apply that approach to manage the base salary levels of the Executive Directors. |
n/a | None | For 2013, base salaries for Executive Directors are:
CEO £1,010,000 CFO £714,000 | ||||||||||||||||||||||
Fixed allowance |
Provides a competitive alternative to the provision of itemised benefits and pension.
Simplifies the package.
Delinks increases in benefits and allowances from increases in base salary.
Paid in cash.
|
The fixed allowance is reviewed periodically by the Committee against market benchmarks based on other companies of a similar size and complexity in line with the approach to base salary.
Changes in the fixed allowance are usually effective from 1 January. |
Unilevers policy is to set the reference point for fixed allowances at or below median against an appropriate peer group and then to make as few variations as possible based on individual circumstances.
The Boards, on the proposal of the Committee, apply that approach to manage the fixed allowances of the Executive Directors. |
n/a | None | For 2013, fixed allowances for Executive Directors are:
CEO £250,000 CFO £300,000
For the CFO, this includes housing allowance, which is being phased out to nil in 2015. At current rates the CFOs fixed allowance will be reduced to £260,000 per annum in 2014 and to £220,000 per annum in 2015. |
* | For 2012, the peer group included: Anglo American, AstraZeneca, BASF, Bayer, BHP Billiton, BMW, BP, British American Tobacco, BT, Carrefour, Centrica, Daimler, GlaxoSmithKline, Imperial Tobacco, Metro, National Grid, Nestlé, Novartis, Peugeot, Rio Tinto, Roche, Royal Dutch Shell, Sanofi, Siemens, Tesco, ThyssenKrupp, Total, Vodafone, Volkswagen and Xstrata. The peer group used for benchmarking purposes is reviewed at appropriate intervals to ensure it remains appropriate. |
64 Report of the Directors Governance | Unilever Annual Report and Accounts 2012 |
Element |
Purpose and link to strategy
|
Operation |
Opportunity |
Performance metrics |
Changes made to policy |
Supporting information |
||||||||||||||||||||
Other benefits plus pension | Provides certain benefits on a cost-effective basis. | Provision of death, disability and medical insurance cover and actual tax return preparation costs.
Unilever will also pay the CEOs social security obligation in the CEOs country of residence to protect him against the difference between the employee social security obligations in his country of residence versus the UK.
In line with the commitments made to the CEO upon recruitment, he also receives a conditional supplemental pension accrual to compensate him for the arrangement forfeited on leaving his previous employer. This supplemental pension accrual is conditional on the CEO remaining in employment with Unilever to age 60 and subsequently retiring from active service or his death or total disability prior to retirement. |
Social security obligation in CEOs country of residence dependent on earnings in year.
Conditional supplemental pension accrual capped from 2012 onwards at 12% of the lower of actual base salary or 2011 base salary (£920,000) plus 3% pa. |
n/a | None | For 2013, the accrual for the CEOs conditional supplemental pension will be capped at £117,123.
For details of benefits provided during 2012 see page 77. |
||||||||||||||||||||
Annual bonus | The annual bonus has been designed to support our business strategy and the ongoing enhancement of shareholder value through a focus on the delivery of annual financial, strategic and operational objectives. | Unilever targets set annually to ensure they are appropriately stretching for the delivery of threshold, target and maximum performance.
Payouts, determined by the Committee, depend on actual performance against targets, the quality of results and performance against personal performance goals.
Annual bonuses may be subject to clawback in the event of a significant downward revision of the financial results of the Group.
Unless otherwise determined by the Committee, Executive Directors are required to invest at least 25% of their annual bonus into the MCIP (see page 66].
|
Target bonus opportunities (as percentage of base salary) are:
CEO 120% other Executive Directors 100%
Maximum bonus opportunities (as percentage of base salary) are:
CEO 200% other Executive Directors 150% |
Annual bonus awards are based on: actual performance against Unilever targets, the quality of results and performance against personal performance goals.
Performance metrics are selected to support the annual business strategy and the enhancement of shareholder value.
Unilever targets and personal performance goals for the Executive Directors are set by the Committee on an annual basis and may be changed as appropriate. |
None | For 2013 bonuses, financial performance will be assessed against the following metrics:
underlying sales growth (1/3); underlying volume growth (1/3); and core operating margin improvement (1/3).
In determining annual bonus awards the Committee also assesses the delivery against personal performance goals and the quality of performance; in terms of both business results and leadership, including corporate social responsibility and progress against the delivery of USLP goals. |
Unilever Annual Report and Accounts 2012 |
Report of the Directors Governance 65 |
DIRECTORS REMUNERATION REPORT continued
Element |
Purpose and link to strategy
|
Operation |
Opportunity |
Performance metrics |
Changes made to policy |
Supporting information |
||||||||||||||||||||
Management Co-Investment Plan (MCIP)
The key terms of the MCIP were approved by shareholders at the 2010 AGM. |
The MCIP encourages senior management to shift their focus firmly towards the sustained delivery of high performance results over the longer term by requiring them to invest at least 25% of their annual bonus in Unilevers shares and hold those shares for at least 3 years.
These shares can earn additional matching shares to the extent that long-term performance targets are met. |
Executive Directors are required to buy Unilevers shares out of their after-tax annual bonus. They must invest at least 25% and may invest up to 60% of the value of their gross annual bonus in Unilevers shares (investment shares) and receive a corresponding number of performance-related shares (matching shares), which will vest only after three years subject to:
Unilevers performance against long-term MCIP targets over the next three years; continued employment; and maintenance of the underlying investment shares.
Awards under the MCIP may be subject to clawback in the event of a significant downward revision of the financial results of the Group.
Awards under the MCIP are subject to ultimate remedy whereby the Committee may adjust awards where the result is considered unfair.
|
Vesting of the matching shares ranges between 0% and 150% of the grant level, dependent on actual performance against long-term MClP targets.
As such, the maximum award of matching shares for the CEO and CFO (as a percentage of base salary), assuming a maximum bonus, maximum deferral under the MCIP and maximum performance under the MCIP, would be 180% of base salary and 135% of base salary respectively. |
The Committee sets three-year performance targets for each MClP matching share award and may change these for future awards as the Committee considers appropriate.
Performance metrics are linked to Unilevers clearly stated growth ambition and our long-term business strategy. |
None | Performance metrics for 2013 awards which are measured over the three-year period 2013-2015 are described under the GSIP on page 67.
The Committee considers that using the same performance metrics across both the MCIP and GSIP is appropriate, as the performance metrics used reflect our key strategic goals and maintain the alignment of our incentive plans to delivering our clearly stated growth ambition. Given that we use four different performance metrics, the Committee believes that the proportion of remuneration linked to each performance condition is not excessive. |
66 Report of the Directors Governance | Unilever Annual Report and Accounts 2012 |
Element |
Purpose and link to strategy
|
Operation |
Opportunity |
Performance metrics |
Changes made to policy |
Supporting information |
||||||||||||||||||||||
Global Share Incentive Plan (GSIP)
The key terms of the GSIP were approved by shareholders at the 2007 AGM. |
The GSIP incentivises Executive Directors to achieve Unilevers clearly stated growth ambition by delivering sustained high performance and sustainable returns for shareholders over the longer term. | Awards of shares are made annually with vesting conditional on Unilevers performance against long-term targets over the next three years.
Awards under the GSIP may be subject to clawback in the event of a significant downward revision of the financial results of the Group.
Awards under the GSIP are subject to ultimate remedy whereby the Committee may adjust awards where the result is considered unfair. |
Target awards of conditional shares under the GSIP each year (as a percentage of base salary) are limited to:
CEO 200% other Executive
The vesting range for awards of conditional shares is between 0% and 200% of the grant level. Accordingly the maximum award of shares under the GSIP are (as a percentage of base salary):
CEO 400% other Executive |
The Committee set three-year performance targets for each conditional GSIP award and may change these for future awards as the Committee considers appropriate.
Performance metrics are linked to Unilevers clearly stated growth ambition and its long-term business strategy. |
None | Awards made in 2013 are subject to four equally weighted long-term performance metrics over the three-year period 2013-2015:
underlying sales growth; core operating margin improvement; cumulative operating cash flow; and relative total shareholder return.
For the three business focused metrics, 25% of awards vest for threshold performance and 200% for the GSIP (150% for the MCIP) vest for maximum performance.
Against the TSR comparator group, comprising 19 other companies (20 including Unilever), 60% vests if Unilever is ranked 10th (which is 53rd percentile performance against this group), 100% vests if Unilever is ranked 7th and 200% for the GSIP (150% for the MCIP) vests if Unilever is ranked 3rd or above.
Further details of the TSR comparator group are set out on page 73.
When determining the level of vesting the Committee also considers the underlying performance of the business to ensure the payouts are appropriate.
|
Unilever Annual Report and Accounts 2012 |
Report of the Directors Governance 67 |
DIRECTORS REMUNERATION REPORT continued
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Unilever Annual Report and Accounts 2012 | Report of the Directors Governance 69 |
DIRECTORS REMUNERATION REPORT continued
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DIRECTORS REMUNERATION REPORT continued
When determining bonus payments the Committee considers performance against targets, the quality of business performance and the individual performance rating (in accordance with our Group-wide performance management system).
Performance against targets:
Performance against targets was strong with maximum underlying sales growth and underlying volume growth targets being exceeded, meaning we grew above our markets and outperformed much of the competition. Core operating margin improvement was close to maximum. This included a mix of higher-quality margin drivers and a reduction in restructuring charges.
The Committee considered that the CEO had an exceptional year leading the business to deliver outstanding financial performance, strong returns to shareholders and excellent progress towards achieving a number of the goals set under the USLP. Similarly the Committee considered that the CFO had a strong year, supporting the CEO in delivering this business success.
Taking into account performance against targets, the quality of results and individual contribution, the Committee determined that the CEO should be awarded a bonus of 200% of base salary in respect of 2012 with the CFO being awarded a bonus of 147% of base salary.
2013 bonus policy
There will be no change to the Executive Directors annual bonus opportunities for 2013 as set out in the Remuneration Policy table on page 65 and the annual bonus performance metrics will remain the same as for 2012.
72 Report of the Directors Governance | Unilever Annual Report and Accounts 2012 |
2012 outcomes
The performance period for awards granted on 18 March 2010 ran from 1 January 2010 to 31 December 2012. The award was equally based on the performance metrics outlined in the table below.
Performance against targets:
The calculations performed in determining these performance outturns have been subject to an independent report.
In addition to the above targets, the performance metrics for underlying sales growth and core operating margin improvement were required to reach at least the threshold of the performance range for both performance metrics before any shares, subject to either performance condition, were able to vest. The thresholds for both metrics were met.
The total overall vesting was 109% of target (54.5% of maximum). The Committee considered the level of vesting in the context of performance against targets, the underlying business performance and performance against key peers and determined that it was appropriate.
2013 awards
There will be no change to the Executive Directors GSIP opportunities for 2013 with the target award for the CEO remaining at 200% of base salary and the target award for the CFO remaining at 175% of base salary.
For the three business-focused metrics, 25% of target awards vest for achieving threshold performance. 200% of target awards vest (150% under the MCIP) for maximum performance. In addition, the performance metrics for underlying sales growth and core operating margin improvement must reach the threshold of the performance range for both performance metrics before any shares subject to either performance condition vest.
For the relative TSR measure, Unilevers TSR is measured against a comparator group of other consumer goods companies. TSR measures the return received by a shareholder, capturing both the increase in share price and the value of dividend income (assuming dividends are reinvested). The TSR results are measured on a common currency basis to better reflect the shareholder experience.
The current TSR peer group is as follows:
Avon | Colgate-Palmolive | Heinz | Kimberly-Clark | Procter & Gamble | ||||
Beiersdorf | Danone | Henkel | LOréal | Reckitt Benckiser | ||||
Campbell Soup | General Mills | Kao | Nestlé | Shiseido | ||||
Coca-Cola | Estée Lauder | Kellogg | PepsiCo |
Unilever Annual Report and Accounts 2012 | Report of the Directors Governance 73 |
DIRECTORS REMUNERATION REPORT continued
74 Report of the Directors Governance | Unilever Annual Report and Accounts 2012 |
Unilever Annual Report and Accounts 2012 | Report of the Directors Governance 75 |
DIRECTORS REMUNERATION REPORT continued
The following table provides a summary of the Committees activities during and shortly following the end of the financial year:
Meeting
|
Standing agenda items
|
Other agenda items
|
||||||||
January 2012 | Review and approval of performance for 2011 annual bonus and 2009 long-term incentives.
Setting targets for 2012 annual bonus and 2012-2014 MCIP and GSIP awards.
Review of draft Directors Remuneration Report.
Approval of ULE reward decisions for 2012.
|
Update on shareholder consultation on executive remuneration. | ||||||||
February 2012 | Review of Executive Directors base salary levels. | Update on shareholder consultation on executive remuneration.
|
||||||||
April 2012 | AGM preparation.
|
|||||||||
July 2012 | Update from AGM.
Review of annual and long-term performance for outstanding plans.
Update on European market trends in executive remuneration and corporate governance.
|
Consideration of performance metrics for long-term incentive arrangements. | ||||||||
September 2012 | Review of performance metrics for long-term incentive arrangements including review of feedback from shareholders.
|
|||||||||
October 2012 | Review of annual and long-term performance for outstanding plans.
Update on European market trends in executive remuneration and corporate governance.
Review of benchmarking and initial consideration of base salary increases.
Review of expenses.
Review of terms of reference.
|
Consideration of remuneration policy in light of proposed BIS regulations. | ||||||||
December 2012 | Review of annual and long-term performance for outstanding plans.
Preliminary review of targets for 2013 annual bonus and 2013-2015 MCIP and GSIP awards.
Review of first draft of the Directors Remuneration Report.
Review of Executive Directors base salaries.
|
Consideration of remuneration policy in light of proposed BIS regulations.
Update on Unilever North America Omnibus Equity Compensation Plan. |
||||||||
January 2013
Held following the year end but prior to the finalisation of this report. |
Review and approval of performance for 2012 annual and 2010 long-term incentives.
Setting targets for 2013 annual bonus and 2013-2015 MCIP and GSIP awards.
Review of draft Directors Remuneration Report.
Approval of ULE reward decisions for 2012.
Committee effectiveness evaluation.
|
Advisers
While it is the Committees responsibility to exercise independent judgement, the Committee does request advice from management and professional advisers, as appropriate, to ensure that its decisions are fully informed given the internal and external environment.
The Committee appointed Deloitte LLP to provide independent advice on various matters it considered. Deloitte were appointed in 2011 following an interview process by the Committee. During the year, Deloitte also provided specific tax, consultancy and corporate finance services to Unilever. The Committee is comfortable that the Deloitte LLP engagement partner and team, that provide remuneration advice to the Committee, do not have connections with Unilever NV or Unilever PLC that may impair their independence. The Committee reviewed the potential for conflicts of interest and judged that there were appropriate safeguards against such conflicts.
76 Report of the Directors Governance | Unilever Annual Report and Accounts 2012 |
Deloitte is a member of the Remuneration Consultants Group and, as such, voluntarily operates under the code of conduct in relation to executive remuneration consulting in the UK. Further details can be found at www.remunerationconsultantsgroup.com.
During the year the Committee also sought input from the Chief Executive Officer (Paul Polman), the Chief Human Resources Officer (Doug Baillie) and the SVP Global Head of Reward (Peter Newhouse) on various subjects including the remuneration of senior management. No individual was present when their own remuneration was being discussed to ensure a conflict of interest did not arise. The Committee also received legal and governance advice from the Group Secretary (Tonia Lovell).
Shareholder voting
Unilever remains committed to ongoing shareholder dialogue and takes an active interest in voting outcomes. In the event of a substantial vote against a resolution in relation to Directors remuneration, Unilever would seek to understand the reasons for any such vote and would set out in the following Annual Report and Accounts any actions in response to it.
The following table sets out actual voting in respect of our previous Report:
Voting outcome (% of votes) | For | Against | ||||||||||
2011 Directors Remuneration Report (2012 AGM) |
PLC | 93.9 | % | 6.1 | % |
31,530,263 votes were withheld (c. 2.5% of share capital).
The Directors Remuneration Report is not subject to a shareholder vote in the Netherlands.
Executive Directors remuneration in 2012
Remuneration for individual Executive Directors (audited)
Annual emoluments 2012 | ||||||||||||||||||||||||||||||||
Name and base country | Base salary 000 |
Fixed allowance 000 |
Value of benefits 000 |
Bonus 000 |
Sub
total 000 |
Pension 000 |
Share awards 000 |
Total 000 |
||||||||||||||||||||||||
Paul Polman (UK) |
1,169 | (a) | 308 | (b) | 332 | (c) | 2,406 | (d) | 4,215 | 134 | (e) | 3,290 | (i) | 7,639 | (j) | |||||||||||||||||
Jean-Marc Huët (UK) |
860 | (f) | 419 | (g) | 46 | (h) | 1,295 | (d) | 2,620 | 0 | 2,699 | (i) | 5,319 | |||||||||||||||||||
Total 2012 |
2,029 | 727 | 378 | 3,701 | 6,835 | 134 | 5,989 | 12,958 | ||||||||||||||||||||||||
Total 2011 |
1,840 | 0 | 489 | (k) | 2,133 | 4,462 | 506 | (l) | 5,640 | 10,608 | (m) |
(a) | The CEOs base salary was set in sterling at £920,000 per annum from January 2012 to June 2012. It was increased to £975,200 effective 1 July 2012. |
(b) | Fixed allowance set in sterling at £250,000 which replaced certain benefits and pension. The CEO elected to invest part of his fixed allowance into the Unilever international pension plan fund in 2012. |
(c) | Benefits for medical insurance, tax return preparation and costs of provision for death-in-service benefits and administration. Also includes payment to protect against the difference between the employee social security obligations in his country of residence versus the UK. He also received a further payment of 152,505 in 2012 in relation to his social security obligations for 2010 and 2011 following a reconciliation for those years. This data was previously captured in the Allowances and Other Payments section. |
(d) | Bonus for the full year 2012. Includes the value of both the cash element and the portion invested in NV and PLC shares under the MCIP. It does not include matching shares awarded on a conditional basis under the MCIP. |
(e) | Conditional supplemental pension provision agreed with the CEO on hiring. This payment is conditional on the CEO remaining in employment with Unilever to age 60 and subsequently retiring from active service or his death or total disability prior to retirement. |
(f) | The CFOs base salary was set in sterling at £680,000 from January 2012 to June 2012. It was increased to £714,000 effective 1 July 2012. |
(g) | Fixed allowance set in sterling at £340,000 for 2012 which replaced certain benefits and pension. |
(h) | Includes benefits for medical insurance, tax return preparation and costs of provision for death-in-service benefits and administration. |
(i) | Costs are non-cash and relate to the expenses following IFRS 2. This is based on share prices on grant dates, 98% adjustment factor for GSIP and MCIP shares awarded in 2012 and GSIP shares awarded in 2011 and 2010, and 89% adjustment factor for GSIP shares awarded in 2009 to take account of the external performance condition TSR. |
(j) | This does not include the one-time Dutch crisis tax charge to which Dutch-based employers like Unilever N.V. are subject of 16% on the portion of employees 2012 salaries exceeding 150,000 from current employment that is taxable in the Netherlands. This tax charge for Unilever N.V. with respect to the CEO is 112,394. |
(k) | Value of benefits in 2011 also included an allowance in lieu of company car, private use of chauffeur-driven car, entertaining allowance and, for the CFO, an annual housing and educational allowance, but excluded death-in-service benefits. |
(l) | Pension in 2011 also included company contributions towards defined contribution pension plans and death-in-service benefits. |
(m) | Total 2011 split Paul Polman 6,661m and Jean-Marc Huët 3,947m. |
Amounts have been translated into euros using the average exchange rate over the year: 1 = £0.8107 (2011: 1 = £0.8692).
We do not grant our Executive Directors any personal loans or guarantees.
Unilever Annual Report and Accounts 2012 | Report of the Directors Governance 77 |
DIRECTORS REMUNERATION REPORT continued
Pensions (audited)
Paul Polman
The total pension cost including death-in-service benefits and administration costs and the companys conditional supplemental pension provision was 264,000. This total pension cost breaks down as follows:
| Paul Polman elected to allocate some of his fixed allowance to his pension. The company therefore contributed 82,000 of the fixed allowance into his own defined contribution pension plan. |
| Paul Polman also elected to sacrifice some of his salary to make an additional pension contribution. The company therefore contributed 16,000 in to the defined contribution pension plan (this amount was deducted from the salary figure reported in the Remuneration for individual Executive Directors table above). |
| The additional accrual for Paul Polmans conditional supplemental pension, which is conditional on the CEO remaining in employment with Unilever to age 60 and subsequently retiring from active service or his death or total disability prior to retirement, was 134,000. |
| The cost of the provision of death-in-service benefits and administration was 32,000. |
Jean-Marc Huët
Jean-Marc Huët did not elect to allocate any of his fixed allowance to his pension. The total cost of his death-in-service benefit was 15,000.
Amounts have been translated into euros using the closing exchange rate for 2011: 1 = £0.8386.
Share Matching Plan (audited)
|
Balance of conditional shares at 1 January 2012 |
|
|
Conditional shares vested in 2012 |
(a) |
|
Balance of conditional shares at 31 December 2012 |
| ||||||||||||
Share type | No. of shares | No. of shares | Price at award | No. of shares | ||||||||||||||||
Paul Polman |
NV | 22,829 | (b) | 3,413 | 25.99 | 19,416 | ||||||||||||||
PLC | 22,829 | (b) | 3,413 | £20.89 | 19,416 | |||||||||||||||
Jean-Marc Huët |
NV | 5,047 | (c) | | | 5,047 | ||||||||||||||
PLC | 5,047 | (c) | | | 5,047 |
(a) | Each award of matching shares is conditional and vests three years after the date of the award subject to continued employment and maintenance of the underlying bonus shares. The Committee considers that there is no need for further performance conditions on the vesting of the matching shares because the number of shares is directly linked to the annual bonus (which is itself subject to demanding performance conditions). In addition, during the vesting period the share price of NV and PLC is influenced by the performance of Unilever. The shares vested on 19 March 2012. |
(b) | Of which 9,484 shares awarded on 18 March 2010 and 9,932 on 14 March 2011. |
(c) | Awarded on 14 March 2011. |
Management Co-Investment Plan (audited)
|
Balance of conditional shares at 1 January 2012 |
|
|
Conditional shares awarded in 2012 |
(a) |
|
Balance of conditional shares at 31 December 2012 |
| ||||||||||||||||
Share type | Original award |
|
(Performance period 1 January 2012 to 31 December 2014) |
|
|
Price at award |
|
|
Dividend shares accrued during the year |
(b) |
||||||||||||||
Paul Polman |
NV | | 17,772 | | 25.62 | 641 | 18,413 | |||||||||||||||||
PLC | | 17,772 | £ | 20.63 | 706 | 18,478 | ||||||||||||||||||
Jean-Marc Huët |
NV | | 3,649 | | 25.62 | 132 | 3,781 | |||||||||||||||||
PLC | | 3,649 | £ | 20.63 | 145 | 3,794 |
(a) | Each award of conditional matching shares vests three years after the date of the award, subject to performance conditions based on underlying sales growth, core operating margin improvement, cumulative operating cash flow and relative total shareholder return (further details can be found on page 73). Awards are all subject to continued employment and maintenance of the underlying investment shares. On 17 February 2012, the grant date, Paul Polman and Jean-Marc Huët invested in the MCIP 60% and 25% respectively of their annual bonus earned during 2011 and paid in 2012. |
(b) | Reflects reinvested dividend equivalents accrued during 2012 and subject to the same performance conditions as the underlying matching shares. |
78 Report of the Directors Governance | Unilever Annual Report and Accounts 2012 |
Global Share Incentive Plan (audited)
The following conditional shares were granted during 2012 and outstanding at 31 December 2012 under the Global Share Incentive Plan:
|
Balance of conditional shares at 1 January 2012 |
|
|
Conditional shares awarded in 2012 |
(a) |
|
Balance of conditional shares at 31 December 2012 |
| ||||||||||||||||||||||||||||
Share type | Original award |
|
(Performance period 1 January 2012 to 31 December 2014) |
|
|
Price at award |
|
|
Dividend shares accrued during the year |
(c) |
|
Vested in 2012 |
(d) |
|
Lapsed in 2012 |
|
|
Price at vesting |
|
No. of shares | ||||||||||||||||
Paul Polman |
NV | 164,915 | (b) | 38,676 | 25.62 | 4,845 | 60,213 | (8,997 | ) | 25.99 | 139,226 | |||||||||||||||||||||||||
PLC | 165,518 | (b) | 38,676 | £20.63 | 5,365 | 60,213 | (8,997 | ) | £20.89 | 140,349 | ||||||||||||||||||||||||||
Jean-Marc Huët |
NV | 66,639 | (c) | 29,798 | 25.62 | 3,475 | | 99,912 | ||||||||||||||||||||||||||||
PLC | 67,058 | (c) | 29,798 | £20.63 | 3,850 | | 100,706 |
(a) | Each award of conditional shares vests three years after the date of the award, subject to performance conditions based on underlying sales growth, core operating margin improvement, cumulative operating cash flow and relative total shareholder return (further details can be found on page 73). The 2012 award was made at grant date 17 February 2012. |
(b) | This includes a grant of 69,210 of each of Unilever NV and PLC shares made on 19 March 2009, a grant of 44,137 of each of Unilever NV and PLC shares made on 18 March 2010, a grant of 47,173 of each of Unilever NV and PLC shares made on 14 March 2011 and 4,395 Unilever NV dividend shares and 4,998 Unilever PLC dividend shares accrued in prior years. The first grant vested on 19 March 2012, and the second and third grant will vest on 18 March 2013 and 14 March 2014 respectively. |
(c) | This includes a grant of 30,906 of each of Unilever NV and PLC shares made on 18 March 2010, a grant of 32,665 of each of Unilever NV and PLC shares made on 14 March 2011 and 3,068 Unilever NV dividend shares and 3,487 Unilever PLC dividend shares accrued in prior years. The first and second grant will vest on 18 March 2013 and 14 March 2014 respectively. |
(d) | The 19 March 2009 grant vested on 19 March 2012 at 87%. |
Restricted Stock (audited)
Jean-Marc Huët received a one-off restricted stock award on joining Unilever under the GSIP. Details of balances and vesting during 2012 are shown below.
Balance of shares at 1 January 2012 |
Vesting in 2012 | Balance of shares at 31 December 2012 |
||||||||||||||||||||||
Share type | No. of shares | No. of shares | Price at vesting | No. of shares | ||||||||||||||||||||
Jean-Marc Huët(a) |
NV | 43,767 | 21,883 | 25.99 | 21,884 | |||||||||||||||||||
PLC | 43,767 | 21,883 | £20.89 | 21,884 |
(a) | Vesting on 19 March 2012 of 1/3 of original award (made 18 March 2010 at 22.53 and £19.44). The final 1/3 of the original award will vest on 18 March 2013. |
Share Save Plan (audited)
The Share Save Plan is an HMRC-approved all-employee savings-related share option scheme under which employees can save up to a limit of £250 per month with an option to buy Unilever PLC shares at the end of a five-year vesting (subject to continued employment).
Share type |
|
Balance of options at 1 January 2012 |
(a) |
|
Granted in 2012 |
|
|
Balance of options at 31 December 2012 |
|
|
First exercisable date |
|
|
Final expiry date |
| |||||||||
Paul Polman |
PLC | 1,042 | | 1,042 | 01/10/2014 | 01/04/2015 |
(a) | Option price at grant was £14.92. |
The highest and lowest share price per ordinary PLC 31/9p share during the year were £24.29 and £19.94 and the market price per ordinary PLC 31/9p share at year end was £23.66.
Unilever Annual Report and Accounts 2012 | Report of the Directors Governance 79 |
DIRECTORS REMUNERATION REPORT continued
Executive Directors interests in shares (audited)
Share type | (a) | Shares held at 1 January 2012 | (b) | Shares held at 31 December 2012 | (b) | |||||||
Paul Polman |
NV | 173,401 | 234,291 | |||||||||
PLC | 131,481 | 192,371 | ||||||||||
Jean-Marc Huët |
NV | 38,769 | 52,921 | |||||||||
PLC | 38,769 | 52,921 |
(a) | NV shares are ordinary 0.16 shares and PLC shares are ordinary 31/9p shares. |
(b) | Numbers exclude awards and options over shares which are disclosed above. |
The table shows the interest in NV and PLC ordinary shares of Executive Directors and their connected persons as at 31 December 2012. On 18 February 2013 Paul Polman and Jean-Marc Huët invested 60% and 25% respectively of their annual bonus earned in 2012 and paid in 2013 in the MCIP. This resulted in 22,999 NV and 22,999 PLC investment shares for Paul Polman and 5,157 NV and 5,157 PLC investment shares for Jean-Marc Huët. They each received a corresponding award of performance-related NV and PLC shares under the terms of the MCIP.
The voting rights of the Directors who hold interests in the share capital of NV and PLC are the same as for other holders of the class of shares indicated. None of the Directors (Executive and Non-Executive) or other executive officers shareholdings amounts to more than 1% of the issued shares in that class of share. Except as stated above, all shareholdings are beneficial.
Non-Executive Directors remuneration in 2012 (audited)
Non-Executive Directors |
|
Total fees paid in 2012 000 |
(a)
|
|
Total fees paid in 2011 000 |
| ||
Michael Treschow(b) |
659 | (c) | 635 | |||||
Louise Fresco |
108 | 87 | ||||||
Ann Fudge |
139 | 113 | ||||||
Charles Golden |
133 | 113 | ||||||
Byron Grote(d) |
128 | 87 | ||||||
Sunil Bharti Mittal |
96 | 59 | ||||||
Hixonia Nyasulu |
127 | 113 | ||||||
Kees Storm(e) |
203 | 160 | ||||||
Sir Malcolm Rifkind(f) |
119 | 97 | ||||||
Paul Walsh(g) |
143 | 94 | ||||||
Former Director |
||||||||
Jeroen van der Veer(h) |
| 75 | ||||||
Total |
1,855 | 1,633 |
(a) | Covers fees received from both NV in euros and PLC in sterling. Includes basic Non-Executive fee and committee chairmanship and/or membership. In moving to the new modular fee structure on 1 January 2012, the intercontinental travel allowance was discontinued. Ann Fudge, Charles Golden and Hixonia Nyasulu received a one-time payment of £10,000 each to compensate for the removal of this allowance. |
(b) | Chairman. |
(c) | This does not include the one-time Dutch crisis tax charge to which Dutch-based companies like Unilever N.V. are subject to of 16% on the portion of directors 2012 fees exceeding 150,000 from current appointment that is taxable in the Netherlands. The tax charge for Unilever N.V. with respect to the Chairman is 26,751. |
(d) | Chairman of Audit Committee. |
(e) | Vice Chairman. |
(f) | Chairman of Corporate Responsibility Committee. |
(g) | Chairman of Compensation and Management Resources Committee & Nominating and Corporate Governance Committee. |
(h) | Retired at AGMs in 2011. |
We do not grant our Non-Executive Directors any personal loans or guarantees.
80 Report of the Directors Governance | Unilever Annual Report and Accounts 2012 |
Unilever Annual Report and Accounts 2012 | Report of the Directors Governance 81 |
82 Financial statements | Unilever Annual Report and Accounts 2012 |
STATEMENT OF DIRECTORS RESPONSIBILITIES
Unilever Annual Report and Accounts 2012 | Financial statements 83 |
84 Financial statements | Unilever Annual Report and Accounts 2012 |
AUDITORS REPORT UNITED KINGDOM
Unilever Annual Report and Accounts 2012 | Financial statements 85 |
FINANCIAL STATEMENTS UNILEVER GROUP
for the year ended 31 December
million 2012 |
million 2011 |
million 2010 |
||||||||||
Turnover 2 |
51,324 | 46,467 | 44,262 | |||||||||
Operating profit 2 |
6,989 | 6,433 | 6,339 | |||||||||
After (charging)/crediting non-core items 3 |
(73 | ) | 144 | 308 | ||||||||
Net finance costs 5
|
|
(397
|
)
|
|
(377
|
)
|
|
(394
|
)
| |||
Finance income |
136 | 92 | 77 | |||||||||
Finance costs |
(526 | ) | (540 | ) | (491 | ) | ||||||
Pensions and similar obligations |
(7 | ) | 71 | 20 | ||||||||
Share of net profit/(loss) of joint ventures and associates 11 |
105 | 113 | 111 | |||||||||
Other income/(loss) from non-current investments 11 |
(14 | ) | 76 | 76 | ||||||||
Profit before taxation |
6,683 | 6,245 | 6,132 | |||||||||
Taxation 6A |
(1,735 | ) | (1,622 | ) | (1,534 | ) | ||||||
Net profit |
4,948 | 4,623 | 4,598 | |||||||||
Attributable to: |
||||||||||||
Non-controlling interests |
468 | 371 | 354 | |||||||||
Shareholders equity |
4,480 | 4,252 | 4,244 | |||||||||
Combined earnings per share 7 |
||||||||||||
Basic earnings per share () |
1.58 | 1.51 | 1.51 | |||||||||
Diluted earnings per share () |
1.54 | 1.46 | 1.46 |
References in the consolidated income statement, consolidated statement of comprehensive income, consolidated statement of changes in equity, consolidated balance sheet and consolidated cash flow statement relate to notes on pages 90 to 131, which form an integral part of the consolidated financial statements.
86 Financial statements | Unilever Annual Report and Accounts 2012 |
for the year ended 31 December
million 2012 |
million 2011 |
million 2010 |
||||||||||
Fair value gains/(losses) on financial instruments net of tax: |
||||||||||||
On cash flow hedges |
(141 | ) | (148 | ) | 41 | |||||||
On available-for-sale financial assets |
16 | (20 | ) | 2 | ||||||||
Actuarial gains/(losses) on pension schemes net of tax |
(644 | ) | (1,243 | ) | 105 | |||||||
Currency retranslation gains/(losses) net of tax(a) |
(316 | ) | (703 | ) | 460 | |||||||
Other comprehensive income 6C |
(1,085 | ) | (2,114 | ) | 608 | |||||||
Net profit |
4,948 | 4,623 | 4,598 | |||||||||
Total comprehensive income 15 |
3,863 | 2,509 | 5,206 | |||||||||
Attributable to: |
||||||||||||
Non-controlling interests |
444 | 314 | 412 | |||||||||
Shareholders equity |
3,419 | 2,195 | 4,794 |
(a) | Includes fair value gains/(losses) on net investment hedges of (160) million (2011: 45 million; 2010: 107 million). |
for the year ended 31 December
million 2012 |
million 2011 |
million 2010 |
||||||||||
Equity at 1 January |
14,921 | 15,078 | 12,536 | |||||||||
Total comprehensive income for the year |
3,863 | 2,509 | 5,206 | |||||||||
Dividends on ordinary capital |
(2,696 | ) | (2,487 | ) | (2,309 | ) | ||||||
Movement in treasury stock |
52 | 48 | (126 | ) | ||||||||
Share-based payment credit |
153 | 105 | 144 | |||||||||
Dividends paid to minority shareholders |
(464 | ) | (288 | ) | (289 | ) | ||||||
Currency retranslation gains/(losses) net of tax |
(2 | ) | (1 | ) | 2 | |||||||
Other movements in equity
|
|
(111
|
)
|
|
(43
|
)
|
|
(86
|
)
| |||
Equity at 31 December 15B |
15,716 | 14,921 | 15,078 |
For further information on movements in equity please refer to note 15B on page 114.
Unilever Annual Report and Accounts 2012 | Financial statements 87 |
FINANCIAL STATEMENTS UNILEVER GROUP continued
as at 31 December
million 2012 |
million 2011 |
|||||||
Assets | ||||||||
Non-current assets |
||||||||
Goodwill 9 |
14,619 | 14,896 | ||||||
Intangible assets 9 |
7,099 | 7,017 | ||||||
Property, plant and equipment 10 |
9,445 | 8,774 | ||||||
Pension asset for funded schemes in surplus 4B |
672 | 1,003 | ||||||
Deferred tax assets 6B |
1,113 | 421 | ||||||
Financial assets 17A |
535 | 478 | ||||||
Other non-current assets 11 |
536 | 632 | ||||||
34,019 | 33,221 | |||||||
Current assets |
||||||||
Inventories 12 |
4,436 | 4,601 | ||||||
Trade and other current receivables 13 |
4,436 | 4,513 | ||||||
Current tax assets |
217 | 219 | ||||||
Cash and cash equivalents 17A |
2,465 | 3,484 | ||||||
Other financial assets 17A |
401 | 1,453 | ||||||
Non-current assets held for sale 22 |
192 | 21 | ||||||
12,147 | 14,291 | |||||||
Total assets | 46,166 | 47,512 | ||||||
Liabilities | ||||||||
Current liabilities |
||||||||
Financial liabilities 15C |
2,656 | 5,840 | ||||||
Trade payables and other current liabilities 14 |
11,668 | 10,971 | ||||||
Current tax liabilities |
1,129 | 725 | ||||||
Provisions 19 |
361 | 393 | ||||||
Liabilities associated with assets held for sale 22 |
1 | | ||||||
15,815 | 17,929 | |||||||
Non-current liabilities |
||||||||
Financial liabilities 15C |
7,565 | 7,878 | ||||||
Non-current tax liabilities |
100 | 258 | ||||||
Pensions and post-retirement healthcare liabilities: |
||||||||
Funded schemes in deficit 4B |
2,291 | 2,295 | ||||||
Unfunded schemes 4B |
2,040 | 1,911 | ||||||
Provisions 19 |
846 | 908 | ||||||
Deferred tax liabilities 6B |
1,393 | 1,125 | ||||||
Other non-current liabilities 14 |
400 | 287 | ||||||
14,635 | 14,662 | |||||||
Total liabilities | 30,450 | 32,591 | ||||||
Equity | ||||||||
Shareholders equity |
||||||||
Called up share capital 15A |
484 | 484 | ||||||
Share premium 15B |
140 | 137 | ||||||
Other reserves 15B |
(6,196 | ) | (6,004 | ) | ||||
Retained profit 15B |
20,731 | 19,676 | ||||||
Shareholders equity |
15,159 | 14,293 | ||||||
Non-controlling interests 15B |
|
557
|
|
|
628
|
| ||
Total equity |
|
15,716
|
|
|
14,921
|
| ||
Total liabilities and equity | 46,166 | 47,512 |
These financial statements have been approved by the Directors.
The Board of Directors
5 March 2013
88 Financial statements | Unilever Annual Report and Accounts 2012 |
for the year ended 31 December
million 2012 |
million 2011 |
million 2010 |
||||||||||
Net profit |
4,948 | 4,623 | 4,598 | |||||||||
Taxation |
1,735 | 1,622 | 1,534 | |||||||||
Share of net profit of joint ventures/associates and other income/(loss) from non-current investments |
(91 | ) | (189 | ) | (187 | ) | ||||||
Net finance costs 5 |
397 | 377 | 394 | |||||||||
Operating profit |
6,989 | 6,433 | 6,339 | |||||||||
Depreciation, amortisation and impairment |
1,199 | 1,029 | 993 | |||||||||
Changes in working capital: |
822 | (177 | ) | 169 | ||||||||
Inventories |
(9 | ) | (219 | ) | (573 | ) | ||||||
Trade and other receivables |
1 | (399 | ) | (343 | ) | |||||||
Trade payables and other liabilities |
830 | 441 | 1,085 | |||||||||
Pensions and similar obligations less payments |
(381 | ) | (553 | ) | (472 | ) | ||||||
Provisions less payments |
(43 | ) | 9 | 72 | ||||||||
Elimination of (profits)/losses on disposals |
(236 | ) | (215 | ) | (476 | ) | ||||||
Non-cash charge for share-based compensation |
153 | 105 | 144 | |||||||||
Other adjustments |
13 | 8 | 49 | |||||||||
Cash flow from operating activities |
8,516 | 6,639 | 6,818 | |||||||||
Income tax paid |
|
(1,680
|
)
|
|
(1,187
|
)
|
|
(1,328
|
)
| |||
Net cash flow from operating activities | 6,836 | 5,452 | 5,490 | |||||||||
Interest received |
146 | 93 | 70 | |||||||||
Purchase of intangible assets |
(405 | ) | (264 | ) | (177 | ) | ||||||
Purchase of property, plant and equipment |
(1,975 | ) | (1,835 | ) | (1,638 | ) | ||||||
Disposal of property, plant and equipment |
237 | 125 | 114 | |||||||||
Acquisition of group companies, joint ventures and associates |
(133 | ) | (3,098 | ) | (1,252 | ) | ||||||
Disposal of group companies, joint ventures and associates |
246 | 1,378 | 891 | |||||||||
Acquisition of other non-current investments |
(91 | ) | (88 | ) | (85 | ) | ||||||
Disposal of other non-current investments |
88 | 178 | 151 | |||||||||
Dividends from joint ventures, associates and other non-current investments |
128 | 116 | 184 | |||||||||
(Purchase)/sale of financial assets |
|
1,004
|
|
|
(1,072
|
)
|
|
578
|
| |||
Net cash flow (used in)/from investing activities | (755 | ) | (4,467 | ) | (1,164 | ) | ||||||
Dividends paid on ordinary share capital |
(2,699 | ) | (2,485 | ) | (2,323 | ) | ||||||
Interest and preference dividends paid |
(506 | ) | (496 | ) | (494 | ) | ||||||
Net change in short-term borrowings |
(870 | ) | 1,261 | (46 | ) | |||||||
Additional financial liabilities |
1,441 | 3,419 | 86 | |||||||||
Repayment of financial liabilities |
(3,565 | ) | (907 | ) | (1,391 | ) | ||||||
Capital element of finance lease rental payments |
(15 | ) | (16 | ) | (22 | ) | ||||||
Other movements on treasury stock |
48 | 30 | (124 | ) | ||||||||
Other financing activities |
(456 | ) | (395 | ) | (295 | ) | ||||||
Net cash flow (used in)/from financing activities | (6,622 | ) | 411 | (4,609 | ) | |||||||
Net increase/(decrease) in cash and cash equivalents | (541 | ) | 1,396 | (283 | ) | |||||||
Cash and cash equivalents at the beginning of the year | 2,978 | 1,966 | 2,397 | |||||||||
Effect of foreign exchange rate changes |
|
(220
|
)
|
|
(384
|
)
|
|
(148
|
)
| |||
Cash and cash equivalents at the end of the year 17A | 2,217 | 2,978 | 1,966 |
The cash flows of pension funds (other than contributions and other direct payments made by the Group in respect of pensions and similar obligations) are not included in the group cash flow statement.
Unilever Annual Report and Accounts 2012 | Financial statements 89 |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS UNILEVER GROUP
90 Financial statements | Unilever Annual Report and Accounts 2012 |
1. Accounting information and policies continued
Unilever Annual Report and Accounts 2012 | Financial statements 91 |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS UNILEVER GROUP continued
Segmental reporting
The Group has revised its operating segments to align with the new structure under which the business is managed. From 2012, operating segment information is provided based on four product areas rather than geographical regions. The four product areas are:
Personal Care | | including sales of skincare and haircare products, deodorants and oral care products. | ||
Foods | | including sales of soups, bouillons, sauces, snacks, mayonnaise, salad dressings, margarines and spreads. | ||
Refreshment | | including sales of ice cream, tea-based beverages, weight-management products and nutritionally enhanced staples sold in developing markets. | ||
Home Care | | including sales of home care products, such as laundry tablets, powders and liquids, soap bars and a wide range of cleaning products. |
Revenue recognition
Turnover comprises sales of goods after the deduction of discounts, sales taxes and estimated returns. It does not include sales between group companies. Discounts given by Unilever include rebates, price reductions and incentives given to customers, promotional couponing and trade communication costs.
Turnover is recognised when the risks and rewards of the underlying products have been substantially transferred to the customer. Depending on individual customer terms, this can be at the time of dispatch, delivery or upon formal customer acceptance.
Core operating profit
From 2012 the Group refers to core operating profit which means operating profit before the impact of non-core items (refer to note 3 for explanation of non-core items).
million Personal Care |
million
Foods |
million
Refreshment |
million
Home Care |
million
Total |
||||||||||||||||
2012 |
||||||||||||||||||||
Turnover |
18,097 | 14,444 | 9,726 | 9,057 | 51,324 | |||||||||||||||
Operating profit |
2,928 | 2,605 | 911 | 545 | 6,989 | |||||||||||||||
Non-core items 3 |
|
160
|
|
|
(73
|
)
|
|
|
|
|
(14
|
)
|
|
73
|
| |||||
Core operating profit |
3,088 | 2,532 | 911 | 531 | 7,062 | |||||||||||||||
Share of net profit/(loss) of joint ventures and associates |
1 | 5 | 99 | | 105 | |||||||||||||||
Depreciation and amortisation |
336 | 311 | 340 | 212 | 1,199 | |||||||||||||||
Impairment and other non-cash charges(a) |
189 | 141 | 106 | 128 | 564 | |||||||||||||||
2011 |
||||||||||||||||||||
Turnover |
15,471 | 13,986 | 8,804 | 8,206 | 46,467 | |||||||||||||||
Operating profit |
2,536 | 2,693 | 723 | 481 | 6,433 | |||||||||||||||
Non-core items 3 |
|
187
|
|
|
(244
|
)
|
|
(47
|
)
|
|
(40
|
)
|
|
(144
|
)
| |||||
Core operating profit |
2,723 | 2,449 | 676 | 441 | 6,289 | |||||||||||||||
Share of net profit/(loss) of joint ventures and associates |
5 | 7 | 98 | 3 | 113 | |||||||||||||||
Depreciation and amortisation |
272 | 286 | 281 | 190 | 1,029 | |||||||||||||||
Impairment and other non-cash charges(a) |
138 | 183 | 154 | 136 | 611 | |||||||||||||||
2010 |
||||||||||||||||||||
Turnover |
13,767 | 14,164 | 8,605 | 7,726 | 44,262 | |||||||||||||||
Operating profit |
2,296 | 2,846 | 724 | 473 | 6,339 | |||||||||||||||
Non-core items 3 |
|
50
|
|
|
(464
|
)
|
|
(2
|
)
|
|
108
|
|
|
(308
|
)
| |||||
Core operating profit |
2,346 | 2,382 | 722 | 581 | 6,031 | |||||||||||||||
Share of net profit/(loss) of joint ventures and associates |
7 | 18 | 92 | (6 | ) | 111 | ||||||||||||||
Depreciation and amortisation |
255 | 282 | 273 | 183 | 993 | |||||||||||||||
Impairment and other non-cash charges(a) |
123 | 132 | 81 | 190 | 526 |
(a) | Other non-cash charges include charges to the income statement during the year in respect of the share-based compensation and provisions. |
92 Financial statements | Unilever Annual Report and Accounts 2012 |
2. Segment information continued
The home countries of the Unilever Group are the Netherlands and the United Kingdom. Turnover and non-current assets(b) for these two countries combined, the USA and Brazil (being the two largest countries outside the home countries) and all other countries are:
million | million | million | million | million | ||||||||||||||||
Netherlands/ United Kingdom |
USA | Brazil | All other countries |
Total | ||||||||||||||||
2012 |
||||||||||||||||||||
Turnover |
3,980 | 7,834 | 3,813 | 35,697 | 51,324 | |||||||||||||||
Non-current assets(b) |
3,353 | 8,670 | 2,235 | 17,441 | 31,699 | |||||||||||||||
2011 |
||||||||||||||||||||
Turnover |
3,693 | 6,889 | 3,644 | 32,241 | 46,467 | |||||||||||||||
Non-current assets(b) |
2,915 | 9,286 | 2,525 | 16,593 | 31,319 | |||||||||||||||
2010 |
||||||||||||||||||||
Turnover |
3,490 | 6,725 | 3,502 | 30,545 | 44,262 | |||||||||||||||
Non-current assets(b) |
2,602 | 5,960 | 2,681 | 15,367 | 26,610 |
(b) | Non-current assets excluding financial assets, deferred tax assets and pension assets for funded schemes in surplus. |
No other country had turnover or non-current assets (as shown above) greater than 10% of the Group total.
Additional information by geographies
Although the Groups operations are managed by product area, we provide additional information based on geographies. The analysis of turnover by geographical area is stated on the basis of origin. Sales between geographical areas are carried out at arms length and were not material.
million | million | million | million | |||||||||||||
|
Asia/ AMET/ RUB |
(C) |
|
The Americas |
|
Europe | Total | |||||||||
2012 |
||||||||||||||||
Turnover |
20,357 | 17,088 | 13,879 | 51,324 | ||||||||||||
Operating profit |
2,637 | 2,433 | 1,919 | 6,989 | ||||||||||||
Non-core items |
|
30
|
|
|
(13
|
)
|
|
56
|
|
|
73
|
| ||||
Core operating profit |
2,667 | 2,420 | 1,975 | 7,062 | ||||||||||||
Share of net profit/(loss) of joint ventures and associates |
(2 | ) | 68 | 39 | 105 | |||||||||||
2011 |
||||||||||||||||
Turnover |
17,723 | 15,251 | 13,493 | 46,467 | ||||||||||||
Operating profit |
2,109 | 2,250 | 2,074 | 6,433 | ||||||||||||
Non-core items |
|
19
|
|
|
(127
|
)
|
|
(36
|
)
|
|
(144
|
)
| ||||
Core operating profit |
2,128 | 2,123 | 2,038 | 6,289 | ||||||||||||
Share of net profit/(loss) of joint ventures and associates |
(1 | ) | 67 | 47 | 113 | |||||||||||
2010 |
||||||||||||||||
Turnover |
16,460 | 14,562 | 13,240 | 44,262 | ||||||||||||
Operating profit |
2,142 | 2,169 | 2,028 | 6,339 | ||||||||||||
Non-core items |
|
(1
|
)
|
|
6
|
|
|
(313
|
)
|
|
(308
|
)
| ||||
Core operating profit |
2,141 | 2,175 | 1,715 | 6,031 | ||||||||||||
Share of net profit/(loss) of joint ventures and associates |
(1 | ) | 69 | 43 | 111 |
(c) | Refers to Asia, Africa, Middle East, Turkey, Russia, Ukraine and Belarus. |
Unilever Annual Report and Accounts 2012 | Financial statements 93 |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS UNILEVER GROUP continued
Research and market support costs
Expenditure on research and market support, such as advertising, is charged to the income statement as incurred.
Non-core items
Disclosed on the face of the income statement are costs and revenues relating to business disposals, acquisition and disposal related costs, impairments and other one-off items, which we collectively term non-core items due to their nature and frequency of occurrence. These items are material in terms of nature and/or amount and are relevant to an understanding of our financial performance.
Business disposals generate both gains and losses which are not reflective of underlying performance. Acquisition and disposal related costs are charges directly attributable to the acquisition or disposal of group companies.
million 2012 |
million 2011 |
million 2010 |
||||||||||
Turnover |
51,324 | 46,467 | 44,262 | |||||||||
Cost of sales |
(30,703 | ) | (27,930 | ) | (25,890 | ) | ||||||
Gross profit |
20,621 | 18,537 | 18,372 | |||||||||
Selling and administrative expenses |
(13,632 | ) | (12,104 | ) | (12,033 | ) | ||||||
Operating profit |
6,989 | 6,433 | 6,339 |
Non-core items
Non-core items are disclosed on the face of the income statement to provide additional information to users to help them better understand underlying business performance.
million 2012 |
million 2011 |
million 2010 |
||||||||||
Acquisition and disposal related costs |
(190 | ) | (234 | ) | (50 | ) | ||||||
Gain/(loss) on disposal of group companies |
117 | 221 | 468 | |||||||||
Impairments and other one-off items(a) |
| 157 | (110 | ) | ||||||||
Non-core items before tax |
(73 | ) | 144 | 308 | ||||||||
Tax impact of non-core items
|
|
(14
|
)
|
|
(6
|
)
|
|
(12
|
)
| |||
Non-core items after tax |
(87 | ) | 138 | 296 | ||||||||
Attributable to: |
||||||||||||
Non-controlling interests |
| | | |||||||||
Shareholders equity |
(87 | ) | 138 | 296 |
(a) | Included in the 2011 balance is a past service credit for the UK pension plan amounting to 153 million and the 2010 balance relates to provision for EU competition investigations. |
Other
Other items within operating costs include:
million 2012 |
million 2011 |
million 2010 |
||||||||||
Staff costs 4 |
(6,291 | ) | (5,345 | ) | (5,599 | ) | ||||||
Distribution costs |
(3,264 | ) | (3,080 | ) | (3,015 | ) | ||||||
Raw and packaging materials and goods purchased for resale |
(20,998 | ) | (19,253 | ) | (17,636 | ) | ||||||
Amortisation of finite-life intangible assets and software 9 |
(213 | ) | (191 | ) | (174 | ) | ||||||
Depreciation of property, plant and equipment 10 |
(986 | ) | (838 | ) | (819 | ) | ||||||
Advertising and promotions |
(6,763 | ) | (6,069 | ) | (6,064 | ) | ||||||
Research and development |
(1,003 | ) | (1,009 | ) | (928 | ) | ||||||
Exchange gains/(losses):
|
|
(118
|
)
|
|
(9
|
)
|
|
7
|
| |||
On underlying transactions |
(96 | ) | (45 | ) | (36 | ) | ||||||
On covering forward contracts |
(22 | ) | 36 | 43 | ||||||||
Lease rentals:
|
|
(558
|
)
|
|
(452
|
)
|
|
(465
|
)
| |||
Minimum operating lease payments |
(558 | ) | (456 | ) | (465 | ) | ||||||
Contingent operating lease payments |
(8 | ) | (3 | ) | (4 | ) | ||||||
Less: Sub-lease income relating to operating lease agreements |
8 | 7 | 4 | |||||||||
94 Financial statements | Unilever Annual Report and Accounts 2012 |
4A. Staff and management costs
Staff costs | million 2012 |
million 2011 |
million 2010 |
|||||||||
Remuneration of employees |
(5,133 | ) | (4,596 | ) | (4,572 | ) | ||||||
Pensions and other post-employment benefits |
(346 | ) | (17 | ) | (276 | ) | ||||||
Social security costs |
(659 | ) | (627 | ) | (607 | ) | ||||||
Share-based compensation costs |
(153 | ) | (105 | ) | (144 | ) | ||||||
(6,291 | ) | (5,345 | ) | (5,599 | ) | |||||||
Average number of employees during the year | 000 2012 |
000 2011 |
000 2010 |
|||||||||
Asia/AMET/RUB |
94 | 92 | 90 | |||||||||
The Americas |
43 | 42 | 40 | |||||||||
Europe |
35 | 35 | 35 | |||||||||
172 | 169 | 165 | ||||||||||
Key management compensation | million 2012 |
million 2011 |
million 2010 |
|||||||||
Salaries and short-term employee benefits |
(28 | ) | (15 | ) | (17 | ) | ||||||
Non-Executive Directors fees |
(2 | ) | (2 | ) | (2 | ) | ||||||
Post-employment benefits |
(2 | ) | (2 | ) | (2 | ) | ||||||
Share-based benefits |
(10 | ) | (11 | ) | (10 | ) | ||||||
(42 | ) | (30 | ) | (31 | ) | |||||||
Of which: |
||||||||||||
Executive Directors |
(12 | ) | (10 | ) | (7 | ) | ||||||
Non-Executive Directors |
(2 | ) | (2 | ) | (2 | ) | ||||||
Other |
(28 | ) | (18 | ) | (22 | ) | ||||||
(42 | ) | (30 | ) | (31 | ) |
Key management personnel are defined as the members of the Unilever Leadership Executive (ULE) and the Non-Executive Directors.
Details of the remuneration of Directors are given in the parts noted as audited in the Directors Remuneration Report on pages 62 to 81.
4B. Pensions and similar obligations
For defined benefit plans, operating and finance costs are recognised separately in the income statement. The amount charged to operating cost in the income statement is the cost of accruing pension benefits promised to employees over the year, plus the costs of individual events such as past service benefit enhancements, settlements and curtailments (such events are recognised immediately in the income statement). The amount charged or credited to finance costs includes a credit equivalent to the Groups expected return on the pension plans assets over the year, offset by a charge equal to the expected increase in the plans liabilities over the year due to the passage of time. Any differences between the expected return on assets and the return actually achieved, and any changes in the liabilities over the year due to changes in assumptions or experience within the plans, are recognised immediately in the statement of comprehensive income.
The defined benefit plan surplus or deficit on the balance sheet comprises the total for each plan of the fair value of plan assets less the present value of the defined benefit obligation (using a discount rate based on high quality corporate bonds).
All defined benefit plans are subject to regular actuarial review using the projected unit method, either by external consultants or by actuaries employed by Unilever. The Group policy is that the most important plans, representing approximately 80% of the defined benefit liabilities, are formally valued every year. Other principal plans, accounting for approximately a further 15% of liabilities, have their liabilities updated each year. Group policy for the remaining plans requires a full actuarial valuation at least every three years. Asset values for all plans are updated every year.
For defined contribution plans, the charges to the income statement are the company contributions payable, as the companys obligation is limited to contributions paid into the plans. The assets and liabilities of such plans are not included in the balance sheet of the Group.
Unilever Annual Report and Accounts 2012 | Financial statements 95 |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS UNILEVER GROUP continued
4B. Pensions and similar obligations continued
Description of plans
In many countries the Group operates defined benefit pension plans based on employee pensionable remuneration and length of service. The majority of these plans are externally funded. The Group also provides other post-employment benefits, mainly post-employment healthcare plans in the United States. These plans are predominantly unfunded. The Group also operates a number of defined contribution plans, the assets of which are held in external funds.
The majority of the Groups externally funded plans are established as trusts, foundations or similar entities. The operation of these entities is governed by local regulations and practice in each country, as is the nature of the relationship between the Group and the trustees (or equivalent) and their composition.
Investment strategy
The Groups investment strategy in respect of its funded pension plans is implemented within the framework of the various statutory requirements of the territories where the plans are based. The Group has developed policy guidelines for the allocation of assets to different classes with the objective of controlling risk and maintaining the right balance between risk and long-term returns in order to limit the cost to the Group of the benefits provided. To achieve this, investments are well diversified, such that the failure of any single investment would not have a material impact on the overall level of assets. The plans continue to invest a good proportion of the assets in equities, which the Group believes offer the best returns over the long term commensurate with an acceptable level of risk. For risk control, the pension funds also have significant investments in liability matching assets (bonds) as well as in property and other alternative assets. The majority of assets are managed by a number of external fund managers with a small proportion managed in-house. Unilever has a pooled investment vehicle (Univest) which it believes offers its pension plans around the world a simplified externally managed investment vehicle to implement their strategic asset allocation models, currently for bonds, equities and alternative assets. The aim is to provide high quality, well diversified, cost effective, risk-controlled vehicles. The pension plans investments are overseen by Unilevers internal investment company, the Univest Company.
Assumptions
With the objective of presenting the assets and liabilities of the pensions and other post-employment benefit plans at their fair value on the balance sheet, assumptions under IAS 19 are set by reference to market conditions at the valuation date. The actuarial assumptions used to calculate the benefit obligations vary according to the country in which the plan is situated. The following table shows the assumptions, weighted by liabilities, used to value the principal defined benefit plans (which cover approximately 95% of total pension liabilities) and the plans providing other post-employment benefits, and in addition the expected long-term rates of return on assets, weighted by asset value.
31 December 2012 | 31 December 2011 | |||||||||||||||
Principal defined benefit pension plans |
Other post-employment benefit plans |
Principal defined benefit pension plans |
Other post-employment benefit plans |
|||||||||||||
Discount rate |
3.9 | % | 4.0 | % | 4.6 | % | 4.3 | % | ||||||||
Inflation |
2.3 | % | n/a | 2.5 | % | n/a | ||||||||||
Rate of increase in salaries |
3.2 | % | 3.6 | % | 3.4 | % | 3.5 | % | ||||||||
Rate of increase for pensions in payment (where provided) |
2.1 | % | n/a | 2.4 | % | n/a | ||||||||||
Rate of increase for pensions in deferment (where provided) |
2.3 | % | n/a | 2.6 | % | n/a | ||||||||||
Long-term medical cost inflation |
n/a | 5.0 | % | n/a | 5.0 | % | ||||||||||
Expected long-term rates of return: |
||||||||||||||||
Equities |
6.9 | % | 7.2 | % | ||||||||||||
Bonds |
3.0 | % | 3.8 | % | ||||||||||||
Property |
4.4 | % | 4.7 | % | ||||||||||||
Others |
4.9 | % | 6.2 | % | ||||||||||||
Weighted average asset return |
5.0 | % | 5.6 | % |
The valuations of other post-employment benefit plans generally assume a higher initial level of medical cost inflation, which falls from 7.0% to the long-term rate within the next five years. Assumed healthcare cost trend rates have a significant effect on the amounts reported for healthcare plans. A one percentage point change in assumed healthcare cost trend rates would have the following effect:
million 1% point increase |
million 1% point decrease |
|||||||
Effect on total of service and interest cost components |
1 | (1 | ) | |||||
Effect on total benefit obligation |
11 | (12 | ) |
The expected rates of return on plan assets were determined, based on actuarial advice, by a process that takes the long-term rates of return on government bonds available at the balance sheet date and applies to these rates suitable risk premiums that take account of historic market returns and current market long-term expectations for each asset class.
96 Financial statements | Unilever Annual Report and Accounts 2012 |
4B. Pensions and similar obligations continued
For the most important pension plans, representing approximately 80% of all defined benefit plans by liabilities, the assumptions used at 31 December 2012 and 2011 were:
United Kingdom | Netherlands | United States | Germany | |||||||||||||||||||||||||||||
2012 | 2011 | 2012 | 2011 | 2012 | 2011 | 2012 | 2011 | |||||||||||||||||||||||||
Discount rate |
4.3 | % | 4.7 | % | 3.1 | % | 4.5 | % | 3.8 | % | 3.9 | % | 3.1 | % | 4.5 | % | ||||||||||||||||
Inflation |
2.6 | % | 3.0 | % | 1.7 | % | 1.8 | % | 2.3 | % | 2.3 | % | 1.7 | % | 1.8 | % | ||||||||||||||||
Rate of increase in salaries |
3.6 | % | 4.0 | % | 2.2 | % | 2.3 | % | 3.5 | % | 3.5 | % | 2.8 | % | 2.8 | % | ||||||||||||||||
Rate of increase for pensions in payment (where provided) |
2.5 | % | 2.8 | % | 1.7 | % | 1.8 | % | | | 1.7 | % | 1.8 | % | ||||||||||||||||||
Rate of increase for pensions in deferment (where provided) |
2.6 | % | 2.9 | % | 1.7 | % | 1.8 | % | | | | | ||||||||||||||||||||
Expected long-term rates of return: |
||||||||||||||||||||||||||||||||
Equities |
7.1 | % | 7.3 | % | 6.5 | % | 7.0 | % | 7.0 | % | 6.9 | % | 6.5 | % | 7.0 | % | ||||||||||||||||
Bonds |
3.5 | % | 3.8 | % | 2.5 | % | 3.5 | % | 3.5 | % | 3.4 | % | 2.5 | % | 3.7 | % | ||||||||||||||||
Property |
4.6 | % | 4.8 | % | 4.0 | % | 4.5 | % | 4.5 | % | 4.4 | % | 4.0 | % | 4.5 | % | ||||||||||||||||
Others |
5.7 | % | 6.9 | % | 3.4 | % | 5.8 | % | 5.0 | % | 5.4 | % | 4.3 | % | 4.6 | % | ||||||||||||||||
Weighted average asset return |
5.8 | % | 6.2 | % | 4.2 | % | 5.0 | % | 5.1 | % | 5.0 | % | 4.3 | % | 4.9 | % | ||||||||||||||||
Number of years a current pensioner is expected to live beyond age 65: |
||||||||||||||||||||||||||||||||
Men |
21.7 | 21.7 | 22.0 | 21.5 | 19.5 | 19.0 | 19.4 | 19.4 | ||||||||||||||||||||||||
Women |
23.6 | 23.5 | 23.5 | 23.3 | 21.5 | 20.9 | 23.0 | 23.0 | ||||||||||||||||||||||||
Number of years a future pensioner currently aged 45 is expected to live beyond age 65: |
||||||||||||||||||||||||||||||||
Men |
23.5 | 23.5 | 23.7 | 23.0 | 20.7 | 20.6 | 19.4 | 19.4 | ||||||||||||||||||||||||
Women |
25.2 | 25.2 | 24.5 | 24.2 | 22.7 | 22.5 | 23.0 | 23.0 |
Demographic assumptions, such as mortality rates, are set having regard to the latest trends in life expectancy (including expectations of future improvements), plan experience and other relevant data. These assumptions are reviewed and updated as necessary as part of the periodic actuarial valuation of the pension plans. The years of life expectancy for 2012 above have been translated from the following tables:
| UK: the year of use S1 series all pensioners (S1AP) tables have been adopted, which are based on the experience of UK pension schemes over the period 2000-2006. Scaling factors are applied reflecting the experience of our pension funds appropriate to the members gender and status. Future improvements in longevity have been allowed for in line with the 2009 CMI Core Projections and a 1% pa long-term improvement rate. |
| The Netherlands: the Dutch Actuarial Societys AG Prognosetafel 2012-2062 table is used with correction factors to allow for the typically longer life expectancy of pension fund members relative to the general population. This table has an in-built allowance for future improvements in longevity. |
| United States: the table RP-2000 with generational mortality improvement using Scale BB. This table has an in-built allowance for future improvements in longevity. |
| Germany: fund specific tables are used which broadly equate to the Heubeck 2005 generational table projected to 2030. |
Assumptions for the remaining defined benefit plans vary considerably, depending on the economic conditions of the countries where they are situated.
Unilever Annual Report and Accounts 2012 | Financial statements 97 |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS UNILEVER GROUP continued
4B. Pensions and similar obligations continued
Income statement
The charge to the income statement comprises:
million 2012 |
million 2011 |
million 2010 |
||||||||||
Charged to operating profit: |
||||||||||||
Defined benefit pension and other benefit plans: |
||||||||||||
Current service cost |
(278 | ) | (252 | ) | (261 | ) | ||||||
Employee contributions |
18 | 15 | 13 | |||||||||
Special termination benefits |
(17 | ) | (31 | ) | (22 | ) | ||||||
Past service cost |
27 | 195 | 60 | |||||||||
Settlements/curtailments |
20 | 146 | 6 | |||||||||
Defined contribution plans
|
|
(116
|
)
|
|
(90
|
)
|
|
(72
|
)
| |||
Total operating cost 4A |
(346 | ) | (17 | ) | (276 | ) | ||||||
Charged to net finance costs: |
||||||||||||
Interest on retirement benefits |
(904 | ) | (908 | ) | (963 | ) | ||||||
Expected return on assets |
897 | 979 | 983 | |||||||||
Total net finance income/(cost) 5
|
|
(7
|
)
|
|
71
|
|
|
20
|
| |||
Net impact on the income statement (before tax) |
(353 | ) | 54 | (256 | ) |
Significant items on the face of the income statement
Included in the 2011 balance are a past service credit of 153 million, as Unilever implemented amendments to certain constructive obligations in the UK that the company had the discretion to amend and curtailment credits of 146 million relating to benefit changes mainly in the UK, the USA and Canada.
Statement of comprehensive income
Amounts recognised in the statement of comprehensive income comprise:
million | million | million | million | million | million | |||||||||||||||||||
2012 | 2011 | 2010 | 2009 | 2008 | Cumulative 1 January 2004 to present |
|||||||||||||||||||
Actual return less expected return on pension and other benefit plan assets |
1,221 | (440 | ) | 677 | 1,277 | (4,243 | ) | 750 | ||||||||||||||||
Experience gains/(losses) arising on pension plan and other benefit plan liabilities |
(210 | ) | (74 | ) | 197 | 250 | | 297 | ||||||||||||||||
Changes in assumptions underlying the present value of the pension and other benefit plan liabilities
|
|
(1,826
|
)
|
|
(1,177
|
)
|
|
(716
|
)
|
|
(1,489
|
)
|
|
1,116
|
|
|
(5,425
|
)
| ||||||
Actuarial gain/(loss) |
(815 | ) | (1,691 | ) | 158 | 38 | (3,127 | ) | (4,378 | ) | ||||||||||||||
Change in unrecognised surplus |
| | | | | 103 | ||||||||||||||||||
Refund of unrecognised assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15
|
| ||||||
Net actuarial gain/(loss) recognised in statement of comprehensive income (before tax) |
(815 | ) | (1,691 | ) | 158 | 38 | (3,127 | ) | (4,260 | ) |
98 Financial statements | Unilever Annual Report and Accounts 2012 |
4B. Pensions and similar obligations continued
Balance sheet
The assets, liabilities and surplus/(deficit) position of the pension and other post-employment benefit plans and the expected rates of return on the plan assets at the balance sheet date were:
31 December 2012 | 31 December 2011 | |||||||||||||||||||||||
million | million | % | million | million | % | |||||||||||||||||||
Pension plans |
Other post- employment benefit plans |
Long-term rates of return expected |
Pension plans |
Other post- employment benefit plans |
Long-term rates of return expected |
|||||||||||||||||||
Assets of principal plans: |
||||||||||||||||||||||||
Equities |
7,486 | | 6.9 | % | 6,860 | | 7.2 | % | ||||||||||||||||
Bonds |
6,238 | | 3.0 | % | 6,120 | | 3.8 | % | ||||||||||||||||
Property |
1,129 | | 4.4 | % | 1,007 | | 4.7 | % | ||||||||||||||||
Other |
2,354 | | 4.9 | % | 1,633 | | 6.2 | % | ||||||||||||||||
Assets of other plans |
458 | 8 | 7.6 | % | 417 | 7 | 7.9 | % | ||||||||||||||||
17,665 | 8 | 16,037 | 7 | |||||||||||||||||||||
Present value of liabilities: |
||||||||||||||||||||||||
Principal plans |
(19,772 | ) | | (17,703 | ) | | ||||||||||||||||||
Other plans |
(900 | ) | (660 | ) | (887 | ) | (657 | ) | ||||||||||||||||
(20,672 | ) | (660 | ) | (18,590 | ) | (657 | ) | |||||||||||||||||
Aggregate net deficit of the plans |
(3,007 | ) | (652 | ) | (2,553 | ) | (650 | ) | ||||||||||||||||
Irrecoverable surplus(a)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Pension liability net of assets |
(3,007 | ) | (652 | ) | (2,553 | ) | (650 | ) | ||||||||||||||||
Of which in respect of: |
||||||||||||||||||||||||
Funded plans in surplus: |
||||||||||||||||||||||||
Liabilities |
(5,053 | ) | (1 | ) | (4,201 | ) | | |||||||||||||||||
Assets
|
|
5,722
|
|
|
4
|
|
|
5,204
|
|
|
|
|
||||||||||||
Aggregate surplus |
669 | 3 | 1,003 | | ||||||||||||||||||||
Irrecoverable surplus(a) |
| | | | ||||||||||||||||||||
Pension asset net of liabilities |
669 | 3 | 1,003 | | ||||||||||||||||||||
Funded plans in deficit: |
||||||||||||||||||||||||
Liabilities |
(14,216 | ) | (22 | ) | (13,101 | ) | (34 | ) | ||||||||||||||||
Assets
|
|
11,943
|
|
|
4
|
|
|
10,833
|
|
|
7
|
|
||||||||||||
Pension liability net of assets |
(2,273 | ) | (18 | ) | (2,268 | ) | (27 | ) | ||||||||||||||||
Unfunded plans: |
||||||||||||||||||||||||
Pension liability |
(1,403 | ) | (637 | ) | (1,288 | ) | (623 | ) |
(a) | A surplus is deemed recoverable to the extent that the Group is able to benefit economically from the surplus. |
Equity securities include Unilever securities amounting to 32 million (0.2% of total plan assets) and 41 million (0.3% of total plan assets) at 31 December 2012 and 2011 respectively. Property includes property occupied by Unilever amounting to 16 million and 14 million at 31 December 2012 and 2011 respectively.
The pension assets above exclude the assets in a Special Benefits Trust amounting to 98 million (2011: 110 million) to fund pension and similar obligations in the US (see also note 17A on page 122).
The sensitivity of the overall pension liabilities to changes in the weighted key financial assumptions are:
Change in assumption | Impact on overall liabilities | |||||||||
Discount rate | Increase/decrease by 0.5 | % | Decrease/increase by 8 | % | ||||||
Inflation rate | Increase/decrease by 0.5 | % | Increase/decrease by 6 | % |
Unilever Annual Report and Accounts 2012 | Financial statements 99 |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS UNILEVER GROUP continued
4B. Pensions and similar obligations continued
Reconciliation of change in assets and liabilities
Movements in assets and liabilities during the year:
million Assets 2012 |
million Assets 2011 |
million Assets 2010 |
million Liabilities 2012 |
million liabilities 2011 |
million Liabilities 2010 |
|||||||||||||||||||
1 January |
16,044 | 15,974 | 14,413 | (19,247 | ) | (18,044 | ) | (16,995 | ) | |||||||||||||||
Acquisitions/disposals |
| 11 | 3 | | (16 | ) | (4 | ) | ||||||||||||||||
Current service cost |
| | | (278 | ) | (252 | ) | (261 | ) | |||||||||||||||
Employee contributions |
18 | 15 | 13 | | | | ||||||||||||||||||
Special termination benefits |
| | | (17 | ) | (31 | ) | (22 | ) | |||||||||||||||
Past service costs |
| | | 27 | 195 | 60 | ||||||||||||||||||
Settlements/curtailments |
(6 | ) | | (162 | ) | 26 | 146 | 168 | ||||||||||||||||
Expected returns on plan assets |
897 | 979 | 983 | | | | ||||||||||||||||||
Interest on pension liabilities |
| | | (904 | ) | (908 | ) | (963 | ) | |||||||||||||||
Actuarial gain/(loss) |
1,221 | (440 | ) | 677 | (2,036 | ) | (1,251 | ) | (519 | ) | ||||||||||||||
Employer contributions |
605 | 463 | 669 | | | | ||||||||||||||||||
Benefit payments |
(1,227 | ) | (1,130 | ) | (1,146 | ) | 1,227 | 1,130 | 1,146 | |||||||||||||||
Reclassification of benefits(b) |
17 | | 19 | (23 | ) | (9 | ) | (28 | ) | |||||||||||||||
Currency retranslation
|
|
104
|
|
|
172
|
|
|
505
|
|
|
(107
|
)
|
|
(207
|
)
|
|
(626
|
)
| ||||||
31 December |
17,673 | 16,044 | 15,974 | (21,332 | ) | (19,247 | ) | (18,044 | ) |
(b) | Certain obligations have been reclassified as employee benefit obligations. |
The actual return on plan assets during 2012 was 2,118 million being the sum of 897 million and 1,221 million from the table above (2011: 539 million).
Funded status of plans at the year end
million 2012 |
million 2011 |
million 2010 |
million 2009 |
million 2008 |
||||||||||||||||
Total assets |
17,673 | 16,044 | 15,974 | 14,413 | 11,719 | |||||||||||||||
Total pension liabilities
|
|
(21,332
|
)
|
|
(19,247
|
)
|
|
(18,044
|
)
|
|
(16,995
|
)
|
|
(15,101
|
)
| |||||
Net liabilities |
(3,659 | ) | (3,203 | ) | (2,070 | ) | (2,582 | ) | (3,382 | ) | ||||||||||
Less unrecognised surplus
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Pension liabilities net of assets |
(3,659 | ) | (3,203 | ) | (2,070 | ) | (2,582 | ) | (3,382 | ) |
Cash flow
Group cash flow in respect of pensions and similar post-employment benefits comprises company contributions paid to funded plans and benefits paid by the company in respect of unfunded plans, as set out in the following table (including the current estimate of contributions for 2013):
|
million 2013 |
E |
|
million 2012 |
|
|
million 2011 |
|
|
million 2010 |
| |||||
Company contributions to funded plans: |
||||||||||||||||
Defined benefit |
610 | 435 | 297 | 482 | ||||||||||||
Defined contribution |
130 | 116 | 90 | 72 | ||||||||||||
Benefits paid by the company in respect of unfunded plans: |
||||||||||||||||
Defined benefit
|
|
160
|
|
|
170
|
|
|
166
|
|
|
187
|
| ||||
Group cash flow in respect of pensions and similar benefits |
900 | 721 | 553 | 741 |
Contributions to funded defined benefit plans are subject to periodic review, taking account of local legislation.
100 Financial statements | Unilever Annual Report and Accounts 2012 |
4C. Share-based compensation plans
The fair value of the awards at the grant date is calculated using pricing models and recognised over the vesting period of the grant as a remuneration cost with a corresponding increase in equity. The value of the charge is adjusted to reflect expected and actual levels of awards vesting, except where the failure to vest is as a result of not meeting a market condition. Cancellations of equity instruments are treated as an acceleration of the vesting period and any outstanding charge is recognised in the income statement immediately.
As at 31 December 2012, the Group had share-based compensation plans in the form of performance shares, share options and other share awards.
The numbers in this note include those for Executive Directors shown in the Directors Remuneration Report on pages 62 to 81 and those for key management personnel shown in note 4A on page 95. Non-Executive Directors do not participate in any of the share-based compensation plans.
The charge in each of the last three years is shown below, and relates to equity settled plans:
Income statement charge | million 2012 |
million 2011 |
million 2010 |
|||||||||
Performance share plans |
(147 | ) | (93 | ) | (120 | ) | ||||||
Other plans |
(6 | ) | (12 | ) | (24 | ) | ||||||
(153 | ) | (105 | ) | (144 | ) |
Performance Share Plans
Performance share awards are made under the Management Co-Investment Plan (MCIP) and the Global Share Incentive Plan (GSIP). The MCIP allows Unilevers managers to invest up to 60% of their annual bonus in shares in Unilever and to receive a corresponding award of performance-related shares. Under GSIP Unilevers managers receive annual awards of NV and PLC shares. The awards of both plans will vest after three years between 0% and 200% of grant level, depending on the satisfaction of performance metrics.
The performance metrics of both MCIP and GSIP are underlying sales growth, operating cash flow and core operating margin improvement. There is an additional target based on relative total shareholder return (TSR) for senior executives.
A summary of the status of the Performance Share Plans as at 31 December 2012, 2011 and 2010 and changes during the years ended on these dates is presented below:
2012 Number of shares |
2011 Number of |
2010 Number of shares |
||||||||||
Outstanding at 1 January |
18,642,656 | 17,240,376 | 17,536,148 | |||||||||
Awarded |
7,036,147 | 9,587,934 | 9,292,689 | |||||||||
Vested |
(6,277,057 | ) | (6,688,229 | ) | (8,626,746 | ) | ||||||
Forfeited
|
|
(1,370,645
|
)
|
|
(1,497,425
|
)
|
|
(961,715
|
)
| |||
Outstanding at 31 December |
18,031,101 | 18,642,656 | 17,240,376 | |||||||||
2012 | 2011 | 2010 | ||||||||||
Share award value information |
||||||||||||
Fair value per share award during the year |
25.02 | 22.91 | 21.49 |
Additional information
At 31 December 2012, there were options outstanding to purchase 16,823,830 (2011: 24,196,358) ordinary shares in NV or PLC in respect of share-based compensation plans of NV and its subsidiaries and the North American plans, and 9,418,749 (2011: 10,396,180) ordinary shares in NV or PLC in respect of share-based compensation plans of PLC and its subsidiaries.
Unilever Annual Report and Accounts 2012 | Financial statements 101 |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS UNILEVER GROUP continued
4C. Share-based compensation plans continued
To satisfy the options granted, certain NV group companies hold 23,630,318 (2011: 33,219,526) ordinary shares of NV or PLC, and trusts in Jersey and the United Kingdom hold 1,205,856 (2011: 3,042,111) PLC shares. The trustees of these trusts have agreed, until further notice, to waive dividends on these shares, save for the nominal sum of 0.01p per 3 1⁄9p ordinary share. Shares acquired during 2012 represent 0.002% of the Groups called up share capital. The balance of shares held in connection with share plans at 31 December 2012 represented 0.8% (2011: 1.2%) of the Groups called up share capital.
The book value of 619 million (2011: 799 million) of all shares held in respect of share-based compensation plans for both NV and PLC is eliminated on consolidation by deduction from other reserves. Their market value at 31 December 2012 was 717 million (2011: 954 million).
At 31 December 2012 there were no options for which the exercise price was above market price.
Shares held to satisfy options and related trusts are accounted for in accordance with IAS 32 Financial Instruments: Presentation and SIC 12 Consolidation of Special Purpose Entities. All differences between the purchase price of the shares held to satisfy options granted and the proceeds received for the shares, whether on exercise or lapse, are charged to reserves. The basis of the charge to operating profit for the economic value of options granted is discussed on page 101.
Between 31 December 2012 and 4 March 2013, 6,262,639 shares were granted and 150,555 shares were forfeited related to the Performance Share Plans.
Net finance costs is comprised of finance costs and finance income, including net finance costs in relation to pensions and similar obligations.
Finance income includes income on cash and cash equivalents and income on other financial assets. Finance costs include interest costs in relation to financial liabilities.
Borrowing costs which are not capitalised are recognised based on the effective interest method.
Net finance costs | million 2012 |
million 2011 |
million 2010 |
|||||||||
Finance costs
|
|
(526
|
)
|
|
(540
|
)
|
|
(491
|
)
| |||
Bank loans and overdrafts |
(69 | ) | (59 | ) | (38 | ) | ||||||
Bonds and other loans |
(451 | ) | (472 | ) | (441 | ) | ||||||
Dividends paid on preference shares |
(4 | ) | (5 | ) | (6 | ) | ||||||
Net gain/(loss) on derivatives for which hedge accounting is not applied(a)
|
|
(2
|
)
|
|
(4
|
)
|
|
(6
|
)
| |||
On foreign exchange derivatives |
(19 | ) | (379 | ) | (601 | ) | ||||||
Exchange difference on underlying items |
17 | 375 | 595 | |||||||||
Finance income |
136 | 92 | 77 | |||||||||
Pensions and similar obligations(b) |
(7 | ) | 71 | 20 | ||||||||
(397 | ) | (377 | ) | (394 | ) |
(a) | For further details of derivatives for which hedge accounting is not applied please refer to note 16C on page 120. |
(b) | Net finance costs in respect of pensions and similar obligations are analysed in note 4B on page 98. |
Income tax on the profit for the year comprises current and deferred tax. Income tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustments to tax payable in respect of previous years.
102 Financial statements | Unilever Annual Report and Accounts 2012 |
6A. Income tax continued
Tax charge in income statement | million 2012 |
million 2011 |
million 2010 |
|||||||||
Current tax |
||||||||||||
Current year |
(1,897 | ) | (1,571 | ) | (1,479 | ) | ||||||
Over/(under) provided in prior years |
(135 | ) | 93 | 88 | ||||||||
(2,032 | ) | (1,478 | ) | (1,391 | ) | |||||||
Deferred tax |
||||||||||||
Origination and reversal of temporary differences |
164 | (179 | ) | (237 | ) | |||||||
Changes in tax rates |
81 | 1 | (2 | ) | ||||||||
Recognition of previously unrecognised losses brought forward |
52 | 34 | 96 | |||||||||
297 | (144 | ) | (143 | ) | ||||||||
(1,735 | ) | (1,622 | ) | (1,534 | ) | |||||||
The reconciliation between the computed weighted average rate of income tax expense, which is generally applicable to Unilever companies, and the actual rate of taxation charged is as follows: | ||||||||||||
Reconciliation of effective tax rate | % 2012 |
% 2011 |
% 2010 |
|||||||||
Computed rate of tax(a) |
26 | 27 | 28 | |||||||||
Differences due to: |
||||||||||||
Incentive tax credits |
(5 | ) | (5 | ) | (5 | ) | ||||||
Withholding tax on dividends |
2 | 2 | 2 | |||||||||
Adjustments to previous years |
| (1 | ) | (3 | ) | |||||||
Expenses not deductible for tax purposes |
2 | 1 | 1 | |||||||||
Other
|
|
1
|
|
|
2
|
|
|
3
|
| |||
Effective tax rate |
26 | 26 | 26 |
(a) | The computed tax rate used is the average of the standard rate of tax applicable in the countries in which Unilever operates, weighted by the amount of profit before taxation generated in each of those countries. For this reason the rate may vary from year to year according to the mix of profit and related tax rates. |
Deferred tax is recognised using the liability method on taxable temporary differences between the tax base and the accounting base of items included in the balance sheet of the Group. Certain temporary differences are not provided for as follows:
| goodwill not deductible for tax purposes; |
| the initial recognition of assets or liabilities that affect neither accounting nor taxable profit; and |
| differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. |
The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted, or substantively enacted, at the year end.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
million | million | million | million | million | million | million | million | |||||||||||||||||||||||||
Movements in 2012 and 2011 | As at 1 January 2012 |
Income statement |
Other | As at 31 December 2012 |
As at 1 January 2011 |
Income statement |
Other | As at 31 December 2011 |
||||||||||||||||||||||||
Pensions and similar obligations |
748 | (39 | ) | 125 | 834 | 440 | (113 | ) | 421 | 748 | ||||||||||||||||||||||
Provisions |
661 | 105 | (147 | ) | 619 | 701 | (45 | ) | 5 | 661 | ||||||||||||||||||||||
Goodwill and intangible assets |
(1,721 | ) | 92 | 193 | (1,436 | ) | (1,122 | ) | 78 | (677 | ) | (1,721 | ) | |||||||||||||||||||
Accelerated tax depreciation |
(668 | ) | (45 | ) | 90 | (623 | ) | (540 | ) | (60 | ) | (68 | ) | (668 | ) | |||||||||||||||||
Tax losses |
100 | 43 | (9 | ) | 134 | 117 | (21 | ) | 4 | 100 | ||||||||||||||||||||||
Fair value gains |
(20 | ) | 6 | (7 | ) | (21 | ) | (25 | ) | (12 | ) | 17 | (20 | ) | ||||||||||||||||||
Fair value losses |
31 | 5 | (24 | ) | 12 | 13 | 2 | 16 | 31 | |||||||||||||||||||||||
Share-based payments |
118 | 64 | (10 | ) | 172 | 120 | (19 | ) | 17 | 118 | ||||||||||||||||||||||
Other |
47 | 66 | (84 | ) | 29 | 23 | 46 | (22 | ) | 47 | ||||||||||||||||||||||
(704 | ) | 297 | 127 | (280 | ) | (273 | ) | (144 | ) | (287 | ) | (704 | ) |
Unilever Annual Report and Accounts 2012 | Financial statements 103 |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS UNILEVER GROUP continued
6B. Deferred tax continued
At the balance sheet date, the Group has unused tax losses of 1,582 million (2011: 1,568 million) and tax credits amounting to 120 million (2011: 39 million) available for offset against future taxable profits. Deferred tax assets have not been recognised in respect of unused tax losses of 1,234 million (2011: 1,191 million) and tax credits of 120 million (2011: 38 million), as it is not probable that there will be future taxable profits within the entities against which the losses can be utilised. The majority of these tax losses and credits arise in tax jurisdictions where they do not expire with the exception of 516 million (2011: 512 million) of state and federal tax losses in the US which expire between now and 2031.
Other deductible temporary differences of 39 million (2011: 58 million) have not been recognised as a deferred tax asset. There is no expiry date for these differences.
At the balance sheet date, the aggregate amount of temporary differences associated with undistributed earnings of subsidiaries for which deferred tax liabilities have not been recognised was 1,449 million (2011: 1,443 million). No liability has been recognised in respect of these differences because the Group is in a position to control the timing of the reversal of the temporary differences, and it is probable that such differences will not reverse in the foreseeable future.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when the deferred income taxes relate to the same fiscal authority. The following amounts, determined after appropriate offsetting, are shown in the consolidated balance sheet:
Deferred tax assets and liabilities | million Assets 2012 |
million Assets 2011 |
million Liabilities 2012 |
million Liabilities 2011 |
million Total 2012 |
million Total 2011 |
||||||||||||||||||
Pensions and similar obligations |
614 | 555 | 220 | 193 | 834 | 748 | ||||||||||||||||||
Provisions |
561 | 419 | 58 | 242 | 619 | 661 | ||||||||||||||||||
Goodwill and intangible assets |
(111 | ) | (612 | ) | (1,325 | ) | (1,109 | ) | (1,436 | ) | (1,721 | ) | ||||||||||||
Accelerated tax depreciation |
(175 | ) | (129 | ) | (448 | ) | (539 | ) | (623 | ) | (668 | ) | ||||||||||||
Tax losses |
133 | 69 | 1 | 31 | 134 | 100 | ||||||||||||||||||
Fair value gains |
7 | (1 | ) | (28 | ) | (19 | ) | (21 | ) | (20 | ) | |||||||||||||
Fair value losses |
1 | 27 | 11 | 4 | 12 | 31 | ||||||||||||||||||
Share-based payments |
51 | 63 | 121 | 55 | 172 | 118 | ||||||||||||||||||
Other |
32 | 30 | (3 | ) | 17 | 29 | 47 | |||||||||||||||||
1,113 | 421 | (1,393 | ) | (1,125 | ) | (280 | ) | (704 | ) | |||||||||||||||
Of which deferred tax to be recovered/(settled) after |
725 | 163 | (1,378 | ) | (1,131 | ) | (653 | ) | (968 | ) |
6C. Tax on other comprehensive income
Income tax is recognised in other comprehensive income for items recognised directly in equity.
Tax effects of the components of other comprehensive income were as follows:
million | million | million | million | million | million | |||||||||||||||||||
Before tax 2012 |
Tax charge/ credit 2012 |
After tax 2012 |
Before tax 2011 |
Tax charge/ credit 2011 |
After tax 2011 |
|||||||||||||||||||
Fair value gains/(losses) on financial instruments |
(130 | ) | 5 | (125 | ) | (194 | ) | 26 | (168 | ) | ||||||||||||||
Actuarial gains/(losses) on pension schemes |
(815 | ) | 171 | (644 | ) | (1,691 | ) | 448 | (1,243 | ) | ||||||||||||||
Currency retranslation gains/(losses) |
(307 | ) | (9 | ) | (316 | ) | (713 | ) | 10 | (703 | ) | |||||||||||||
(1,252 | ) | 167 | (1,085 | ) | (2,598 | ) | 484 | (2,114 | ) |
104 Financial statements | Unilever Annual Report and Accounts 2012 |
The calculations of combined earnings per share are based on the net profit attributable to ordinary share capital divided by the average number of share units representing the combined ordinary share capital of NV and PLC in issue during the year, after deducting shares held as treasury stock.
The calculations of diluted earnings per share and core earnings per share (Core EPS) are based on: (i) conversion into PLC ordinary shares of those shares in a group company which are convertible in the year 2038, as described in Corporate Governance report on page 51; and (ii) the effect of share-based compensation plans, details of which are set out in note 4C on pages 101 to 102.
Combined earnings per share | 2012 |
2011 |
2010 |
|||||||||
Basic earnings per share |
1.58 | 1.51 | 1.51 | |||||||||
Diluted earnings per share |
1.54 | 1.46 | 1.46 | |||||||||
Core EPS |
1.57 | 1.41 | 1.36 | |||||||||
Millions of share units | ||||||||||||
Calculation of average number of share units | 2012 | 2011 | 2010 | |||||||||
Average number of shares: NV |
1,714.7 | 1,714.7 | 1,714.7 | |||||||||
PLC |
1,310.2 | 1,310.2 | 1,310.2 | |||||||||
Less shares held by employee share trusts and companies
|
|
(196.1
|
)
|
|
(209.0
|
)
|
|
(212.6
|
)
| |||
Combined average number of share units |
2,828.8 | 2,815.9 | 2,812.3 | |||||||||
Add shares issuable in 2038 |
70.9 | 70.9 | 70.9 | |||||||||
Add dilutive effect of share-based compensation plans
|
|
16.2
|
|
|
21.3
|
|
|
21.9
|
| |||
Diluted combined average number of share units |
2,915.9 | 2,908.1 | 2,905.1 | |||||||||
Calculation of earnings | million 2012 |
million 2011 |
million 2010 |
|||||||||
Net profit |
4,948 | 4,623 | 4,598 | |||||||||
Non-controlling interests
|
|
(468
|
)
|
|
(371
|
)
|
|
(354
|
)
| |||
Net profit attributable to shareholders equity |
4,480 | 4,252 | 4,244 | |||||||||
Calculation of core earnings | million 2012 |
million 2011 |
million 2010 |
|||||||||
Net profit attributable to shareholders equity |
4,480 | 4,252 | 4,244 | |||||||||
Post tax impact of non-core items 3
|
|
87
|
|
|
(138
|
)
|
|
(296
|
)
| |||
Core profit attributable to shareholders equity |
4,567 | 4,114 | 3,948 |
Dividends are recognised on the date that the shareholders right to receive payment is established. This is generally the date when the dividend is declared.
Dividends on ordinary capital during the year | million 2012 |
million 2011 |
million 2010 |
|||||||||
NV dividends |
(1,482 | ) | (1,368 | ) | (1,270 | ) | ||||||
PLC dividends |
(1,214 | ) | (1,119 | ) | (1,039 | ) | ||||||
(2,696 | ) | (2,487 | ) | (2,309 | ) |
Four quarterly interim dividends were declared and paid during 2012 totalling 0.95 (2011: 0.88) per NV ordinary share and £0.77 (2011: £0.77) per PLC ordinary share.
Quarterly dividends of 0.2430 per NV ordinary share and £0.2039 per PLC ordinary share were declared on 23 January 2013, to be payable in March 2013. See note 25 Events after the balance sheet date on page 129. Total dividends declared in relation to 2012 were 0.97 (2011: 0.90) per NV ordinary share and £0.79 (2011: £0.78) per PLC ordinary share.
Unilever Annual Report and Accounts 2012 | Financial statements 105 |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS UNILEVER GROUP continued
Goodwill
Goodwill is initially recognised based on the accounting policy for business combinations (see note 21). Goodwill is subsequently measured at cost less amounts provided for impairment. The Groups cash generating units (CGUs) are based on the four product categories and the three geographical areas.
Goodwill acquired in a business combination is allocated to the Groups CGUs, or groups of CGUs, that are expected to benefit from the synergies of the combination. These might not always be the same as the CGUs that include the assets and liabilities of the acquired business. Each unit or group of units to which the goodwill is allocated represents the lowest level within the Group at which the goodwill is monitored for internal management purposes, and is not larger than an operating segment.
Intangible assets
Separately purchased intangible assets are initially measured at cost. On acquisition of new interests in group companies, Unilever recognises any specifically identifiable intangible assets separately from goodwill. Intangible assets are initially measured at fair value as at the date of acquisition.
Finite-life intangible assets mainly comprise patented and non-patented technology, know-how and software. These assets are capitalised and amortised on a straight-line basis in the income statement over the period of their expected useful lives, or the period of legal rights if shorter. None of the amortisation periods exceeds ten years. Indefinite-life intangibles mainly comprise trademarks and brands. These assets are capitalised at cost but are not amortised. They are subject to a review for impairment annually, or more frequently if events or circumstances indicate this is necessary. Any impairment is charged to the income statement as it arises.
Research and development
Development expenditure is capitalised only if the costs can be reliably measured, future economic benefits are probable, the product is technically feasible and the Group has the intent and the resources to complete the project. Research expenditure is recognised in profit or loss as incurred.
million | million | million | million | million | ||||||||||||||||
Movements during 2012 | Goodwill | Indefinite-life intangible assets |
Finite-life intangible assets |
Software | Total | |||||||||||||||
Cost |
||||||||||||||||||||
1 January 2012 |
15,929 | 6,609 | 663 | 1,152 | 24,353 | |||||||||||||||
Acquisitions of group companies |
10 | 9 | | | 19 | |||||||||||||||
Disposals of group companies |
(22 | ) | (7 | ) | | | (29 | ) | ||||||||||||
Reclassed to held for disposal |
(44 | ) | (70 | ) | | | (114 | ) | ||||||||||||
Additions |
| 29 | 10 | 396 | 435 | |||||||||||||||
Disposals |
| (10 | ) | (1 | ) | (45 | ) | (56 | ) | |||||||||||
Currency retranslation
|
|
(238
|
)
|
|
(24
|
)
|
|
(2
|
)
|
|
(23
|
)
|
|
(287
|
)
| |||||
31 December 2012 |
15,635 | 6,536 | 670 | 1,480 | 24,321 | |||||||||||||||
Amortisation and impairment |
||||||||||||||||||||
1 January 2012 |
(1,033 | ) | (245 | ) | (601 | ) | (561 | ) | (2,440 | ) | ||||||||||
Amortisation for the year |
| | (43 | ) | (170 | ) | (213 | ) | ||||||||||||
Disposals |
| | | 11 | 11 | |||||||||||||||
Currency retranslation
|
|
17
|
|
|
7
|
|
|
3
|
|
|
12
|
|
|
39
|
| |||||
31 December 2012
|
|
(1,016
|
)
|
|
(238
|
)
|
|
(641
|
)
|
|
(708
|
)
|
|
(2,603
|
)
| |||||
Net book value 31 December 2012 |
14,619 | 6,298 | 29 | 772 | 21,718 | |||||||||||||||
Movements during 2011 |
||||||||||||||||||||
Cost |
||||||||||||||||||||
1 January 2011 |
14,150 | 4,757 | 644 | 899 | 20,450 | |||||||||||||||
Acquisitions of group companies |
1,677 | 1,935 | 15 | 5 | 3,632 | |||||||||||||||
Disposals of group companies |
(4 | ) | (263 | ) | | | (267 | ) | ||||||||||||
Additions |
| 8 | 2 | 260 | 270 | |||||||||||||||
Disposals |
| | | (16 | ) | (16 | ) | |||||||||||||
Currency retranslation
|
|
106
|
|
|
172
|
|
|
2
|
|
|
4
|
|
|
284
|
| |||||
31 December 2011 |
15,929 | 6,609 | 663 | 1,152 | 24,353 | |||||||||||||||
Amortisation and impairment |
||||||||||||||||||||
1 January 2011 |
(1,007 | ) | (235 | ) | (540 | ) | (435 | ) | (2,217 | ) | ||||||||||
Amortisation for the year |
| | (58 | ) | (133 | ) | (191 | ) | ||||||||||||
Disposals |
| | | 5 | 5 | |||||||||||||||
Currency retranslation
|
|
(26
|
)
|
|
(10
|
)
|
|
(3
|
)
|
|
2
|
|
|
(37
|
)
| |||||
31 December 2011
|
|
(1,033
|
)
|
|
(245
|
)
|
|
(601
|
)
|
|
(561
|
)
|
|
(2,440
|
)
| |||||
Net book value 31 December 2011 |
14,896 | 6,364 | 62 | 591 | 21,913 |
106 Financial statements | Unilever Annual Report and Accounts 2012 |
9. Goodwill and intangible assets continued
There are no significant carrying amounts of goodwill and intangible assets that are allocated across multiple cash generating units.
Impairment charges
We have tested all material goodwill and indefinite-life intangible assets for impairment. No impairments were identified.
Significant CGUs
The goodwill and indefinite-life intangible assets held in the three CGUs relating to Foods across the geographical areas are considered significant within the total carrying amounts of goodwill and indefinite-life intangible assets at 31 December 2012 in terms of size, headroom and sensitivity to assumptions used. No other CGUs are considered significant in this respect.
The goodwill and indefinite-life intangible assets held in the significant CGUs are:
billion 2012 |
billion 2012 |
billion 2011 |
billion 2011 |
|||||||||||||
Goodwill | Indefinite- life intangibles |
Goodwill | Indefinite- life intangibles |
|||||||||||||
Foods Europe |
5.8 | 1.6 | 5.7 | 1.6 | ||||||||||||
Foods The Americas |
3.9 | 1.4 | 4.1 | 1.5 | ||||||||||||
Foods Asia/AMET/RUB |
1.4 | 0.4 | 1.5 | 0.4 |
During 2012, the Group conducted an impairment review of the carrying value of these assets as part of its comprehensive annual review. Value in use has been calculated as the present value of projected future cash flows. A pre-tax discount rate of 7.4% was used.
For the significant CGUs, the following key assumptions were used in the discounted cash flow projections:
Foods | Foods | Foods | ||||||||||
Europe | The Americas |
Asia/AMET/ RUB |
||||||||||
Longer-term sustainable growth rates |
0.3 | % | 1.6 | % | 3.3 | % | ||||||
Average near-term nominal growth rates |
0.8 | % | 4.9 | % | 10.5 | % | ||||||
Average operating margins |
22-24 | % | 17-20 | % | 13-16 | % |
The growth rates and margins used to estimate future performance are based on past performance and our experience of growth rates and margins achievable in our key markets.
The projections covered a period of five years, as we believe this to be the most appropriate timescale over which to review and consider annual performances before applying a fixed terminal value multiple to the final year cash flows.
The growth rates used are consistent with our annual planning and strategic planning processes.
We have performed sensitivity analyses around the base assumptions and have concluded that no reasonable possible changes in key assumptions would cause the recoverable amount of the significant CGUs to be less than the carrying value.
Property, plant and equipment is measured at cost including eligible borrowing costs less depreciation and accumulated impairment losses.
Depreciation is provided on a straight-line basis over the expected average useful lives of the assets. Residual values are reviewed at least annually. Estimated useful lives by major class of assets are as follows:
Freehold buildings (no depreciation on freehold land) | 40 years | |
Leasehold land and buildings | 40 years (or life of lease if less) | |
Plant and equipment | 2-20 years |
Property, plant and equipment is subject to review for impairment if triggering events or circumstances indicate that this is necessary. If an indication of impairment exists, the asset or cash generating unit recoverable amount is estimated and any impairment loss is charged to the income statement as it arises.
Unilever Annual Report and Accounts 2012 | Financial statements 107 |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS UNILEVER GROUP continued
10. Property, plant and equipment continued
Movements during 2012 | million Land and buildings |
million Plant and equipment |
million
Total |
|||||||||
Cost |
||||||||||||
1 January 2012 |
3,875 | 12,592 | 16,467 | |||||||||
Acquisitions |
| 1 | 1 | |||||||||
Disposals of group companies |
| (52 | ) | (52 | ) | |||||||
Additions |
293 | 1,694 | 1,987 | |||||||||
Disposals |
(65 | ) | (516 | ) | (581 | ) | ||||||
Currency retranslation |
(52 | ) | (181 | ) | (233 | ) | ||||||
Reclassification as held for sale |
(50 | ) | (77 | ) | (127 | ) | ||||||
Other adjustments
|
|
5
|
|
|
42
|
|
|
47
|
| |||
31 December 2012 |
4,006 | 13,503 | 17,509 | |||||||||
Depreciation |
||||||||||||
1 January 2012 |
(1,237 | ) | (6,456 | ) | (7,693 | ) | ||||||
Disposals of group companies |
| 9 | 9 | |||||||||
Depreciation charge for the year |
(121 | ) | (865 | ) | (986 | ) | ||||||
Disposals |
40 | 448 | 488 | |||||||||
Currency retranslation |
13 | 71 | 84 | |||||||||
Reclassification as held for sale |
22 | 64 | 86 | |||||||||
Other adjustments
|
|
(3
|
)
|
|
(49
|
)
|
|
(52
|
)
| |||
31 December 2012 |
(1,286 | ) | (6,778 | ) | (8,064 | ) | ||||||
Net book value 31 December 2012 |
2,720 | 6,725 | 9,445 | (a) | ||||||||
Includes payments on account and assets in course of construction |
188 | 1,343 | 1,531 | |||||||||
Movements during 2011 |
||||||||||||
Cost |
||||||||||||
1 January 2011 |
3,582 | 11,836 | 15,418 | |||||||||
Acquisitions |
76 | 107 | 183 | |||||||||
Disposals of group companies |
(36 | ) | (86 | ) | (122 | ) | ||||||
Additions |
346 | 1,502 | 1,848 | |||||||||
Disposals |
(88 | ) | (603 | ) | (691 | ) | ||||||
Currency retranslation |
(51 | ) | (177 | ) | (228 | ) | ||||||
Reclassification as held for sale |
26 | 51 | 77 | |||||||||
Other adjustments
|
|
20
|
|
|
(38
|
)
|
|
(18
|
)
| |||
31 December 2011 |
3,875 | 12,592 | 16,467 | |||||||||
Depreciation |
||||||||||||
1 January 2011 |
(1,209 | ) | (6,355 | ) | (7,564 | ) | ||||||
Disposals of group companies |
12 | 38 | 50 | |||||||||
Depreciation charge for the year |
(96 | ) | (742 | ) | (838 | ) | ||||||
Disposals |
69 | 515 | 584 | |||||||||
Currency retranslation |
1 | 82 | 83 | |||||||||
Reclassification as held for sale |
(13 | ) | (6 | ) | (19 | ) | ||||||
Other adjustments
|
|
(1
|
)
|
|
12
|
|
|
11
|
| |||
31 December 2011 |
(1,237 | ) | (6,456 | ) | (7,693 | ) | ||||||
Net book value 31 December 2011 |
2,638 | 6,136 | 8,774 | (a) | ||||||||
Includes payments on account and assets in course of construction |
242 | 1,169 | 1,411 |
(a) | Includes 243 million (2011: 272 million) of freehold land. |
The Group also has commitments to capital expenditure of 364 million (2011: 514 million). See note 20 on page 125 for property, plant and equipment under finance lease agreements.
108 Financial statements | Unilever Annual Report and Accounts 2012 |
Joint ventures are undertakings in which the Group has an interest and which are jointly controlled by the Group and one or more other parties. Associates are undertakings where the Group has an investment in which it does not have control or joint control but can exercise significant influence.
Interests in joint ventures and associates are accounted for using the equity method and are stated in the consolidated balance sheet at cost, adjusted for the movement in the Groups share of their net assets and liabilities. The Groups share of the profit or loss after tax of joint ventures and associates is included in the Groups consolidated profit before taxation.
Where the Groups share of losses exceeds its interest in the equity accounted investee, the carrying amount of the investment is reduced to zero and the recognition of further losses is discontinued, except to the extent that the Group has an obligation to make payments on behalf of the investee.
Biological assets are measured at fair value less costs to sell with any changes recognised in the income statement.
million 2012 |
million 2011 |
|||||||
Interest in net assets of joint ventures |
32 | 48 | ||||||
Interest in net assets of associates |
51 | 45 | ||||||
Long-term trade and other receivables |
172 | 171 | ||||||
Fair value of biological assets |
29 | 32 | ||||||
Other non-financial assets(a) |
252 | 336 | ||||||
536 | 632 | |||||||
(a) Other non-financial assets mainly relate to tax deposits paid. |
||||||||
Movements during 2012 and 2011 | million 2012 |
million 2011 |
||||||
Joint ventures(b) |
||||||||
1 January |
48 | 44 | ||||||
Additions |
| 10 | ||||||
Dividends received/reductions |
(131 | ) | (125 | ) | ||||
Share of net profit |
107 | 113 | ||||||
Currency retranslation
|
|
8
|
|
|
6
|
| ||
31 December |
32 | 48 | ||||||
Associates(c) |
||||||||
1 January |
45 | 45 | ||||||
Additions |
7 | 2 | ||||||
Dividends received/reductions |
| (3 | ) | |||||
Share of net profit
|
|
(2
|
)
|
|
|
| ||
Currency retranslation |
1 | 1 | ||||||
31 December |
51 | 45 |
(b) | Our principal joint ventures are Unilever Jerónimo Martins in Portugal, Pepsi Lipton International and the Pepsi/Lipton Partnership in the US. |
(c) | Associates as at 31 December 2012 primarily comprise our investments in Langholm Capital Partners. Other Unilever Ventures assets are included under Other non-current non-financial assets. |
The joint ventures and associates have no significant contingent liabilities to which the Group is exposed, and the Group has no significant contingent liabilities in relation to its interest in the joint ventures and associates.
The Group has no outstanding capital commitments to joint ventures.
Outstanding balances with joint ventures and associates are shown in note 23 on page 128.
Other income from non-current investments | million 2012 |
million 2011 |
million 2010 |
|||||||||
Income from other non-current investments |
(14 | ) | 76 | 76 |
Unilever Annual Report and Accounts 2012 | Financial statements 109 |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS UNILEVER GROUP continued
Inventories are valued at the lower of weighted average cost and net realisable value. Cost comprises direct costs and, where appropriate, a proportion of attributable production overheads. Net realisable value is the estimated selling price less the estimated costs necessary to make the sale.
Inventories | million 2012 |
million 2011 |
||||||
Raw materials and consumables |
1,517 | 1,584 | ||||||
Finished goods and goods for resale |
2,919 | 3,017 | ||||||
4,436 | 4,601 |
Inventories with a value of 143 million (2011: 158 million) are carried at net realisable value, this being lower than cost. During 2012, 131 million (2011: 99 million) was charged to the income statement for damaged, obsolete and lost inventories. In 2012, 71 million (2011: 43 million) was utilised or released to the income statement from inventory provisions taken in earlier years.
Trade and other receivables are initially recognised at fair value plus any directly attributable transaction costs. Subsequently these assets are held at amortised cost, using the effective interest method and net of any impairment losses.
We do not consider the fair values of trade and other receivables to be significantly different from their carrying values. Credit terms for customers are determined in individual territories. Concentrations of credit risk with respect to trade receivables are limited, due to the Groups customer base being large and diverse. Our historical experience of collecting receivables, supported by the level of default, is that credit risk is low across territories and so trade receivables are considered to be a single class of financial assets. Balances are considered for impairment on an individual basis rather than by reference to the extent that they become overdue.
Trade and other current receivables | million 2012 |
million 2011 |
||||||
Due within one year |
||||||||
Trade receivables |
2,793 | 2,897 | ||||||
Prepayments and accrued income |
549 | 591 | ||||||
Other receivables |
1,094 | 1,025 | ||||||
4,436 | 4,513 |
Other receivables comprise financial assets of 502 million (2011: 327 million), including supplier and customer deposits, employee advances and certain derivatives, and non-financial assets of 592 million (2011: 698 million), including tax deposits and reclaimable sales tax.
110 Financial statements | Unilever Annual Report and Accounts 2012 |
13. Trade and other current receivables continued
Ageing of trade receivables | million 2012 |
million 2011 |
||||||
Total trade receivables |
2,916 | 3,013 | ||||||
Less impairment provision for trade receivables |
(123 | ) | (116 | ) | ||||
2,793 | 2,897 | |||||||
Of which: |
||||||||
Not overdue |
2,473 | 2,505 | ||||||
Past due less than three months |
236 | 300 | ||||||
Past due more than three months but less than six months |
80 | 72 | ||||||
Past due more than six months but less than one year |
48 | 52 | ||||||
Past due more than one year |
79 | 84 | ||||||
Impairment provision for trade receivables |
(123 | ) | (116 | ) | ||||
2,793 | 2,897 | |||||||
Impairment provision for trade and other receivables current and non-current impairments | million 2012 |
million 2011 |
||||||
1 January |
145 | 156 | ||||||
Charged to income statement |
33 | 19 | ||||||
Reductions/releases |
(23 | ) | (26 | ) | ||||
Currency retranslation
|
|
(4
|
)
|
|
(4
|
)
| ||
31 December |
151 | 145 |
Trade payables and other liabilities are initially recognised at fair value less any directly attributable transaction costs. Subsequently these liabilities are held at amortised cost, using the effective interest method.
We do not consider the fair values of trade and other payables to be significantly different from their carrying values.
Trade and other liabilities | million 2012 |
million 2011 |
||||||
Due within one year |
||||||||
Trade payables |
7,084 | 6,767 | ||||||
Accruals |
3,459 | 3,332 | ||||||
Social security and sundry taxes |
419 | 397 | ||||||
Others |
706 | 475 | ||||||
11,668 | 10,971 | |||||||
Due after more than one year |
||||||||
Accruals |
57 | 115 | ||||||
Others |
343 | 172 | ||||||
400 | 287 | |||||||
Total trade payables and other liabilities |
12,068 | 11,258 |
Included in others are third party royalties and dividends and certain derivatives.
Unilever Annual Report and Accounts 2012 | Financial statements 111 |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS UNILEVER GROUP continued
Ordinary shares
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity, net of any tax effects.
Internal holdings
The ordinary shares numbered 1 to 2,400 (inclusive) in NV (Special Shares) and deferred stock of PLC are held as to one half of each class by N.V. Elma a subsidiary of NV and one half by United Holdings Limited a subsidiary of PLC. This capital is eliminated on consolidation.
For information on the rights related to the aforementioned ordinary shares, see Corporate Governance report on page 51. The subsidiaries mentioned above have waived their rights to dividends on their ordinary shares in NV.
Share-based compensation
The Group operates a number of share-based compensation plans involving options and awards of ordinary shares of NV and PLC. Full details of these plans are given in note 4C on pages 101 and 102.
Other reserves
Other reserves include the fair value reserve, the foreign currency translation reserve, the capital redemption reserve and treasury stock.
Shares held by employee share trusts
Certain PLC trusts, NV and group companies purchase and hold NV and PLC shares to satisfy options granted. The assets and liabilities of these trusts are included in the consolidated financial statements. The book value of shares held is deducted from other reserves, and trusts borrowings are included in the Groups liabilities. The costs of the trusts are included in the results of the Group. These shares are excluded from the calculation of earnings per share.
Financial liabilities
Financial liabilities are initially recognised at fair value, less any directly related transaction costs. Certain bonds are designated as being part of a fair value hedge relationship. In these cases, the bonds are carried at amortised cost, adjusted for the fair value of the risk being hedged, with changes in value shown in profit and loss. Other financial liabilities, excluding derivatives, are subsequently carried at amortised cost.
Derivative financial instruments
The Groups use of, and accounting for, derivative instruments is explained in note 16 on page 116 and on page 120.
The Groups Treasury activities are designed to:
| maintain a competitive balance sheet in line with A+/A1 rating (see note 15); |
| secure funding at lowest costs for the Groups operations, M&A activity and external dividend payments (see note 15); |
| protect the Groups financial results and position from financial risks (see note 16); |
| maintain market risks within acceptable parameters, while optimising returns (see note 16); and |
| protect the Groups financial investments, while maximising returns (see note 17). |
The treasury department provides central deposit taking, funding and foreign exchange management services for the Groups operations. The department is governed by standards and processes which are approved by Unilever Leadership Executive (ULE). In addition to guidelines and exposure limits, a system of authorities and extensive independent reporting covers all major areas of activity. Performance is monitored closely by senior management. Reviews are undertaken periodically by internal audit.
Key instruments used by the department are:
| short-term and long-term borrowings; |
| cash and cash equivalents; and |
| plain vanilla derivatives, including interest rate swaps and FX contracts. |
The treasury department maintains a list of approved financial instruments. The use of any new instrument must be approved by the Chief Financial Officer. The use of leveraged instruments is not permitted.
112 Financial statements | Unilever Annual Report and Accounts 2012 |
15. Capital and funding continued
Unilever considers the following components of its balance sheet to be managed capital:
| total equity-retained profit, other reserves, share capital, share premium, non-controlling interests (note 15A and 15B); |
| short-term debt current financial liabilities (note 15C); and |
| long-term debt non-current bank loans, bonds and other loans (note 15C). |
The Group manages its capital so as to safeguard its ability to continue as a going concern and to optimise returns to our shareholders through an appropriate balance of debt and equity. The capital structure of the Group is based on managements judgement of the appropriate balance of key elements in order to meet its strategic and day-to-day needs. We consider the amount of capital in proportion to risk and manage the capital structure in light of changes in economic conditions and the risk characteristics of the underlying assets.
Our current long-term credit rating is A+/A1 and our short-term credit rating is A1/P1. We aim to maintain a competitive balance sheet which we consider to be the equivalent of a credit rating of A+/A1 in the long term. This provides us with:
| appropriate access to the debt and equity markets; |
| sufficient flexibility for acquisitions; |
| sufficient resilience against economic and financial uncertainty while ensuring ample liquidity; and |
| optimal weighted average cost of capital, given the above constraints. |
Unilever monitors the qualitative and quantitative factors utilised by the ratings agencies. This information is publicly available and is updated by the credit rating agencies on a regular basis.
Unilever will take appropriate steps in order to maintain, or if necessary adjust, the capital structure. Unilever is not subject to financial covenants in any of its significant financing agreements.
|
Authorised 2012 |
(a)
|
|
Issued, called up and fully paid 2012 |
(b)
|
|
Authorised 2011 |
(a)
|
|
Issued, called up and fully paid 2011 |
(b)
| |||||||
Unilever N.V. | million | million | million | million | ||||||||||||||
NV ordinary shares of 0.16 each |
480 | 274 | 480 | 274 | ||||||||||||||
NV ordinary shares of 428.57 each (shares numbered 1 to 2,400 Special Shares) |
1 | 1 | 1 | 1 | ||||||||||||||
Internal holdings eliminated on consolidation (428.57 shares) |
| (1 | ) | | (1 | ) | ||||||||||||
481 | 274 | 481 | 274 | |||||||||||||||
Unilever PLC | £ million | £ million | ||||||||||||||||
PLC ordinary shares of 3 1⁄9p each |
40.8 | 40.8 | ||||||||||||||||
PLC deferred stock of £1 each |
0.1 | 0.1 | ||||||||||||||||
Internal holding eliminated on consolidation (£1 stock) |
(0.1 | ) | (0.1 | ) | ||||||||||||||
40.8 | 40.8 | |||||||||||||||||
million | million | |||||||||||||||||
Euro equivalent in millions (at £1.00 = 5.143) |
210 | 210 | ||||||||||||||||
Unilever Group | million | million | ||||||||||||||||
Ordinary share capital of NV |
274 | 274 | ||||||||||||||||
Ordinary share capital of PLC |
210 | 210 | ||||||||||||||||
484 | 484 |
(a) | At 31 December 2012, Unilever N.V. had 3,000,000,000 (2011: 3,000,000,000) authorised ordinary shares. The requirement for a UK company to have an authorised share capital was abolished by the UK Companies Act 2006. In May 2010 Unilever PLC shareholders approved new Articles of Association which reflect this. |
(b) | At 31 December 2012, the following quantities of shares were in issue: 1,714,727,700 of NV ordinary shares; 2,400 of NV Special Shares; 1,310,156,361 of PLC ordinary shares and 100,000 of PLC deferred stock. The same quantities were in issue at 31 December 2011. |
For information on the rights of shareholders of NV and PLC and the operation of the Equalisation Agreement, see Corporate Governance report on page 52.
A nominal dividend of 6% is paid on the deferred stock of PLC, which is not redeemable.
Unilever Annual Report and Accounts 2012 | Financial statements 113 |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS UNILEVER GROUP continued
million | million | million | million | million | million | million | ||||||||||||||||||||||
Consolidated statement of changes in equity | Called up share capital |
Share premium account |
Other reserves |
Retained profit |
Total | Non- controlling interests |
Total equity |
|||||||||||||||||||||
1 January 2010 |
484 | 131 | (5,900 | ) | 17,350 | 12,065 | 471 | 12,536 | ||||||||||||||||||||
Total comprehensive income for the year |
| | 465 | 4,329 | 4,794 | 412 | 5,206 | |||||||||||||||||||||
Dividends on ordinary capital |
| | | (2,309 | ) | (2,309 | ) | | (2,309 | ) | ||||||||||||||||||
Movements in treasury stock(a) |
| | 28 | (154 | ) | (126 | ) | | (126 | ) | ||||||||||||||||||
Share-based payment credit(b) |
| | | 144 | 144 | | 144 | |||||||||||||||||||||
Dividends paid to non-controlling interests |
| | | | | (289 | ) | (289 | ) | |||||||||||||||||||
Currency retranslation gains/(losses) net of tax |
| 3 | | | 3 | (1 | ) | 2 | ||||||||||||||||||||
Other movements in equity
|
|
|
|
|
|
|
|
1
|
|
|
(87
|
)
|
|
(86
|
)
|
|
|
|
|
(86
|
)
| |||||||
31 December 2010 |
484 | 134 | (5,406 | ) | 19,273 | 14,485 | 593 | 15,078 | ||||||||||||||||||||
Total comprehensive income for the year |
| | (737 | ) | 2,932 | 2,195 | 314 | 2,509 | ||||||||||||||||||||
Dividends on ordinary capital |
| | | (2,487 | ) | (2,487 | ) | | (2,487 | ) | ||||||||||||||||||
Movements in treasury stock(a) |
| | 138 | (90 | ) | 48 | | 48 | ||||||||||||||||||||
Share-based payment credit(b) |
| | | 105 | 105 | | 105 | |||||||||||||||||||||
Dividends paid to non-controlling interests |
| | | | | (288 | ) | (288 | ) | |||||||||||||||||||
Currency retranslation gains/(losses) net of tax |
| 3 | | | 3 | (4 | ) | (1 | ) | |||||||||||||||||||
Other movements in equity
|
|
|
|
|
|
|
|
1
|
|
|
(57
|
)
|
|
(56
|
)
|
|
13
|
|
|
(43
|
)
| |||||||
31 December 2011 |
484 | 137 | (6,004 | ) | 19,676 | 14,293 | 628 | 14,921 | ||||||||||||||||||||
Total comprehensive income for the year |
| | (374 | ) | 3,793 | 3,419 | 444 | 3,863 | ||||||||||||||||||||
Dividends on ordinary capital |
| | | (2,696 | ) | (2,696 | ) | | (2,696 | ) | ||||||||||||||||||
Movements in treasury stock(a) |
| | 182 | (130 | ) | 52 | | 52 | ||||||||||||||||||||
Share-based payment credit(b) |
| | | 153 | 153 | | 153 | |||||||||||||||||||||
Dividends paid to non-controlling interests |
| | | | | (464 | ) | (464 | ) | |||||||||||||||||||
Currency retranslation gains/(losses) net of tax |
| 3 | (1 | ) | | 2 | (4 | ) | (2 | ) | ||||||||||||||||||
Other movements in equity
|
|
|
|
|
|
|
|
1
|
|
|
(65
|
)
|
|
(64
|
)
|
|
(47
|
)
|
|
(111
|
)
| |||||||
31 December 2012 |
484 | 140 | (6,196 | ) | 20,731 | 15,159 | 557 | 15,716 |
(a) | Includes purchases and sales of treasury stock, and transfer from treasury stock to retained profit of share-settled schemes arising from prior years and differences between exercise and grant price of share options. |
(b) | The share-based payment credit relates to the reversal of the non-cash charge recorded against operating profit in respect of the fair value of share options and awards granted to employees. |
Other reserves | million Total 2012 |
million Total 2011 |
million Total 2010 |
|||||||||
Fair value reserves
|
|
(219
|
)
|
|
(94
|
)
|
|
74
|
| |||
Cash flow hedges |
(241 | ) | (100 | ) | 48 | |||||||
Available-for-sale financial assets |
22 | 6 | 26 | |||||||||
Currency retranslation of group companies |
(1,843 | ) | (1,594 | ) | (1,026 | ) | ||||||
Adjustment on translation of PLCs ordinary capital at 31/9p = 0.16 |
(164 | ) | (164 | ) | (164 | ) | ||||||
Capital redemption reserve |
32 | 32 | 32 | |||||||||
Book value of treasury stock |
(4,002 | ) | (4,184 | ) | (4,322 | ) | ||||||
(6,196 | ) | (6,004 | ) | (5,406 | ) |
Unilever acquired 37,894 NV ordinary shares through purchases on the stock exchanges during the year. These shares are held as treasury stock as a separate component of other reserves. No PLC ordinary shares were purchased during the year. The total number held at 31 December 2012 was 158,350,450 (2011: 165,437,018) NV shares and 34,743,347 (2011: 39,082,242) PLC shares. Of these, 16,789,821 NV shares and 8,046,353 PLC shares were held in connection with share-based compensation plans (see note 4C on pages 101 and 102).
Treasury stock movements during the year | million 2012 |
million 2011 |
||||||
1 January |
(4,184 | ) | (4,322 | ) | ||||
Purchases and other utilisations
|
|
182
|
|
|
138
|
| ||
31 December |
(4,002 | ) | (4,184 | ) | ||||
Currency retranslation reserve movements during the year |
million 2012 |
million 2011 |
||||||
1 January |
(1,594 | ) | (1,026 | ) | ||||
Currency retranslation during the year |
(87 | ) | (552 | ) | ||||
Movement in net investment hedges |
(160 | ) | 45 | |||||
Recycled to income statement |
(2 | ) | (61 | ) | ||||
31 December |
(1,843 | ) | (1,594 | ) |
114 Financial statements | Unilever Annual Report and Accounts 2012 |
Financial liabilities(a)(b) | million Current 2012 |
million Non-current 2012 |
million Total 2012 |
million Current 2011 |
million Non-current 2011 |
million Total 2011 |
||||||||||||||||||
Preference shares |
| 68 | 68 | | 68 | 68 | ||||||||||||||||||
Bank loans and overdrafts |
581 | 765 | 1,346 | 2,073 | 664 | 2,737 | ||||||||||||||||||
Bonds and other loans |
1,968 | 6,511 | 8,479 | 3,650 | 6,935 | 10,585 | ||||||||||||||||||
At amortised cost |
1,205 | 5,718 | 6,923 | 2,898 | 5,357 | 8,255 | ||||||||||||||||||
Subject to fair value hedge accounting |
763 | 793 | 1,556 | 752 | 1,578 | 2,330 | ||||||||||||||||||
Finance lease creditors 20 |
15 | 187 | 202 | 16 | 188 | 204 | ||||||||||||||||||
Derivatives |
92 | 34 | 126 | 101 | 23 | 124 | ||||||||||||||||||
2,656 | 7,565 | 10,221 | 5,840 | 7,878 | 13,718 | |||||||||||||||||||
(a) For the purposes of notes 15C and 17A, financial assets and liabilities exclude trade and other current receivables and liabilities which are covered in notes 13 and 14 respectively. (b) Financial liabilities include 1 million (2011:80 million) of secured liabilities.
Analysis of bonds and other loans
|
| |||||||||||||||||||||||
million | million | million | million | million | million | |||||||||||||||||||
Amortised cost |
Fair value hedge adjustment |
Total | Amortised cost |
Fair value hedge adjustment |
Total | |||||||||||||||||||
2012 | 2012 | 2012 | 2011 | 2011 | 2011 | |||||||||||||||||||
Unilever N.V. |
||||||||||||||||||||||||
3.375% Bonds 2015 () |
749 | 44 | 793 | 749 | 46 | 795 | ||||||||||||||||||
4.875% Bonds 2013 () |
749 | 14 | 763 | 749 | 34 | 783 | ||||||||||||||||||
3.125% Bonds 2013 (US $) |
341 | | 341 | 347 | | 347 | ||||||||||||||||||
3.500% Notes 2015 (Swiss francs) |
290 | | 290 | 287 | | 287 | ||||||||||||||||||
Commercial paper () |
137 | | 137 | 1,096 | | 1,096 | ||||||||||||||||||
1.150% Notes 2014 (Renminbi) |
36 | | 36 | 37 | | 37 | ||||||||||||||||||
4.625% Bonds 2012 () |
| | | 749 | 3 | 752 | ||||||||||||||||||
3.125% Notes 2012 (Swiss francs) |
| | | 206 | | 206 | ||||||||||||||||||
Other |
24 | | 24 | 34 | | 34 | ||||||||||||||||||
Total NV |
2,326 | 58 | 2,384 | 4,254 | 83 | 4,337 | ||||||||||||||||||
Unilever PLC |
||||||||||||||||||||||||
4.750% Bonds 2017 (£) |
488 | | 488 | 474 | | 474 | ||||||||||||||||||
4.000% Bonds 2014 (£) |
427 | | 427 | 415 | | 415 | ||||||||||||||||||
Total PLC |
915 | | 915 | 889 | | 889 | ||||||||||||||||||
Other group companies |
||||||||||||||||||||||||
Switzerland |
||||||||||||||||||||||||
Other |
6 | | 6 | 43 | | 43 | ||||||||||||||||||
United States |
||||||||||||||||||||||||
4.250% Notes 2021 (US $) |
754 | | 754 | 768 | | 768 | ||||||||||||||||||
5.900% Bonds 2032 (US $) |
749 | | 749 | 760 | | 760 | ||||||||||||||||||
Commercial paper (US $) |
691 | | 691 | 1,526 | | 1,526 | ||||||||||||||||||
3.650% Notes 2014 (US $) |
568 | | 568 | 578 | | 578 | ||||||||||||||||||
4.800% Notes 2019 (US $) |
567 | | 567 | 577 | | 577 | ||||||||||||||||||
0.850% Notes 2017 (US $) |
412 | | 412 | | | | ||||||||||||||||||
2.750% Notes 2016 (US $) |
378 | | 378 | 385 | | 385 | ||||||||||||||||||
0.450% Notes 2015 (US $) |
340 | | 340 | | | | ||||||||||||||||||
7.250% Bonds 2026 (US $) |
218 | | 218 | 222 | | 222 | ||||||||||||||||||
6.625% Bonds 2028 (US $) |
169 | | 169 | 171 | | 171 | ||||||||||||||||||
5.150% Notes 2020 (US $) |
124 | | 124 | 127 | | 127 | ||||||||||||||||||
7.000% Bonds 2017 (US $) |
111 | | 111 | 113 | | 113 | ||||||||||||||||||
5.600% Bonds 2097 (US $) |
69 | | 69 | 71 | | 71 | ||||||||||||||||||
Other |
14 | | 14 | 12 | | 12 | ||||||||||||||||||
Other countries |
10 | | 10 | 6 | | 6 | ||||||||||||||||||
Total other group companies
|
|
5,180
|
|
|
|
|
|
5,180
|
|
|
5,359
|
|
|
|
|
|
5,359
|
| ||||||
Total bonds and other loans |
8,421 | 58 | 8,479 | 10,502 | 83 | 10,585 |
Information in relation to the derivatives used to hedge bonds and other loans within a fair value hedge relationship is shown in note 16.
Unilever Annual Report and Accounts 2012 | Financial statements 115 |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS UNILEVER GROUP continued
Derivatives and hedge accounting
Derivatives are measured at fair value with any related transaction costs expensed as incurred. The treatment of changes in the value of derivatives depends on their use as explained below.
(i) Fair value hedges
Certain derivatives are held to hedge the risk of changes in value of a specific bond or other loan. In these situations, the Group designates the liability and related derivative to be part of a fair value hedge relationship. The carrying value of the bond is adjusted by the fair value of the risk being hedged, with changes going to the income statement. Gains and losses on the corresponding derivative are also recognised in the income statement. The amounts recognised are offset in the income statement to the extent that the hedge is effective. When the relationship no longer meets the criteria for hedge accounting, the fair value hedge adjustment made to the bond is amortised to the income statement using the effective interest method.
(ii) Cash flow hedges
Derivatives are also held to hedge the uncertainty in timing or amount of future forecast cash flows. Such derivatives are classified as being part of cash flow hedge relationships. For an effective hedge, gains and losses from changes in the fair value of derivatives are recognised in equity. Any ineffective elements of the hedge are recognised in the income statement. If the hedged cash flow relates to a non-financial asset, the amount accumulated in equity is subsequently included within the carrying value of that asset. For other cash flow hedges, amounts deferred in equity are taken to the income statement at the same time as the related cash flow.
When a derivative no longer qualifies for hedge accounting, any cumulative gain or loss remains in equity until the related cash flow occurs. When the cash flow takes place, the cumulative gain or loss is taken to the income statement. If the hedged cash flow is no longer expected to occur, the cumulative gain or loss is taken to the income statement immediately.
(iii) Net investment hedges
Certain derivatives are designated as hedges of the currency risk on the Groups investment in foreign subsidiaries. The accounting policy for these arrangements is set out in note 1.
(iv) Derivatives for which hedge accounting is not applied
Derivatives not classified as hedges are held in order to hedge certain balance sheet items and commodity exposures. No hedge accounting is applied to these derivatives, which are carried at fair value with changes being recognised in the income statement.
The Group is exposed to the following risks that arise from its use of financial instruments, the management of which is described in the following sections:
| liquidity risk (see note 16A); |
| market risk (see note 16B); and |
| credit risk (see note 17B). |
16A. Management of liquidity risk
Liquidity risk is the risk that the Group will face difficulty in meeting its obligations associated with its financial liabilities. The Groups approach to managing liquidity is to ensure that it will have sufficient funds to meet its liabilities when due without incurring unacceptable losses. In doing this, management considers both normal and stressed conditions. A material and sustained shortfall in our cash flow could undermine the Groups credit rating, impair investor confidence and also restrict the Groups ability to raise funds.
Given continuing volatility in the financial markets, the Group has maintained a cautious funding strategy, running a positive cash balance throughout 2012. This has been the result of a strong cash delivery from the business, coupled with the proceeds from bond issuances in 2012. This cash has been invested conservatively with low risk counter-parties at maturities of less than six months.
Cash flow from operating activities provides the funds to service the financing of financial liabilities on a day-to-day basis. The Group seeks to manage its liquidity requirements by maintaining access to global debt markets through short-term and long-term debt programmes. In addition, Unilever has committed credit facilities for general corporate use.
Unilever had US $6,250 million of undrawn committed facilities on 31 December 2012 as follows:
| revolving 364-day bilateral credit facilities of in aggregate US $6,140 million (2011: US $5,950 million) with a 364-day term-out; and |
| 364-day bilateral money market commitments of in aggregate US $110 million (2011: US $200 million), under which the underwriting banks agree, subject to certain conditions, to subscribe for notes with maturities of up to three years. |
As part of the regular annual process these facilities will again be renewed in 2013.
116 Financial statements | Unilever Annual Report and Accounts 2012 |
16A. Management of liquidity risk continued
The following table shows Unilevers contractually agreed undiscounted cash flows, including expected interest payments, which are payable under financial liabilities at the balance sheet date:
million | million | million | million | million | million | million | million | |||||||||||||||||||||||||
Undiscounted cash flows | Due within 1 year |
Due between 1 and 2 years |
Due between 2 and 3 years |
Due between 3 and 4 years |
Due between 4 and 5 years |
Due after 5 years |
Total | Net carrying amount as shown in balance sheet |
||||||||||||||||||||||||
2012 |
||||||||||||||||||||||||||||||||
Non-derivative financial liabilities: |
||||||||||||||||||||||||||||||||
Preference shares |
(4 | ) | (4 | ) | (4 | ) | (4 | ) | (4 | ) | (72 | ) | (92 | ) | (68 | ) | ||||||||||||||||
Bank loans and overdrafts |
(603 | ) | (53 | ) | (50 | ) | (328 | ) | (349 | ) | (1 | ) | (1,384 | ) | (1,346 | ) | ||||||||||||||||
Bonds and other loans |
||||||||||||||||||||||||||||||||
At amortised cost |
(1,461 | ) | (1,291 | ) | (833 | ) | (570 | ) | (1,201 | ) | (4,314 | ) | (9,670 | ) | (6,923 | ) | ||||||||||||||||
Subject to fair value hedge accounting |
(812 | ) | (25 | ) | (776 | ) | | | | (1,613 | ) | (1,556 | ) | |||||||||||||||||||
Finance lease creditors 20 |
(28 | ) | (27 | ) | (46 | ) | (24 | ) | (22 | ) | (203 | ) | (350 | ) | (202 | ) | ||||||||||||||||
Trade payables 14 |
(11,249 | ) | (400 | ) | | | | | (11,649 | ) | (11,649 | ) | ||||||||||||||||||||
Issued financial guarantees |
(35 | ) | | | | | | (35 | ) | | ||||||||||||||||||||||
(14,192 | ) | (1,800 | ) | (1,709 | ) | (926 | ) | (1,576 | ) | (4,590 | ) | (24,793 | ) | (21,744 | ) | |||||||||||||||||
Derivative financial liabilities: |
||||||||||||||||||||||||||||||||
Interest rate derivatives: |
||||||||||||||||||||||||||||||||
Derivative contracts receipts |
383 | 248 | 348 | | | | 979 | |||||||||||||||||||||||||
Derivative contracts payments |
(430 | ) | (369 | ) | (395 | ) | | | | (1,194 | ) | |||||||||||||||||||||
Foreign exchange derivatives: |
||||||||||||||||||||||||||||||||
Derivative contracts receipts |
6,477 | | | | | | 6,477 | |||||||||||||||||||||||||
Derivative contracts payments |
(6,579 | ) | | | | | | (6,579 | ) | |||||||||||||||||||||||
Commodity derivatives: |
||||||||||||||||||||||||||||||||
Derivative contracts receipts |
365 | | | | | | 365 | |||||||||||||||||||||||||
Derivative contracts payments |
(387 | ) | | | | | | (387 | ) | |||||||||||||||||||||||
(171 | ) | (121 | ) | (47 | ) | | | | (339 | ) | (328 | ) | ||||||||||||||||||||
31 December |
(14,363 | ) | (1,921 | ) | (1,756 | ) | (926 | ) | (1,576 | ) | (4,590 | ) | (25,132 | ) | ||||||||||||||||||
2011 |
||||||||||||||||||||||||||||||||
Non-derivative financial liabilities: |
||||||||||||||||||||||||||||||||
Preference shares |
(4 | ) | (4 | ) | (4 | ) | (4 | ) | (4 | ) | (72 | ) | (92 | ) | (68 | ) | ||||||||||||||||
Bank loans and overdrafts |
(2,123 | ) | (183 | ) | (116 | ) | (22 | ) | (372 | ) | (1 | ) | (2,817 | ) | (2,737 | ) | ||||||||||||||||
Bonds and other loans |
||||||||||||||||||||||||||||||||
At amortised cost |
(3,163 | ) | (602 | ) | (1,284 | ) | (487 | ) | (576 | ) | (5,114 | ) | (11,226 | ) | (8,255 | ) | ||||||||||||||||
Subject to fair value hedge accounting |
(847 | ) | (812 | ) | (25 | ) | (775 | ) | | | (2,459 | ) | (2,330 | ) | ||||||||||||||||||
Finance lease creditors 20 |
(28 | ) | (27 | ) | (25 | ) | (23 | ) | (23 | ) | (220 | ) | (346 | ) | (204 | ) | ||||||||||||||||
Trade payables 14 |
(10,574 | ) | (287 | ) | | | | | (10,861 | ) | (10,861 | ) | ||||||||||||||||||||
Issued financial guarantees |
(35 | ) | | | | | | (35 | ) | | ||||||||||||||||||||||
(16,774 | ) | (1,915 | ) | (1,454 | ) | (1,311 | ) | (975 | ) | (5,407 | ) | (27,836 | ) | (24,455 | ) | |||||||||||||||||
Derivative financial liabilities: |
||||||||||||||||||||||||||||||||
Interest rate derivatives: |
||||||||||||||||||||||||||||||||
Derivative contracts receipts |
70 | 199 | 31 | 51 | 47 | 184 | 582 | |||||||||||||||||||||||||
Derivative contracts payments |
(81 | ) | (212 | ) | (40 | ) | (67 | ) | (58 | ) | (178 | ) | (636 | ) | ||||||||||||||||||
Foreign exchange derivatives: |
||||||||||||||||||||||||||||||||
Derivative contracts receipts |
9,202 | | | | | | 9,202 | |||||||||||||||||||||||||
Derivative contracts payments |
(9,355 | ) | | | | | | (9,355 | ) | |||||||||||||||||||||||
Commodity derivatives: |
||||||||||||||||||||||||||||||||
Derivative contracts receipts |
242 | | | | | | 242 | |||||||||||||||||||||||||
Derivative contracts payments |
(249 | ) | | | | | | (249 | ) | |||||||||||||||||||||||
(171 | ) | (13 | ) | (9 | ) | (16 | ) | (11 | ) | 6 | (214 | ) | (197 | ) | ||||||||||||||||||
31 December |
(16,945 | ) | (1,928 | ) | (1,463 | ) | (1,327 | ) | (986 | ) | (5,401 | ) | (28,050 | ) |
Unilever Annual Report and Accounts 2012 | Financial statements 117 |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS UNILEVER GROUP continued
16A. Management of liquidity risk continued
The following table shows cash flows for which cash flow hedge accounting is applied. The derivatives in the cash flow hedge relationships are expected to have an impact on profit and loss in the same periods as the cash flows occur.
million | million | million | million | million | million | million | million | |||||||||||||||||||||||||
|
Due within 1 year |
|
|
Due between 1 and 2 years |
|
|
Due between 2 and 3 years |
|
|
Due between 3 and 4 years |
|
|
Due between 4 and 5 years |
|
|
Due after 5 years |
|
Total |
|
Net carrying amount of related derivatives |
(a) | |||||||||||
2012 |
||||||||||||||||||||||||||||||||
Foreign exchange cash inflows |
877 | | | | | | 877 | |||||||||||||||||||||||||
Foreign exchange cash outflows |
(473 | ) | | | | | | (473 | ) | (4 | ) | |||||||||||||||||||||
Interest rate cash flows |
| (173 | ) | (109 | ) | | | | (282 | ) | (146 | ) | ||||||||||||||||||||
Commodity contracts cash flows |
(498 | ) | | | | | | (498 | ) | (19 | ) | |||||||||||||||||||||
2011 |
||||||||||||||||||||||||||||||||
Foreign exchange cash inflows |
779 | | | | | | 779 | |||||||||||||||||||||||||
Foreign exchange cash outflows |
(519 | ) | | | | | | (519 | ) | 3 | ||||||||||||||||||||||
Interest rate cash flows |
| | (17 | ) | (41 | ) | (57 | ) | (170 | ) | (285 | ) | (27 | ) | ||||||||||||||||||
Commodity contracts cash flows |
(356 | ) | | | | | | (356 | ) | (2 | ) |
(a) | See note 16C on page 120. |
16B. Management of market risk
Unilevers size and operations result in it being exposed to the following market risks that arise from its use of financial instruments:
| commodity price risk; |
| currency risk; and |
| interest rate risk. |
The above risks may affect the Groups income and expenses, or the value of its financial instruments. The objective of the Groups management of market risk is to maintain this risk within acceptable parameters, while optimising returns. Generally, the Group applies hedge accounting to manage the volatility in profit and loss arising from market risk.
The Groups exposure to, and management of, these risks is explained below. It often includes derivative financial instruments, the uses of which are described in note 16C.
Potential impact of risk | Management policy and hedging strategy
|
Sensitivity to the risk | ||||
i) Commodity price risk
|
||||||
The Group is exposed to the risk of changes in commodity prices in relation to its purchase of certain raw materials.
At 31 December 2012, the Group has hedged its exposure to future commodity purchases for 504 million (2011: 368 million) with commodity derivatives. |
The Group uses commodity forward contracts to hedge against this risk. All commodity forward contracts hedge future purchases of raw materials and the contracts are settled either in cash or by physical delivery.
Commodity derivatives are generally designated as hedging instruments in cash flow hedge accounting relations.
|
A 10% increase in commodity prices as at 31 December 2012 would have led to a 49 million gain on the commodity derivatives in the cash flow hedge reserve (2011: 38 million gain in the cash flow hedge reserve). A decrease of 10% in commodity prices on a full-year basis would have the equal but opposite effect. | ||||
ii) Currency risk
|
||||||
Currency risk on sales, purchases and borrowings
Because of Unilevers global reach, it is subject to the risk that changes in foreign currency values impact the Groups sales, purchases and borrowings. |
The Group manages currency exposures within prescribed limits, mainly through the use of forward foreign currency exchange contracts.
Operating companies manage foreign exchange exposures within prescribed limits. Local compliance is monitored centrally.
|
As an estimation of the approximate impact of the residual risk, with respect to financial instruments, the Group has calculated the impact of a 10% change in exchange rates. |
118 Financial statements | Unilever Annual Report and Accounts 2012 |
16B. Management of market risk continued
Potential impact of risk | Management policy and hedging strategy |
Sensitivity to the risk | ||||
At 31 December 2012, the unhedged exposure to the Group from companies holding financial assets and liabilities other than in their functional currency amounted to 45 million (2011: 56 million). |
Exchange risks related to the principal amounts of the US$ and Swiss franc denominated debt either form part of hedging relationships themselves, or are hedged through forward contracts.
The aim of the Groups approach to management of currency risk is to leave the Group with no material residual risk. This aim has been achieved in all years presented.
|
A 10% strengthening of the euro against key currencies to which the Group is exposed would have led to approximately an additional 4 million gain in the income statement (2011: 6 million gain). A 10% weakening of the euro against these currencies would have led to an equal but opposite effect. | ||||
Currency risk on the Groups investments
The Group is also subject to the exchange risk in relation to the translation of the net assets of its foreign operations into euros for inclusion in its consolidated financial statements.
At 31 December 2012 the nominal value of the Groups designated net investment hedges amounted to 4.2 billion (2011: 4.1 billion). Most of these arrangements were in relation to US $/ contracts. |
Unilever aims to minimise this foreign investment exchange exposure by borrowing in local currency in the operating companies themselves. In some locations, however, the Groups ability to do this is inhibited by local regulations, lack of local liquidity or by local market conditions.
Where the residual risk from these countries exceeds prescribed limits, Treasury may decide on a case-by-case basis to actively hedge the exposure. This is done either through additional borrowings in the related currency, or through the use of forward foreign exchange contracts.
Where local currency borrowings, or forward contracts, are used to hedge the currency risk in relation to the Groups net investment in foreign subsidiaries, these relationships are designated as net investment hedges for accounting purposes.
|
A 10% strengthening of the euro against all other key currencies would have led to an additional 382 million loss being recognised in equity (2011: 377 million loss). A 10% weakening of the euro against these currencies would have the equal but opposite effect.
There would be no impact on the income statement under either of these scenarios. | ||||
iii) Interest rate risk(a)
|
||||||
The Group is exposed to market interest rate fluctuations on its floating rate debt. Increases in benchmark interest rates could increase the interest cost of our floating-rate debt and increase the cost of future borrowings. The Groups ability to manage interest costs also has an impact on reported results.
Taking into account the impact of interest rate swaps, at 31 December 2012, interest rates were fixed on approximately 91% of the expected net debt for 2013, and 90% for 2014 (73% for 2012 and 57% for 2013 at 31 December 2011).
The average interest rate on short-term borrowings in 2012 was 1.5% (2011: 2.5%). |
Unilevers interest rate management approach aims for an optimal balance between fixed and floating-rate interest rate exposures on expected net debt. The objective of this approach is to minimise annual interest costs after tax and to reduce volatility.
This is achieved either by issuing fixed or floating-rate long-term debt, or by modifying interest rate exposure through the use of interest rate swaps.
Furthermore, Unilever has interest rate swaps for which cash flow hedge accounting is applied. |
Assuming that all other variables remain constant, a 100bps increase in floating interest rates on a full-year basis as at 31 December 2012 would have led to an additional 3 million of finance costs (2011: 26 million additional finance costs). A 100bps decrease in floating interest rates on a full-year basis would have an equal but opposite effect.
Assuming that all other variables remain constant, a 100bps increase in floating interest rates on a full-year basis as at 31 December 2012 would have led to an additional 102 million credit in equity from derivatives in cash flow hedge relationships (2011: 16 million credit). A 100bps decrease in floating interest rates on a full-year basis would have led to an additional 111 million debit in equity from derivatives in cash flow hedge relationships (2011: 16 million debit).
|
(a) | See the split in fixed and floating-rate interest in the following table. |
Unilever Annual Report and Accounts 2012 | Financial statements 119 |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS UNILEVER GROUP continued
16B. Management of market risk continued
The following table shows the split in fixed and floating rate interest exposures, taking into account the impact of interest rate swaps and cross currency swaps:
million 2012 |
million 2011 |
|||||||
Cash and cash equivalents |
2,465 | 3,484 | ||||||
Current other financial assets |
401 | 1,453 | ||||||
Current financial liabilities |
(2,656 | ) | (5,840 | ) | ||||
Non-current financial liabilities |
(7,565 | ) | (7,878 | ) | ||||
Net debt |
(7,355 | ) | (8,781 | ) | ||||
Of which: |
||||||||
Fixed rate (weighted average amount of fixing for the following year) |
(7,053 | ) | (6,179 | ) | ||||
Floating rate |
(302 | ) | (2,602 | ) | ||||
(7,355 | ) | (8,781 | ) |
The Group does not use derivative financial instruments for speculative purposes. The uses of derivatives and the related values of derivatives are summarised in the following table:
million | million | million | million | million | million | |||||||||||||||||||
Trade and other receivables |
Other current financial assets |
Trade payables and other liabilities |
Current financial liabilities |
Non-current financial liabilities |
Total | |||||||||||||||||||
31 December 2012 | ||||||||||||||||||||||||
Foreign exchange derivatives | ||||||||||||||||||||||||
Fair value hedges |
1 | | (5 | ) | | | (4 | ) | ||||||||||||||||
Cash flow hedges |
9 | | (13 | ) | | | (4 | ) | ||||||||||||||||
Hedges of net investments in foreign operations |
| (126 | )(a) | | (5 | ) | | (131 | ) | |||||||||||||||
Hedge accounting not applied |
10 | 222 | (16 | ) | (57 | ) | | 159 | ||||||||||||||||
Cross currency swaps | ||||||||||||||||||||||||
Hedge accounting not applied |
| 38 | | (30 | ) | (34 | ) | (26 | ) | |||||||||||||||
Interest rate swaps | ||||||||||||||||||||||||
Fair value hedges |
| 36 | | | | 36 | ||||||||||||||||||
Cash flow hedges |
| | (146 | ) | | | (146 | ) | ||||||||||||||||
Hedge accounting not applied |
| | | | | | ||||||||||||||||||
Commodity contracts | ||||||||||||||||||||||||
Cash flow hedges |
3 | | (22 | ) | | | (19 | ) | ||||||||||||||||
Hedge accounting not applied |
| | | | | | ||||||||||||||||||
23 | 170 | (202 | ) | (92 | ) | (34 | ) | (135 | ) | |||||||||||||||
Total assets | 193 | Total liabilities | (328 | ) | (135 | ) | ||||||||||||||||||
31 December 2011 | ||||||||||||||||||||||||
Foreign exchange derivatives | ||||||||||||||||||||||||
Fair value hedges |
9 | | (4 | ) | | | 5 | |||||||||||||||||
Cash flow hedges |
22 | | (19 | ) | | | 3 | |||||||||||||||||
Hedges of net investments in foreign operations |
| 18 | | (7 | ) | | 11 | |||||||||||||||||
Hedge accounting not applied |
22 | 50 | (17 | ) | (92 | ) | | (37 | ) | |||||||||||||||
Cross currency swaps | ||||||||||||||||||||||||
Hedge accounting not applied |
| 31 | | (2 | ) | (23 | ) | 6 | ||||||||||||||||
Interest rate swaps | ||||||||||||||||||||||||
Fair value hedges |
| 109 | | | | 109 | ||||||||||||||||||
Cash flow hedges |
| | (27 | ) | | | (27 | ) | ||||||||||||||||
Hedge accounting not applied |
| | | | | | ||||||||||||||||||
Commodity contracts | ||||||||||||||||||||||||
Cash flow hedges |
4 | | (6 | ) | | | (2 | ) | ||||||||||||||||
Hedge accounting not applied |
1 | | | | | 1 | ||||||||||||||||||
58 | 208 | (73 | ) | (101 | ) | (23 | ) | |||||||||||||||||
Total assets | 266 | Total liabilities | (197 | ) | 69 |
(a) | The offsetting swaps that are used to hedge concern loans are included in other current financial assets under Hedge accounting not applied. |
120 Financial statements | Unilever Annual Report and Accounts 2012 |
Cash and cash equivalents
Cash and cash equivalents in the balance sheet include deposits, investments in money market funds and highly liquid investments. To be classified as cash and cash equivalents, an asset must:
| be readily convertible into cash; |
| have an insignificant risk of changes in value; and |
| have a maturity period of three months or less at acquisition. |
Cash and cash equivalents in the cash flow statement also include bank overdrafts and are recorded at amortised cost.
Other financial assets
Other financial assets are first recognised on the trade date. At that point they are classified as:
(i) | held-to-maturity investments; |
(ii) | loans and receivables; |
(iii) | available-for-sale financial assets; or |
(iv) | financial assets at fair value through profit or loss. |
(i) Held-to-maturity investments
These are assets with set cash flows and fixed maturities which Unilever intends to hold to maturity. They are held at cost plus interest using the effective interest method, less any impairment.
(ii) Loans and receivables
These are assets with an established payment profile and which are not listed on a recognised stock exchange. They are initially recognised at fair value, which is usually the original invoice amount plus any directly related transaction costs. Afterwards loans and receivables are carried at amortised cost, less any impairment.
(iii) Available-for-sale financial assets
Any financial assets not classified as either loans and receivables or financial assets at fair value through profit or loss are designated as available-for-sale. They are initially recognised at fair value, usually the original invoice amount plus any directly related transaction costs. Afterwards they are measured at fair value with changes being recognised in equity. When the investment is sold or impaired, the accumulated gains and losses are moved from equity to the income statement. Interest and dividends from these assets are recognised in the income statement.
(iv) Financial assets at fair value through profit or loss
These are derivatives and assets that are held for trading. Related transaction costs are expensed as incurred. Unless they form part of a hedging relationship, these assets are held at fair value, with changes being recognised in the income statement.
Impairment of financial assets
Each year the Group assesses whether there is evidence that financial assets are impaired. A significant or prolonged fall in value below the cost of an asset generally indicates that an asset may be impaired. If impaired, financial assets are written down to their estimated recoverable amount. Impairment losses on assets classified as loans and receivables are recognised in profit and loss. When a later event causes the impairment losses to decrease, the reduction in impairment loss is also recognised in profit and loss. Impairment losses on assets classified as available-for-sale are recognised by moving the loss accumulated in equity to the income statement. Any subsequent recovery in value of an available-for-sale debt security is recognised within profit and loss. However, any subsequent recovery in value of an equity security is recognised within equity, and is recorded at amortised cost.
Unilever Annual Report and Accounts 2012 | Financial statements 121 |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS UNILEVER GROUP continued
The Groups treasury function aims to protect the Groups financial investments, while maximising returns. The Groups cash resources and other financial assets are shown below.
million | million | million | million | million | million | |||||||||||||||||||
Financial assets(a) | Current 2012 |
Non- current |
Total 2012 |
Current 2011 |
Non- current |
Total 2011 |
||||||||||||||||||
Cash and cash equivalents |
||||||||||||||||||||||||
Cash at bank and in hand |
831 | | 831 | 1,139 | | 1,139 | ||||||||||||||||||
Short-term deposits with maturity of less than 3 months |
1,495 | | 1,495 | 2,243 | | 2,243 | ||||||||||||||||||
Other cash equivalents(b) |
139 | | 139 | 102 | | 102 | ||||||||||||||||||
2,465 | | 2,465 | 3,484 | | 3,484 | |||||||||||||||||||
Other financial assets |
||||||||||||||||||||||||
Held-to-maturity investments |
26 | 3 | 29 | | | | ||||||||||||||||||
Loans and receivables(c) |
2 | 1 | 3 | 930 | 2 | 932 | ||||||||||||||||||
Available-for-sale financial assets(d) |
183 | 504 | 687 | 307 | 413 | 720 | ||||||||||||||||||
Financial assets at fair value through profit or loss: |
||||||||||||||||||||||||
Derivatives |
170 | | 170 | 208 | | 208 | ||||||||||||||||||
Other |
20 | 27 | 47 | 8 | 63 | 71 | ||||||||||||||||||
401 | 535 | 936 | 1,453 | 478 | 1,931 | |||||||||||||||||||
|
||||||||||||||||||||||||
Total |
2,866 | 535 | 3,401 | 4,937 | 478 | 5,415 |
(a) | For the purposes of notes 15C and 17A, financial assets and liabilities exclude trade and other current receivables and liabilities which are covered in notes 13 and 14 respectively. |
(b) | Other cash equivalents include investments in money market funds of 20 million (2011: 20 million) and investments in treasury bills of 67 million (2011:niI) for which the risk of changes in value is insignificant. |
(c) | Current loans and receivables include short-term deposits with banks with maturities of longer than three months. |
(d) | Current available-for-sale financial assets include government securities and A-minus or higher rated money and capital market instruments. Also included are investments in money market funds of 104 million (2011: 116 million) for which the risk of changes in value is insignificant. Non -current available-for-sale financial assets predominantly consist of investments in a number of companies and financial institutions in Europe and the US, including 98 million (2011: 110 million) of assets in a trust to fund benefit obligations in the US (see also note 4B on page 99). |
Cash and cash equivalents reconciliation to the cash flow statement | million 2012 |
million 2011 |
||||||
Cash and cash equivalents per balance sheet |
2,465 | 3,484 | ||||||
Less: bank overdrafts |
(248 | ) | (506 | ) | ||||
Cash and cash equivalents per cash flow statement |
2,217 | 2,978 |
Credit risk is the risk of financial loss to the Group if a customer or counter-party fails to meet its contractual obligations. Additional information in relation to credit risk on trade receivables is given in note 13. These risks are generally managed by local controllers. Credit risk related to the use of treasury instruments is managed on a Group basis. This risk arises from transactions with financial institutions involving cash and cash equivalents, deposits and derivative financial instruments. To reduce this risk, Unilever has concentrated its main activities with a limited number of counter-parties which have secure credit ratings. Individual risk limits are set for each counter-party based on financial position, credit rating and past experience. Credit limits and concentration of exposures are actively monitored by the Groups treasury department. Netting agreements are also put in place with Unilevers principal counterparties. In the case of a default, these arrangements would allow Unilever to net assets and liabilities across transactions with that counter-party. To further reduce the Groups credit exposures on derivative financial instruments, Unilever has collateral agreements with Unilevers principal counter-parties in relation to derivative financial instruments. Under these arrangements, counter-parties are required to deposit securities and/or cash as a collateral for their obligations in respect of derivative financial instruments. At 31 December 2012 the collateral held by Unilever under such arrangements amounted to 6 million (2011: 88 million), of which 6 million (2011: 43 million) was in cash, and nil (2011: 45 million) was in the form of bond securities. The non-cash collateral has not been recognised as an asset in the Groups balance sheet.
Further details in relation to the Groups exposure to credit risk are shown in note 13 and note 16A.
122 Financial statements | Unilever Annual Report and Accounts 2012 |
The Group is exposed to the risks of changes in fair value of its financial assets and liabilities. The following table summarises the fair values and carrying amounts of financial instruments.
million | million | million | million | |||||||||||||
Fair values of financial assets and financial liabilities | Fair value |
Fair value |
Carrying amount 2012 |
Carrying amount 2011 |
||||||||||||
Financial assets |
||||||||||||||||
Cash and cash equivalents |
2,465 | 3,484 | 2,465 | 3,484 | ||||||||||||
Held-to-maturity investments |
29 | | 29 | | ||||||||||||
Loans and receivables |
3 | 932 | 3 | 932 | ||||||||||||
Available-for-sale financial assets |
687 | 720 | 687 | 720 | ||||||||||||
Financial assets at fair value through profit or loss: |
||||||||||||||||
Derivatives |
170 | 208 | 170 | 208 | ||||||||||||
Other |
47 | 71 | 47 | 71 | ||||||||||||
3,401 | 5,415 | 3,401 | 5,415 | |||||||||||||
Financial liabilities |
||||||||||||||||
Preference shares |
(112 | ) | (102 | ) | (68 | ) | (68 | ) | ||||||||
Bank loans and overdrafts |
(1,347 | ) | (2,737 | ) | (1,346 | ) | (2,737 | ) | ||||||||
Bonds and other loans |
(9,458 | ) | (11,605 | ) | (8,479 | ) | (10,585 | ) | ||||||||
Finance lease creditors |
(233 | ) | (231 | ) | (202 | ) | (204 | ) | ||||||||
Derivatives |
(126 | ) | (124 | ) | (126 | ) | (124 | ) | ||||||||
(11,276 | ) | (14,799 | ) | (10,221 | ) | (13,718 | ) |
The fair value of trade receivables and payables is considered to be equal to the carrying amount of these items due to their short-term nature.
Fair value hierarchy
The fair values shown above have been classified into three categories depending on the inputs used in the valuation technique. The categories used are as follows:
| Level 1: quoted prices for identical instruments; |
| Level 2: directly or indirectly observable market inputs, other than Level 1 inputs; and |
| Level 3: inputs which are not based on observable market data. |
For assets and liabilities which are carried at fair value, the classification of fair value calculations by category is summarised below:
million | million | million | million | million | million | million | million | |||||||||||||||||||||||||
Level 1 2012 |
Level 1 2011 |
Level 2 2012 |
Level 2 2011 |
Level 3 2012 |
Level 3 2011 |
Total fair value 2012 |
Total fair value 2011 |
|||||||||||||||||||||||||
Assets at fair value |
||||||||||||||||||||||||||||||||
Other cash equivalents 17A |
| | 139 | 102 | | | 139 | 102 | ||||||||||||||||||||||||
Available-for-sale financial assets 17A |
16 | 236 | 185 | 482 | 486 | 2 | 687 | 720 | ||||||||||||||||||||||||
Financial assets at fair value through profit or loss: |
||||||||||||||||||||||||||||||||
Derivatives 16C |
| | 193 | 266 | | | 193 | 266 | ||||||||||||||||||||||||
Other 17A |
27 | 71 | | | 20 | | 47 | 71 | ||||||||||||||||||||||||
Liabilities at fair value |
||||||||||||||||||||||||||||||||
Bonds and other loans 15C |
| | (1,556 | ) | (2,330 | ) | | | (1,556 | ) | (2,330 | ) | ||||||||||||||||||||
Derivatives 16C |
| | (328 | ) | (197 | ) | | | (328 | ) | (197 | ) |
During the reporting period ending 31 December 2012, 275 million of financial assets were transferred from Level 1 to Level 3 (2011: nil) and 197 million of financial assets were transferred from Level 2 to Level 3 (2011: nil) following a review of the valuation inputs. There were no transfers from Level 2 to Level 1 (2011: nil).
Reconciliation of Level 3 fair value measurements of financial assets is given below:
Reconciliation of movements in Level 3 valuations | million 2012 |
million 2011 |
||||||
1 January |
2 | 69 | ||||||
Gains and losses recognised in profit and loss |
(35 | ) | | |||||
Gains and losses recognised in other comprehensive income |
67 | (20 | ) | |||||
Purchases and new issues |
| | ||||||
Sales and settlements |
| (47 | ) | |||||
Transfers into Level 3 |
472 | | ||||||
Transfers out of Level 3
|
|
|
|
|
|
| ||
31 December |
506 | 2 |
Unilever Annual Report and Accounts 2012 | Financial statements 123 |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS UNILEVER GROUP continued
18. Financial instruments fair value risk continued
Significant unobservable inputs used in Level 3 fair values
The only individually material asset valued using Level 3 techniques is a particular unlisted investment with a carrying value at year end of 197 million. A change in one or more of the inputs to reasonably possible alternative assumptions would not change fair value significantly.
Calculation of fair values
The fair values of the financial assets and liabilities are defined as being the amounts at which the instruments could be exchanged or liability settled in an arms length transaction between knowledgeable, willing parties. The following methods and assumptions have been used to estimate the fair values:
Assets and liabilities carried at fair value
| The fair values of quoted investments falling into Level 1 are based on current bid prices. |
| The fair values of unquoted available-for-sale financial assets are based on recent trades in liquid markets, observable market rates, discounted cash flow analysis and statistical modelling techniques such as Monte Carlo simulation. If all significant inputs required to fair value an instrument are observable, the instrument is included in Level 2. If one or more of the significant inputs is not based on observable market data, the instrument is included in Level 3. |
| Derivatives are valued using valuation techniques with market observable inputs. The models incorporate various inputs including the credit quality of counter-parties, foreign exchange spot and forward rates, interest rate curves and forward rate curves of the underlying commodities. |
| For listed securities where the market is not liquid, and for unlisted securities, valuation techniques are used. These include the use of recent arms length transactions, reference to other instruments that are substantially the same and discounted cash flow calculations. |
Other financial assets and liabilities (fair values for disclosure purposes only)
| Cash and cash equivalents, trade and other current receivables, bank loans and overdrafts, trade payables and other current liabilities have fair values that approximate to their carrying amounts due to their short-term nature. |
| The fair values of preference shares and listed bonds are based on their market value. |
| Non-listed bonds, other loans, bank loans and non-current receivables and payables are based on the net present value of the anticipated future cash flows associated with these instruments using rates currently available for debt on similar terms, credit risk and remaining maturities. |
| Fair values for finance lease creditors have been assessed by reference to current market rates for comparable leasing arrangements. |
Provisions are recognised where a legal or constructive obligation exists at the balance sheet date, as a result of a past event, where the amount of the obligation can be reliably estimated and where the outflow of economic benefit is probable.
Provisions | million 2012 |
million 2011 |
||||||
Due within one year |
361 | 393 | ||||||
Due after one year |
846 | 908 | ||||||
Total provisions |
1,207 | 1,301 |
million | million | million | million | million | ||||||||||||||||
Movements during 2012 | Restructuring | Legal | Disputed indirect taxes |
Other | Total | |||||||||||||||
1 January 2012 |
348 | 81 | 654 | 218 | 1,301 | |||||||||||||||
Income statement: |
||||||||||||||||||||
Charges |
255 | 24 | 359 | 48 | 686 | |||||||||||||||
Releases |
(70 | ) | (6 | ) | (190 | ) | (9 | ) | (275 | ) | ||||||||||
Utilisation |
(240 | ) | (36 | ) | (80 | ) | (46 | ) | (402 | ) | ||||||||||
Currency translation
|
|
(3
|
)
|
|
(2
|
)
|
|
(95
|
)
|
|
(3
|
)
|
|
(103
|
)
| |||||
31 December 2012 |
290 | 61 | 648 | 208 | 1,207 |
The provision for disputed indirect taxes is comprised of a number of small disputed items. The largest elements relate to disputes with Brazilian authorities. Due to the nature of the disputes, the timing of provision utilisation and any cash outflows is uncertain. The majority of disputed items attract an interest charge.
No individual items within the remaining provisions are significant. Unilever expects that the issues relating to these restructuring, legal and other provisions will be substantively resolved within five years.
124 Financial statements | Unilever Annual Report and Accounts 2012 |
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership. All other leases are classified as operating leases.
Assets held under finance leases are initially recognised at the lower of fair value at the date of commencement of the lease and the present value of the minimum lease payments. Subsequent to initial recognition, these assets are accounted for in accordance with the accounting policy relating to that specific asset. The corresponding liability is included in the balance sheet as a finance lease obligation. Lease payments are apportioned between finance costs in the income statement and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability.
Lease payments under operating leases are charged to the income statement on a straight-line basis over the term of the lease.
Contingent liabilities are either possible obligations that will probably not require a transfer of economic benefits, or present obligations that may, but probably will not, require a transfer of economic benefits. It is not appropriate to make provisions for contingent liabilities, but there is a chance that they will result in an obligation in the future.
million | million | million | million | million | million | |||||||||||||||||||
Long-term finance lease commitments | Future minimum lease payments 2012 |
Finance cost 2012 |
Present value 2012 |
Future minimum lease payments 2011 |
Finance cost 2011 |
Present value 2011 |
||||||||||||||||||
Buildings(a) |
324 | 142 | 182 | 321 | 139 | 182 | ||||||||||||||||||
Plant and machinery |
26 | 6 | 20 | 25 | 3 | 22 | ||||||||||||||||||
350 | 148 | 202 | 346 | 142 | 204 | |||||||||||||||||||
The commitments fall due as follows: |
||||||||||||||||||||||||
Within 1 year |
28 | 13 | 15 | 28 | 12 | 16 | ||||||||||||||||||
Later than 1 year but not later than 5 years |
119 | 63 | 56 | 98 | 51 | 47 | ||||||||||||||||||
Later than 5 years |
203 | 72 | 131 | 220 | 79 | 141 | ||||||||||||||||||
350 | 148 | 202 | 346 | 142 | 204 |
(a) | All leased land is classified as operating leases. |
The table below shows the net book value of property, plant and equipment under a number of finance lease agreements.
million | million | million | ||||||||||
Net book value | Buildings | Plant and equipment |
Total | |||||||||
Cost |
198 | 155 | 353 | |||||||||
Depreciation
|
|
(52
|
)
|
|
(126
|
)
|
|
(178
|
)
| |||
31 December 2012 |
146 | 29 | 175 | |||||||||
Cost |
201 | 167 | 368 | |||||||||
Depreciation
|
|
(47
|
)
|
|
(133
|
)
|
|
(180
|
)
| |||
31 December 2011 |
154 | 34 | 188 |
The Group has sublet part of the leased properties under finance leases. Future minimum sublease payments of 33 million (2011: 38 million) are expected to be received.
Long-term operating lease commitments | million 2012 |
million 2011 |
||||||
Land and buildings |
1,400 | 1,199 | ||||||
Plant and machinery |
547 | 429 | ||||||
1,947 | 1,628 |
Unilever Annual Report and Accounts 2012 | Financial statements 125 |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS UNILEVER GROUP continued
20. Commitments and contingent liabilities continued
million | million | million | million | |||||||||||||
Operating lease and other commitments fall due as follows: | Operating leases 2012 |
Operating leases 2011 |
Other commit- ments |
Other commit- ments 2011 |
||||||||||||
Within 1 year |
383 | 381 | 1,159 | 1,087 | ||||||||||||
Later than 1 year but not later than 5 years |
1,015 | 836 | 1,009 | 1,078 | ||||||||||||
Later than 5 years |
549 | 411 | 75 | 99 | ||||||||||||
1,947 | 1,628 | 2,243 | 2,264 |
The Group has sublet part of the leased properties under operating leases. Future minimum sublease payments of 50 million (2011: 58 million) are expected to be received.
Other commitments principally comprise commitments under contracts to purchase materials and services. They do not include commitments for capital expenditure, which are reported in note 10 on page 108.
Contingent liabilities arise in respect of litigation against group companies, investigations by competition, regulatory and fiscal authorities and obligations arising under environmental legislation. The estimated total of such contingent liabilities at 31 December 2012 was 236 million (2011: 246 million). The Group does not believe that any of these contingent liabilities will result in a material loss.
Legal proceedings
The Group is involved from time to time in legal and arbitration proceedings arising in the ordinary course of business.
Ongoing compliance with competition laws is of key importance to Unilever. As the approach to enforcement of competition authorities globally continues to evolve, it is possible that our industry may on occasions be the focus of investigations. It is Unilevers policy to co-operate fully with competition authorities whenever questions or issues arise. In addition the Group continues to reinforce and enhance our internal competition law compliance programme on an ongoing basis. Where specific issues arise provisions are made and contingent liabilities disclosed to the extent appropriate.
Details of the significant outstanding legal proceedings and ongoing regulatory investigations are as follows:
Tax case in Brazil
During 2004 in Brazil, and in common with many other businesses operating in that country, one of our Brazilian subsidiaries received a notice of infringement from the Federal Revenue Service. The notice alleges that a 2001 reorganisation of our local corporate structure was undertaken without valid business purpose. The dispute is in court and, if upheld, will result in a tax payment relating to years from 2001 to the present day. The 2001 reorganisation was comparable with restructurings done by many companies in Brazil. The Group believes that the likelihood of a successful challenge by the tax authorities is remote, however, there can be no guarantee of success in court.
Business combinations are accounted for using the acquisition accounting method as at the acquisition date, which is the date at which control is transferred to the Group.
Goodwill is measured at the acquisition date as the fair value of consideration transferred, plus non-controlling interests and the fair value of any previously held equity interests less the net recognised amount (which is generally fair value) of the identifiable assets and liabilities assumed. Consideration transferred does not include amounts related to settlement of pre-existing relationships. Such amounts are generally recognised in net profit.
Transaction costs are expensed as incurred, other than those incurred in relation to the issue of debt or equity securities. Any contingent consideration payable is measured at fair value at the acquisition date. Subsequent changes in the fair value of contingent consideration are recognised in net profit.
Changes in ownership that do not result in a change of control are accounted for as equity transactions and therefore do not have any impact on goodwill. The difference between consideration and the non-controlling share of net assets acquired is recognised within equity.
126 Financial statements | Unilever Annual Report and Accounts 2012 |
21. Acquisitions and disposals continued
2012 acquisitions and disposals
On 30 July 2012 the Group announced a definitive agreement to sell its North America frozen meals business to ConAgra Foods, Inc. for a total cash consideration of US$265 million. The deal was completed on 19 August 2012.
Further to the acquisition in December 2011, the Group acquired the remaining 18% of the outstanding share capital in Concern Kalina.
2011
On 24 September 2010 the Group announced a definitive agreement to sell our consumer tomato products business in Brazil to Cargill for approximately R$600 million. The deal was completed on 1 March 2011.
On 28 September 2010 the Group announced an agreement to buy EVGAs ice cream brands and distribution network in Greece for an undisclosed sum. The deal was completed on 27 January 2011.
On 23 March 2011 the Group announced a binding agreement to sell the global Sanex business to Colgate-Palmolive for 672 million. The deal was completed on 20 June 2011.
On 23 March 2011 the Group announced a binding agreement to buy the Colombian Laundry business from Colgate-Palmolive for US$215 million. The deal was completed on 29 July 2011.
On 10 May 2011 the Group completed the purchase of 100% of Alberto Culver at a consideration of 2,689 million in cash.
The disposal of Simple Soap in the UK, the Republic of Ireland and the Channel Islands and the Cidal and Wrights brands worldwide was completed on 30 June 2011.
On 24 August 2011 the Group announced a definitive agreement to sell the Alberto V05 brand in the United States and Puerto Rico from the Alberto Culver portfolio and the Rave brand globally from the Unilever portfolio to private equity firm Brynwood Partners VI L.P. for an undisclosed sum. The deal was completed on 31 August 2011
On 1 December 2011 the Group completed the sale of Culver Specialty Brands division to B&G Foods, Inc. for 240 million.
On 6 December 2011 the Group completed the acquisition of 82% of the outstanding shares of Concern Kalina, one of Russias leading local personal care companies.
On 20 December 2011 the Group completed the acquisition of Ingman Ice Cream for an undisclosed sum.
The table below shows the impact of disposals on the Group during the year. The results of disposed businesses are included in the consolidated financial statements up to their date of disposal.
Disposals | million 2012 |
million 2011 |
million 2010 |
|||||||||
Goodwill and intangible assets |
29 | 1,058 | 223 | |||||||||
Other non-current assets |
35 | 81 | 105 | |||||||||
Current assets |
38 | 145 | 151 | |||||||||
Trade creditors and other payables |
(2 | ) | (57 | ) | (51 | ) | ||||||
Provisions for liabilities and charges |
| (12 | ) | (17 | ) | |||||||
Net assets sold |
100 | 1,215 | 411 | |||||||||
(Gain)/loss on recycling of currency retranslation on disposal |
| (61 | ) | 1 | ||||||||
Profit on sale attributable to Unilever
|
|
117
|
|
|
221
|
|
|
467
|
| |||
Consideration
|
|
217
|
|
|
1,375
|
|
|
879
|
| |||
Cash |
229 | 1,404 | 891 | |||||||||
Cash balances of businesses sold |
| (2 | ) | 1 | ||||||||
Financial assets, cash deposits and financial liabilities of businesses sold |
(9 | ) | (6 | ) | (14 | ) | ||||||
Non-cash items and deferred consideration |
(3 | ) | (21 | ) | 1 | |||||||
The following table sets out the effect of acquisitions in 2012, 2011 and 2010 on the consolidated balance sheet. The fair values currently established for all acquisitions made in 2012 are provisional. The goodwill arising on these transactions has been capitalised and is subject to an annual review for impairment (or more frequently if necessary) in accordance with our accounting policies as set out in note 9 on page 106. Any impairment is charged to the income statement as it arises. Detailed information relating to goodwill is given in note 9 on pages 106 and 107.
Acquisitions | million 2012 |
million 2011 |
million 2010 |
|||||||||
Net assets acquired |
10 | 1,733 | 1,262 | |||||||||
Goodwill arising in subsidiaries
|
|
10
|
|
|
1,677
|
|
|
225
|
| |||
Consideration |
20 | 3,410 | 1,487 |
Unilever Annual Report and Accounts 2012 | Financial statements 127 |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS UNILEVER GROUP continued
Non-current assets and groups of assets and liabilities which comprise disposal groups are classified as held for sale when all of the following criteria are met: a decision has been made to sell; the assets are available for sale immediately; the assets are being actively marketed; and a sale has been agreed or is expected to be concluded within 12 months of the balance sheet date.
Immediately prior to classification as held for sale, the assets or groups of assets are remeasured in accordance with the Groups accounting policies. Subsequently, assets and disposal groups classified as held for sale are valued at the lower of book value or fair value less disposal costs. Assets held for sale are not depreciated.
million 2012 |
million 2011 |
|||||||
Groups held for sale |
||||||||
Goodwill and intangibles |
114 | 9 | ||||||
Property, plant and equipment |
28 | | ||||||
Inventories |
26 | | ||||||
Trade and other receivables |
11 | | ||||||
179 | 9 | |||||||
Non-current assets held for sale |
||||||||
Property, plant and equipment |
13 | 12 | ||||||
Liabilities held for sale |
||||||||
Liabilities associated with assets held for sale |
1 | |
A related party is a person or entity that is related to the Group. These include both people and entities that have, or are subject to, the influence or control of the Group.
The following related party balances existed with associate or joint venture businesses at 31 December:
Related party balances | million 2012 |
million 2011 |
||||||
Trading and other balances due from joint ventures |
116 | 243 | ||||||
Trading and other balances due from/(to) associates |
| |
Joint ventures
Sales by Unilever group companies to Unilever Jerónimo Martins and Pepsi Lipton International were 78 million and 13 million in 2012 (2011: 100 million and 11 million) respectively. Sales from Unilever Jerónimo Martins to Unilever group companies were 49 million in 2012 (2011: 45 million). Balances owed by/(to) Unilever Jerónimo Martins and Pepsi Lipton International at 31 December 2012 were 116 million and 0.4 million (2011: 244 million and 0.7 million) respectively.
Associates
Langholm Capital Partners invests in private European companies with above-average longer-term growth prospects. Since the Langholm I Fund was launched in 2002, Unilever has invested 84 million in Langholm I, with an outstanding commitment at the end of 2012 of 1 million (2011: 2 million). Unilever has received back a total of 130 million in cash from its investment in Langholm I.
Langholm Capital Partners II was launched in 2009. Unilever has invested 31 million in Langholm II, with an outstanding commitment at the end of 2012 of 44 million (2011: 50 million).
128 Financial statements | Unilever Annual Report and Accounts 2012 |
This note includes all amounts paid to the Groups auditors, PricewaterhouseCoopers, whether in relation to their audit of the Group or otherwise.
During the year the Group (including its subsidiaries) obtained the following services from the Group auditor and its associates:
million 2012 |
million 2011 |
million 2010 |
||||||||||
Fees payable to PricewaterhouseCoopers(a) for the audit of the consolidated and parent company accounts of Unilever N.V. and Unilever PLC |
7 | 7 | 7 | |||||||||
Fees payable to PricewaterhouseCoopers(b) for the audit of accounts of subsidiaries of Unilever N.V. and Unilever PLC pursuant to legislation
|
|
11
|
|
|
11
|
|
|
11
|
| |||
Total statutory audit fees(c) |
18 | 18 | 18 | |||||||||
Audit-related assurance services |
2 | 2 | 1 | |||||||||
Other taxation advisory services |
1 | 1 | 1 | |||||||||
Services relating to corporate finance transactions |
| | 1 | |||||||||
Other assurance services |
| | 1 | |||||||||
All other non-audit services |
| 1 | 1 |
(a) | Of which: 1 million was paid to PricewaterhouseCoopers Accountants N.V. (2011: 1 million; 2010: 1 million); and 6 million was paid to PricewaterhouseCoopers LLP (2011: 6 million; 2010: 6 million). |
(b) | Comprises fees paid to the network of separate and independent member firms of PricewaterhouseCoopers International Limited for audit work on statutory financial statements and Group reporting returns of subsidiary companies. |
(c) | In addition, 1 million of statutory audit fees were payable to PricewaterhouseCoopers in respect of services supplied to associated pension schemes (2011: 1 million; 2010: 1 million). |
Where events occurring after the balance sheet date provide evidence of conditions that existed at the end of the reporting period, the impact of these events is adjusted within the financial statements. Otherwise, events after the balance sheet date of a material size or nature are disclosed below.
On 3 January 2013 the Group announced that it has signed a definitive agreement to sell its global Skippy business to Hormel Foods for a total cash consideration of approximately US$700 million.
On 23 January 2013 Unilever announced a quarterly dividend with the 2012 fourth quarter results of 0.2430 per NV ordinary share and £0.2039 per PLC ordinary share.
Unilever Annual Report and Accounts 2012 | Financial statements 129 |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS UNILEVER GROUP continued
130 Financial statements | Unilever Annual Report and Accounts 2012 |
26. Principal group companies and
non-current investments continued
Unilever Annual Report and Accounts 2012 | Financial statements 131 |
COMPANY ACCOUNTS AUDITORS REPORT UNILEVER N.V.
132 Financial statements | Unilever Annual Report and Accounts 2012 |
COMPANY ACCOUNTS UNILEVER N.V.
(after proposed appropriation of profit)
million 2012 |
million 2011 |
|||||||
Fixed assets | ||||||||
Intangible assets |
1,010 | | ||||||
Fixed investments
|
|
28,400
|
|
|
28,426
|
| ||
Total non-current assets | 29,410 | 28,426 | ||||||
Debtors due within one year |
4,798 | 8,193 | ||||||
Deferred taxation |
20 | 33 | ||||||
Cash at bank and in hand |
3 | 1 | ||||||
Total current assets | 4,821 | 8,227 | ||||||
Creditors due within one year
|
|
(25,044
|
)
|
|
(23,391
|
)
| ||
Net current assets/(Iiabilities) | (20,223 | ) | (15,164 | ) | ||||
Total assets less current liabilities | 9,187 | 13,262 | ||||||
Creditors due after more than one year | 1,148 | 5,419 | ||||||
Provisions for liabilities and charges (excluding pensions and similar obligations) | 74 | 39 | ||||||
Net pension liability | 112 | 92 | ||||||
Capital and reserves
|
|
7,853
|
|
|
7,712
|
| ||
Called up share capital |
275 | 275 | ||||||
Share premium account |
20 | 20 | ||||||
Legal reserves |
16 | 16 | ||||||
Other reserves |
(3,330 | ) | (3,450 | ) | ||||
Profit retained |
10,872 | 10,851 | ||||||
Total capital employed | 9,187 | 13,262 | ||||||
|
||||||||
million 2012 |
million 2011 |
|||||||
Income from fixed investments after taxation |
1,508 | 1,327 | ||||||
Other income and expenses
|
|
(22
|
)
|
|
71
|
| ||
Profit for the year | 1,486 | 1,398 |
For the information required by Article 392 of Book 2 of the Civil Code in the Netherlands, refer to pages 132 and 137. Pages 134 to 136 are part of the notes to the Unilever N.V. company accounts.
The company accounts of Unilever N.V. are included in the consolidated accounts of the Unilever Group. Therefore, and in accordance with Article 402 of Book 2 of the Civil Code in the Netherlands, the profit and loss account only reflects the income from fixed investments after taxation and other income and expenses after taxes. The company accounts of Unilever N.V. do not contain a cash flow statement as this is not required by Book 2 of the Civil Code in the Netherlands.
Unilever Annual Report and Accounts 2012 | Financial statements 133 |
NOTES TO THE COMPANY ACCOUNTS UNILEVER N.V.
134 Financial statements | Unilever Annual Report and Accounts 2012 |
Unilever Annual Report and Accounts 2012 | Financial statements 135 |
NOTES TO THE COMPANY ACCOUNTS UNILEVER N.V. continued
136 Financial statements | Unilever Annual Report and Accounts 2012 |
FURTHER STATUTORY AND OTHER INFORMATION UNILEVER N.V.
Unilever Annual Report and Accounts 2012 | Financial statements 137 |
COMPANY ACCOUNTS AUDITORS REPORT UNILEVER PLC
138 Financial statements | Unilever Annual Report and Accounts 2012 |
£ million 2012 |
£ million 2011 |
|||||||
Fixed assets | ||||||||
Intangible assets |
166 | 59 | ||||||
Fixed investments |
5,979 | 5,979 | ||||||
6,145 | 6,038 | |||||||
Current assets | ||||||||
Debtors due within one year | 256 | 428 | ||||||
Creditors due within one year
|
|
(3,651
|
)
|
|
(3,778
|
)
| ||
Net current assets/(liabilities) | (3,395 | ) | (3,350 | ) | ||||
Total assets less current liabilities | 2,750 | 2,688 | ||||||
Creditors due after more than one year | 746 | 745 | ||||||
Provision for liabilities and charges (excluding pensions and similar obligations) | 8 | 9 | ||||||
Capital and reserves | 1,996 | 1,934 | ||||||
Called up share capital |
41 | 41 | ||||||
Share premium account |
94 | 94 | ||||||
Capital redemption reserve |
11 | 11 | ||||||
Other reserves |
(381 | ) | (405 | ) | ||||
Profit retained |
2,231 | 2,193 | ||||||
Total capital employed | 2,750 | 2,688 |
The financial statements on pages 139 to 141 were approved by the Board of Directors on 5 March 2013 and signed on its behalf by M Treschow and P Polman.
As permitted by Section 408 of the United Kingdom Companies Act 2006, an entity profit and loss account is not included as part of the published company accounts for PLC. Under the terms of Financial Reporting Standard 1 (revised 1996) Cash Flow Statements (FRS 1) a cash flow statement is not included, as the cash flows are included in the consolidated cash flow statement of the Unilever Group.
On behalf of the Board of Directors
M Treschow
Chairman
P Polman
Chief Executive Officer
5 March 2013
Unilever Annual Report and Accounts 2012 | Financial statements 139 |
NOTES TO THE COMPANY ACCOUNTS UNILEVER PLC
140 Financial statements | Unilever Annual Report and Accounts 2012 |
Unilever Annual Report and Accounts 2012 | Financial statements 141 |
FURTHER STATUTORY AND OTHER INFORMATION UNILEVER PLC
142 Financial statements | Unilever Annual Report and Accounts 2012 |
Unilever Annual Report and Accounts 2012 | Financial statements 143 |
Annual General Meetings
Date | Voting Record date |
Voting & Registration date | ||||
NV | 9.30am 15 May 2013 | 17 April 2013 | 5.30pm 8 May 2013 | |||
PLC | 3.00pm 15 May 2013 | 10 May 2013 | 3.00pm 13 May 2013 | |||
Announcements of results | ||||||
First Quarter | 25 April 2013 | Third Quarter | 24 October 2013 | |||
Second Quarter | 25 July 2013 | Fourth Quarter | 23 January 2014 |
Quarterly Dividends
Dates listed below are applicable to all four Unilever listings (NV ordinary shares, PLC ordinary shares, NV New York shares and PLC ADRs).
Announced | Ex-dividend date | Record date | Payment date | |||||||||||||
Quarterly Dividend announced with the Q4 2012 results |
23 January 2013 | 6 February 2013 | 8 February 2013 | 13 March 2013 | ||||||||||||
Quarterly Dividend announced with the Q1 2013 results |
25 April 2013 | 8 May 2013 | 10 May 2013 | 2 June 2013 | ||||||||||||
Quarterly Dividend announced with the Q2 2013 results |
25 July 2013 | 7 August 2013 | 9 August 2013 | 11 September 2013 | ||||||||||||
Quarterly Dividend announced with the Q3 2013 results |
24 October 2013 | 6 November 2013 | 8 November 2013 | 11 December 2013 | ||||||||||||
Preferential Dividends NV
|
| |||||||||||||||
Announced | Ex-dividend date | Record date | Payment date | |||||||||||||
6% and 7% |
6 September 2013 | 9 September 2013 | 11 September 2013 | 1 October 2013 |
Rotterdam | London | |
Unilever N.V. | Unilever PLC | |
Investor Relations Department | Investor Relations Department | |
Weena 455, PO Box 760 | Unilever House | |
3000 DK Rotterdam | 100 Victoria Embankment | |
The Netherlands | London EC4Y 0DY | |
United Kingdom | ||
Telephone +44 (0)20 7822 6830 | Telephone +44 (0)20 7822 6830 | |
Telefax +44 (0)20 7822 5754 | Telefax +44 (0)20 7822 5754 |
Any queries can also be sent to us electronically via www.unilever.com/resource/contactus.aspx.
144 Shareholder information | Unilever Annual Report and Accounts 2012 |
Unilever Annual Report and Accounts 2012 | Shareholder information 145 |
NOTES
146 | Unilever Annual Report and Accounts 2012 |
NOTES
Unilever Annual Report and Accounts 2012 | 147 |
148 | Unilever Annual Report and Accounts 2012 |
Cautionary statement
This document 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 will, aim, expects, anticipates, intends, looks, believes, vision, or the negative of these terms and other similar expressions of future performance or results, 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. Among other risks and uncertainties, the material or principal factors which cause actual results to differ materially are: Unilevers global brands not meeting consumer preferences; increasing competitive pressures; Unilevers investment choices in its portfolio management; inability to find sustainable solutions to support long-term growth; customer relationships; the recruitment and retention of talented employees; disruptions in our supply chain; the cost of raw materials and commodities; secure and reliable IT infrastructure; successful execution of acquisitions, divestitures and business transformation projects; economic and political risks and natural disasters; the debt crisis in Europe; financial risks; failure to meet high product safety and ethical standards; and managing regulatory, tax and legal matters. Further details of potential risks and uncertainties affecting the Group are described in the Groups filings with the London Stock Exchange. Euronext Amsterdam and the US Securities and Exchange Commission, including the Groups Annual Report on Form 20-F for the year ended 31 December 2012 and the Annual Report and Accounts 2012. These forward-looking statements speak only as of the date of this announcement. Except as required by any applicable law or regulation, the Group expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Groups expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.
This document is not prepared in accordance with US GAAP and should not therefore be relied upon by readers as such. The Groups Annual Report on Form 20-F for 2012 is separately filed with the US Securities and Exchange Commission and is available on our corporate website www.unilever.com. Any information on or linked from our or third-party websites is not incorporated by reference into this document or the Annual Report on Form 20-F. In addition, a printed copy of the Annual Report on Form 20-F is available, free of charge, upon request to Unilever PLC, Investor Relations Department, Unilever House, 100 Victoria Embankment, London EC4Y 0DY, United Kingdom.
Designed and produced by Unilever Communications in conjunction with Addison at www.addison.co.uk.
Photography by Oliver Edwards, Igor Emmerich, Philip Gatward, Michael Heffernan, Chris Moyse, Rian Ardi Wakito,
Martin Wanyoike, The Pack Shot Company and from the Unilever image library.
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This document forms part of the Unilever Annual Report and Accounts 2012 suite of documents and is printed on Amadeus 100% Recycled Silk. This has been exclusively supplied by Denmaur Independent Papers which has offset the carbon produced by the production and delivery of this paper to the printer.
The paper contains 100% recycled content, of which 100% is de-inked post-consumer waste. All of the pulp is bleached using an elemental chlorine free process (ECF). Printed in the UK by Pureprint using its alcofree® and pureprint® environmental printing technology, and vegetable inks were used throughout. Pureprint is a CarbonNeutral® company. Both manufacturing mill and the printer are registered to the Environmental Management System ISO 14001 and are Forest Stewardship Council® (FSC) chain-of-custody certified.
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UNILEVER N.V. | ||
Weena 455, PO Box 760 | ||
3000 DK Rotterdam | ||
The Netherlands | ||
T +31 (0)10 217 4000 | ||
F +31 (0)10 217 4798 | ||
Commercial Register Rotterdam | ||
Number: 24051830 | ||
UNILEVER PLC | ||
Unilever House | ||
100 Victoria Embankment | ||
London EC4Y 0DY | ||
United Kingdom | ||
T +44 (0)20 7822 5252 | ||
F +44 (0)20 7822 5951 | ||
UNILEVER PLC REGISTERED OFFICE | ||
Unilever PLC | ||
Port Sunlight | ||
Wirral | ||
Merseyside CH62 4ZD | ||
United Kingdom | ||
For further information on our social, economic and environmental performance, please visit our website |
Registered in England and Wales Company Number: 41424 | |
|
|
WWW.UNILEVER.COM
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
UNILEVER N.V. |
/s/ T. E. LOVELL |
By T. E. LOVELL, |
Group Secretary |
Date: 8 March 2013