"Unilever comfortable with outlook for the year for earnings and leading brand growth"
The following is the presentation text for the Unilever pre-close teleconference, given by Howard Green, head of investor relations, at 1400 hrs GMT today (March 25, 2002).
The purpose of this teleconference is to update the market on the progress of our business based on the first two months of trading in the quarter. This is as a precursor to our "close" period, ahead of the quarterly results announcement on April 26, 2002. The timetable for future updates remains unchanged from that previously announced.
The principal issue covered is:
- How we see our business progressing towards our Path to Growth targets and the key themes within our expected Q1 performance.
We remain comfortable with delivery of our targets for the year of low double digit earnings per share growth, before exceptional items and goodwill amortisation, and with sustaining the growth of our leading brands.
Within the first quarter we expect:
- EPS growth of around 25%. We estimate that operating margin will be ahead by around 150 bps. The strong growth in operating margin is driven by an improvement in gross margins of well in excess of 100 bps. This represents a significant step-up from last year. It reflects both the benefits of our savings programmes, which continue to deliver according to plan, and momentum in price increases designed to recover increases in costs driven by devaluation in a number of our developing and emerging markets.
- Turning to sales growth, in developing and emerging markets the pattern of underlying sales growth is slowing which is as we would expect at this stage of the margin recovery process. This, together with faster tail attrition and planned later phasing of innovation and market place activity in Europe, North America and Asia than in the previous year, leads to an underlying sales growth in the quarter which we expect to be in the range of 1 to 2%.
Against the tougher comparator from the phasing of planned innovation programmes and market place activity we expect leading brands growth to be around 3% in the quarter, bringing growth over the last twelve months to approaching 5%. The impact of disposals will be to reduce sales by some 300 bps, equivalent to €370 million of sales in the quarter. Thus reported sales are expected to show a decline of between 1 and 2%.
Turning now to the other elements of the profit and loss account.
Associated costs, at around €70 million, are expected to be in line with Q1 of last year. Operating margin progression is after the short-term dilution effect of disposals which we expect to be the equivalent of €60 million in this quarter.
Goodwill amortisation is estimated at €365 million in the quarter.
Net interest is estimated at €330 million and reflects the benefits of continuing strong cash flow and lower interest rates.
Exceptional items are forecast to be around €350 million before tax and around €250 million after tax.
We expect the underlying tax rate in the quarter to be between 33 and 34%.
The number of shares for calculating EPS is 982 million NV equivalent share units or 6.55 billion if you take the PLC equivalent share units.
Let me summarise. The expected sales and earnings in Q1 are fully consistent with our annual operating plan which delivers low double-digit growth in earnings per share and sustained growth of our leading brands.
We remain comfortable with where we are in terms of the business cycle in those markets which have suffered economic dislocation. Our innovation and other marketing plans for 2002 are on track and we continue to manage the tail of our business to maximise value.
Growth in sales and earnings per share will continue to be driven by:
- Firstly, an increase in the momentum of growth of our leading brands through the year fuelled by our planned innovation and market place activity programmes backed by an increased investment in advertising & promotion. Although more back end loaded, our innovation programme for 2002 is at least as intensive as last year with a sustained rate in HPC and a step-up in Foods.
- Secondly, the benefits of global procurement. By the end of 2001 we had achieved €1.2 billion of cumulative savings and are well on our way to achieving the target of €1.6 billion of savings by the end of this year.
- Thirdly, the benefits of Path to Growth restructuring. By the end of 2001 we had achieved €0.5 billion of cumulative savings, leaving €1 billion of savings to be harnessed by 2004. In 2002 we expect to at least match the €0.4 billion of savings that we achieved in 2001.
- Fourthly, the benefits of Bestfoods integration. We originally targeted 35% of the total synergy to fall in 2002 and we are confident that this will be achieved.
Our restated results for 2001 at average 2001 exchange rates can be downloaded from the Investor Centre section of www.unilever.com.
March 25 2002
SAFE HARBOUR STATEMENT: This presentation may contain forward-looking statements (within the meaning of the U.S. Private Securities Litigation Reform Act 1995). Any forward-looking statements are based on current expectations with respect to important risk factors. It is important to note that the actual results could materially differ from the results anticipated in any forward-looking statements which may be contained in this presentation. Factors which might cause forward-looking statements to differ materially from actual results include, among other things, the overall economic, political, social and business conditions, the demand for our goods and services, competition in the market, fluctuations in interest rates and foreign currencies, the impact and other uncertainties of future acquisitions and disposals and any changes in the tax laws and other legislation and regulation, in the jurisdictions in which we operate.
We do not undertake any obligation to update any forward-looking statements contained in or incorporated in this presentation to reflect actual results, changes in assumptions or in other factors which may affect any forward-looking statements.
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