Unilever braced for restructuring benefits

By Neil Merrett

- Last updated on GMT

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Unilever posted a 5 per cent improvement in sales during the full
fiscal year, on the back of its increased focus on products with
vitality benefits, emerging markets and personal care.

The sales improvement amounted to €40bn, the company said.

However, operating profit grew by just one per cent to €5.2bn in constant terms for the twelve-month period ending 31 December.

However, group chief executive Patrick Cescau said that ongoing restructuring within the company was expected to drive 2008 sales growth towards the upper end of the previously predicted three to five per cent.

Cescau added that the company will continue focusing on fast-growing goods and brands,and expanding distribution for its Lipton tea products "The re-shaping of the business and the acceleration of our change programme are bringing real benefits," he stated.

"They make Unilever a more flexible and resilient company, better placed to meet the challenges of operating in a tougher economic and cost environment."

On the back of these ongoing changes, Unilever said it was confident of meeting its 2010 ambitions of recording an operating margin of 15 per cent.

Fourth quarter Fourth quarter net profits fell from €2.03bn in the 2006 financial year to €721m - a figure that was impacted by a €1.2bn gain from the sale of its frozen foods division in 2006.

The sale reflects an ongoing period of restructuring within the company's global operations to ensure greater cost efficiency as part of the "One Unilever" .

Unilever expects to make €2bn worth of divestments through the scheme, with its slower performing divisions facing the possibility of being cut from the business.

Europe Despite a 2.8 per cent improvement in sales over the period for the group's European operations to €15.2bn, operating margins fell by 1.7 percentage points to 11 per cent, the company said.

Following the sale of its Boursin cheese brand, the purchase of Inmarko, and a program of streamlining administration and production operations underway in the region during 2008, margin benefits are expected by the group.

The Americas In the company's Americas division, operating margins were down by 1.1 percentage points to 14.7 per cent.

Underlying sales growth was up in the region for Unilever by 4.1 per cent over the full year.

Though advertising and promotional expenditure were attributed to margin declines, the company said that it again expected to post improvements in cost efficiency.

As a result of the worldwide "One Unilever" restructuring scheme, the group's Argentinean, Mexican and Brazilian operations all were reduced to single head offices during 2007, with a similar reduction expected in the US during 2008.

To further its added-value brand focus, Unilever said it had also disposed of its local Brazilian margarine brands in order to concentrate on a new venture in the country with Perdigão.

The joint venture is designed to push its Becel spread, which the company claims can offer heart health benefits.

Asia and Africa Unilever said its operations in Asia and Africa had become increasingly significant during 2007, a fact reflected in the 11 per cent underlying sales growth to €11.5bn over the full year.

The company said that sales growth was broad based across a number of brand and national markets, though it particularly praised the impacts of its Chinese and ice cream operations on the profits.

Full year operating margins within the region climbed 1.6 percentage points to 13.8 per cent.

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