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RNS Number : 2485E Unilever PLC 09 March 2022
Unilever PLC ("Unilever")
2021 Annual Financial Report Announcement
Unilever announces that the following documents are available on its website
www.unilever.com/ara:
Unilever Annual Report and Accounts 2021
Unilever Annual Report on Form 20-F 2021
A copy of each of the documents listed has been submitted to the National
Storage Mechanism and will shortly be available for inspection at:
https://data.fca.org.uk/#/nsm/nationalstoragemechanism. A copy of the Unilever
Annual Report on Form 20-F 2021 has also been filed with the U.S. Securities
and Exchange Commission and is available at: www.sec.gov/edgar.shtml.
Attached to this announcement is the additional information for the purposes
of compliance with the Disclosure and Transparency Rules including principal
risk factors, details of related party issues and a responsibility statement.
The unaudited 2021 Full Year and Fourth Quarter Results for the year ended 31
December 2021, which were announced on 10 February 2022, were prepared in
accordance with IAS 34.
ADDITIONAL INFORMATION
Principal Risk Factors
These are the risks that we see as most material to Unilever's business and
performance at this time. There may be other risks that could emerge in the
future.
We set out below certain mitigating actions that we believe help us to manage
our principal 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 cash flow, 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, 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 WHAT WE ARE DOING TO MANAGE THE RISK
BRAND PREFERENCE
Our success depends on the value and relevance of our brands and products to We monitor external market trends and collate consumer, customer and shopper
consumers around the world and on our ability to innovate and remain insights in order to develop category and brand strategies. We invest in
competitive. markets and segments where we have built, or are confident that we can build,
competitive advantage.
Consumer tastes, preferences and behaviours are changing more rapidly than
ever before. We see a growing trend for consumers preferring brands which both Our brand communication strategies are designed to optimise digital
meet their functional needs and have an explicit social or environmental communication opportunities. We develop and customise brand messaging content
purpose. specifically for each of our chosen communication channels (both traditional
and digital) to ensure that our brand messages reach our target consumers.
Brand teams are driving social purpose into their brand's proposition and
communication.
Technological change is disrupting our traditional brand communication models.
Our ability to develop and deploy the right communication, both in terms of
messaging content and medium is critical to the continued strength of our
brands. 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.
We are dependent on creating innovative products that continue to meet the
needs of our consumers and getting these new products to market with speed.
Our innovation management process converts category strategies into projects
which deliver new products to market. We develop product ideas both in-house
and with selected partners to enable us to respond to rapidly changing
The Covid-19 pandemic has driven significant changes in consumer habits and consumer trends with speed.
demand (for example, an increase in hygiene-related products and a reduction
in out-of-home food products), which is requiring a continuing and rapid
evolution of our brands to ensure we remain competitive.
Level of risk: No change
PORTFOLIO MANAGEMENT
Unilever's strategic investment choices will affect the long-term growth and Our strategy and our business plans are designed to ensure that resources are
profits of our business. prioritised towards those categories and markets having the greatest long-term
potential for Unilever. Our acquisition and disposal activity is driven by our
portfolio strategy with a clear, defined evaluation process.
Unilever's growth and profitability are determined by our portfolio of
Divisions, 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.
Level of risk: No change
CLIMATE CHANGE
Climate change and governmental actions to reduce such change may disrupt our We monitor climate change and in 2021 we published our Climate Transition
operations and/or reduce consumer demand for our products. Action Plan which provides details on how we are reducing the carbon intensity
of our operations, developing products with a lower carbon footprint or that
require less water during consumer use including details of how we will
achieve our GHG reduction targets which include net zero emissions across our
Climate change could impact our business in various ways. Government action to value chain and zero emissions in our operations.
reduce climate change such as the introduction of a carbon tax, land use
regulations or product composition regulations which restrict or ban certain
GHG intensive ingredients, could impact our business through higher costs or
reduced flexibility of operations. Market risks associated with the energy We are decarbonising our operations through eco-efficiency measures, powering
transition and rising energy prices could disrupt our operations and increase our factories with renewable electricity, transitioning to renewable energy
costs. for heating and cooling and replacing climate harmful refrigerants. We invest
in new products and formulations so that our products work with less water,
poor quality water or no water.
Physical environment risks such as water scarcity could impact our operations
or reduce demand for our products that require water during consumer use.
Increased frequency of extreme weather events such as high temperatures, We monitor trends in raw material availability and pricing due to short-term
hurricanes or floods could cause increased incidence of disruption to our weather impacts to ensure continued availability of input materials and
supply chain, manufacturing and distribution network. If we do not take integrate weather system modelling into our forecasting process.
action, climate change could result in increased costs, reduced profit and
reduced growth.
We also monitor government policy and actions to combat climate change and
take proactive action to minimise the impact on our business and advocate for
Level of risk: No change changes to public policy frameworks consistent with the 1.5°C ambition of the
Paris Agreement.
PLASTIC PACKAGING
We use a significant amount of plastic to package our products. A reduction in We are committed to reducing the amount of post-consumer plastic packaging
the amount of virgin plastic we use, the use of recycled plastic and an waste going to landfill. We have committed to ensuring 100% of our plastic
increase in the recyclability of our packaging are critical to our future packaging is reusable, recyclable or compostable by 2025.
success.
We aim to halve our use of virgin plastic by both reducing usage and
Both consumer and customer responses to the environmental impact of plastic accelerating use of recycled plastic. This requires us to redesign products by
waste and emerging regulations by governments to tax or ban the use of certain considering multiple-use packs, wider use of refills, recycling and using
plastics requires us to find solutions to reduce the amount of plastic we use, post-consumer recycled materials in innovative ways.
increase recycling post-consumer use and source recycled plastic for use in
our packaging. We are also dependent on the work of our industry partners to
create and improve recycling infrastructure throughout the world.
We are working on innovative solutions through new business models. We aim to
collect and process more plastic packaging than we sell, enabled through
driving systematic change in circular thinking at an industry level working
Not only is there a risk around finding appropriate replacement materials, but with partners such as the Ellen MacArthur Foundation. We are also working with
also due to high demand, the cost of recycled plastic or other alternative governments, industry partners, suppliers and consumers to raise awareness and
packaging materials could significantly increase in the foreseeable future and find solutions to improve the recycling infrastructure for plastics. We are
this could impact our business performance. We could also be exposed to higher helping consumers to understand disposal methods and supporting collection
costs as a result of taxes or fines if we are unable to comply with plastic schemes and facilities.
regulations, which would again impact our profitability and reputation.
Level of risk: No change
CUSTOMER
Successful customer relationships are vital to our business and continued We build and maintain trading relationships across a broad spectrum of
growth. channels ranging from centrally managed multinational customers through to
small traders accessed via distributors in many emerging markets. We identify
changing shopper habits and build relationships with new customers, such as
those serving the eCommerce channel.
Maintaining strong relationships with our existing customers and building
relationships with new customers who have built new technology-enabled
business models to serve changing shopper habits are necessary to ensure our
brands are well presented to our consumers and available for purchase at all We develop joint business plans with our key customers that include detailed
times. investment plans and customer service objectives and we regularly monitor
progress.
The strength of our customer relationships also affects our ability to obtain
pricing and competitive trade terms. Failure to maintain strong relationships We have developed capabilities for customer sales and outlet design which
with customers could negatively impact our terms of business with affected enable us to find new ways to improve customer performance and enhance our
customers and reduce the availability of our products to consumers. customer relationships. We invest in technology to optimise order and stock
management processes for our distributive trade customers.
The Covid-19 pandemic has driven a rapid increase in online shopping, which
means we need to accelerate development of eCommerce capabilities to remain
competitive.
Level of risk: No change
TALENT
A skilled workforce and agile ways of working are essential for the continued We have an integrated management development process which includes regular
success of our business. performance reviews underpinned by a common set of leadership behaviours,
skills and competencies. We have development plans to upskill and reskill
employees for future roles and will bring in flexible talent to access new
skills.
With the rapidly changing nature of work and skills, there is a risk that our
workforce is not equipped with the skills required for the new environment.
We have targeted programmes to attract and retain top talent and we actively
monitor our performance in retaining a diverse talent pool within Unilever.
Our ability to attract, develop and retain a diverse range of skilled people
is critical if we are to compete and grow effectively. This is especially true
in our key emerging markets where there can be a high level of competition for
a limited talent pool. We regularly review our ways of working to drive speed and simplicity through
our business in order to remain agile and responsive to marketplace trends.
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 We are moving to agile ways of working to unlock internal capacity and
business and could adversely affect operations and financial results. prioritise work based on growth and impact.
The wellbeing of our employees is vital to the success of our business.
Covid-19 continues to have a significant impact on their wellbeing, therefore
helping our employees manage the impact of Covid-19 on their lives and their
ability to work effectively requires continued focus.
Level of risk: No change
SUPPLY CHAIN
Our business depends on purchasing materials, We have contingency plans designed to enable us to secure alternative key
material supplies at short notice, to transfer or share production between
efficient manufacturing and the timely distribution manufacturing sites and to use substitute materials in our product
formulations and recipes.
of products to our customers.
We have policies and procedures designed to ensure the health and safety of
Our supply chain network is exposed to potentially adverse events such as our employees and the products in our facilities, and to deal with major
physical disruptions, environmental and industrial accidents, trade incidents including business continuity and disaster recovery.
restrictions or disruptions at a key supplier, which could impact our ability
to deliver orders to our customers.
Commodity price risk is managed through forward buying of traded commodities,
other appropriate hedging mechanisms and product pricing. Trends are monitored
The Covid-19 pandemic is an adverse event that has challenged and continues to and modelled regularly and integrated into our forecasting process.
challenge the continuity of our supply chain. Maintaining manufacturing
operations whilst adhering to changing local regulations and meeting enhanced
health and safety standards has proven possible but has required significant
management. In addition, ensuring the operation of a global logistics network
for both input materials and finished goods has presented challenges and
requires continued focus and flexibility.
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.
Level of risk: Increase
SAFE AND HIGH QUALITY PRODUCTS
The quality and safety of our products are of paramount importance for our Our product quality processes and controls are comprehensive, from product
brands and our reputation. design to customer shelf. They are verified annually and regularly monitored
through performance indicators that drive improvement activities. Our key
suppliers are externally certified and the quality of material received is
regularly monitored to ensure that it meets the rigorous quality standards
The risk that raw materials are accidentally or maliciously contaminated that our products require.
throughout the supply chain or that other product defects occur due to human
error, equipment failure or other factors cannot be excluded.
In the event of an incident relating to the safety of our consumers or the
quality of our products, incident management teams are activated in the
Labelling errors can have potentially serious consequences for both consumer affected markets under the direction of our product quality, science and
safety and brand reputation. Therefore, on-pack labelling needs to provide communications experts, to ensure timely and effective marketplace action.
clear and accurate ingredient information in order that consumers can make
informed decisions regarding the products they buy.
We have processes in place to ensure that the data used to generate on-pack
labelling is compliant with applicable regulations and with relevant Unilever
Level of risk: No change labelling policies in order to provide the clarity and transparency needed for
consumers.
SYSTEMS AND INFORMATION
Unilever's operations are increasingly dependent on IT systems and the To reduce the impact of external cyber-attacks impacting our business we have
management of information. firewalls and threat monitoring systems in place, complete with immediate
response capabilities to mitigate identified threats. We also 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
The cyber-attack threat of unauthorised access and misuse of sensitive controls.
information or disruption to operations continues to increase. Such an attack
could inhibit our business operations in a number of ways, including
disruption to sales, production and cash flows, ultimately impacting our
results. 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.
In addition, increasing digital interactions with customers, suppliers and
consumers place ever greater emphasis on the need for secure and reliable IT
systems and infrastructure and careful management of the information that is We also have a set of IT security standards and closely monitor their
in our possession to ensure data privacy. operation to protect our systems and information. Hardware that runs and
manages core operating data is fully backed up with separate contingency
systems to provide real-time backup operations should they ever be required.
Given the changes in the ways of working of all our employees as well as our
customers and suppliers as a result of Covid-19, there has been an increased
reliance on certain elements of our IT infrastructure. We are particularly We have standardised ways of hosting information on our public websites and
reliant on third-party experts in this space and thus the impact of Covid-19 have systems in place to monitor compliance with appropriate privacy laws and
on their operations also poses a risk for us. regulations, and with our own policies.
Level of risk: Increase
BUSINESS TRANSFORMATION
Successful execution of business transformation projects is key to delivering All acquisitions, disposals and global organisational transformation projects
their intended business benefits and avoiding disruption to other business are sponsored by a member of the ULE. All such projects have steering groups
activities. in place led by a senior executive and regular progress updates are provided
to the ULE. Sound project disciplines are used in all transformation projects
and these projects are resourced by dedicated and appropriately qualified
personnel.
Unilever is continually engaged in major change projects, including
acquisitions, disposals and organisational transformation, to drive continuous
improvement in our business and to strengthen our portfolio and capabilities.
Continued digitalisation of our business models and processes, together with The digitalisation of our business is led by a dedicated specialist team
enhancing data management capabilities, is a critical part of our together with representatives from all parts of the business to ensure an
transformation. integrated and holistic approach. A significant part of the organisational
transformation involves the transfer of activities to third parties on and
offshore. New ways of working are being developed to manage this new business
model.
We have an extensive programme of transformation projects. Failure to execute
such initiatives successfully could result in under-delivery of the expected
benefits and there could be a significant impact on the value of the business.
Unilever also monitors the volume of change programmes under way in an effort
to stagger the impact on current operations and to ensure minimal disruption.
Level of risk: Increase
ECONOMIC AND POLITICAL INSTABILITY
Adverse economic conditions may affect one or more countries, regions or may The breadth of Unilever's portfolio and our geographic reach help to mitigate
extend globally. Unilever operates around the world and is exposed to economic our exposure to any particular localised risk. Our flexible business model
and political instability that may reduce consumer demand for our products, allows us to adapt our portfolio and respond quickly to develop new offerings
disrupt sales operations and/or impact the profitability of our operations. that suit consumers' and customers' changing needs during economic downturns.
Government actions such as foreign exchange or price controls can impact on We regularly update our forecast of business results and cash flows and, where
the growth and profitability of our local operations. necessary, rebalance investment priorities.
Unilever has more than half of its turnover in emerging markets which can We believe that many years of exposure to emerging markets have given us
offer greater growth opportunities but also expose Unilever to related experience of operating and developing our business successfully during
economic and political volatility. periods of economic and political volatility.
Level of risk: Increase
TREASURY AND TAX
Unilever is exposed to a variety of external financial Currency exposures are managed within prescribed limits and by the use of
financial hedging instruments. Further, operating companies borrow in local
risks in relation to Treasury and Tax. currency except where inhibited by local regulations, lack of local liquidity
or local market conditions.
The relative value of currencies can fluctuate widely and could have a
significant impact on business results. Further, because Unilever consolidates We seek to maintain access to global debt markets through short-term and
its financial statements in euros it is subject to exchange risks associated long-term debt programmes. In addition, we maintain significant undrawn
with the translation of the underlying net assets and earnings of its foreign committed credit facilities for general corporate purposes as disclosed in
subsidiaries. note 16A.
We are also subject to the imposition of exchange controls by individual Group treasury regularly monitors exposure to our banks, tightening
countries which could limit our ability to import materials paid in foreign counter-party limits where appropriate. Unilever actively manages its banking
currency or to remit dividends to the parent company. exposures on a daily basis. We regularly assess and monitor counter-party risk
in our suppliers and customers and take appropriate action to manage our
exposures.
A material shortfall in our cash flow could undermine Unilever's credit
rating, impair investor confidence and restrict Unilever's ability to raise
funds. In times of financial crisis, there is a further risk that we may not Our Global Tax Principles provide overarching governance and we have a process
be able to raise funds due to market illiquidity. in place to monitor compliance with the Tax Principles. We have a Tax Risk
Framework in place which sets out the controls established to assess and
monitor tax risk for direct and indirect taxes. We monitor proposed changes in
taxation legislation and ensure these are taken into account when we consider
We are exposed to counter-party risks with banks, suppliers and customers, our future business plans.
which could result in financial losses.
Tax is a complex and evolving area where laws and their interpretation are
changing regularly, leading to the risk of unexpected tax exposures.
International tax reform remains a key focus of attention with the OECD's Base
Erosion and Profit Shifting project, and the Digitalising Economy Project, and
further potential tax reform in the European Union and the US.
Level of risk: No change
ETHICAL
Unilever's brands and reputation are valuable assets and the way in which we Our Code of Business Principles and our Code Policies govern the behaviour of
operate, contribute to society and engage with the world around us is always our employees, suppliers, distributors and other third parties who work with
under scrutiny both internally and externally. us. Our processes for identifying and resolving breaches of our Code of
Business Principles and our Code Policies are clearly defined and regularly
communicated throughout Unilever. Data relating to such breaches is reviewed
by the ULE and by relevant Board Committees and helps to determine the
Acting in an ethical manner, consistent with the expectations of customers, allocation of resources for future policy development, process improvement,
consumers and other stakeholders, is essential for the protection of the training
reputation of Unilever and its brands.
and awareness initiatives.
A key element of our ethical approach to business is to reduce inequality and
promote fairness. Our activities touch the lives of millions of people and it Our Responsible Sourcing Policy and Responsible Business Partners Policy help
is our responsibility to protect their rights and help them live well. us improve the lives of the people in our supply chains by ensuring human
rights are protected and makes a healthy and safe workplace a mandatory
requirement for our suppliers. We have detailed safety standards and monitor
safety incidents at the highest level.
The safety of our employees and the people and communities we work with is
critical. Failure to meet these high standards could result in damage to
Unilever's corporate reputation and business results.
Through our Brands with Purpose agenda, a number of our brands are taking
action on societal issues such as fairness and equality.
Level of risk: No change
LEGAL AND REGULATORY
Compliance with laws and regulations is an essential part of Unilever's Unilever is committed to complying with the laws and regulations of the
business operations. countries in which we operate. In specialist areas the relevant teams at
global, regional or local levels 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.
Unilever is subject to national and regional laws and regulations in such
diverse areas as product safety, product claims, trademarks, copyright,
patents, competition, employee health and safety, data privacy, the
environment, corporate governance, listing and disclosure, employment and Our legal and regulatory specialists are heavily involved in monitoring and
taxes. reviewing our practices to provide reasonable assurance that we remain aware
of and in line with all relevant laws and legal obligations.
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.
Level of risk: No change
RELATED PARTY TRANSACTIONS
The following related party balances existed with associate or joint venture
businesses at 31 December:
Related party balances € million € million
2021 2020
Sales to joint ventures 1,060 1,004
Purchases from joint ventures 127 118
Receivables from joint ventures 71 80
Payables to joint ventures 36 43
Loans to joint ventures 241 255
Royalties and service fees 20 21
Significant joint ventures are Unilever FIMA LDA in Portugal, Binzagr Unilever
Distribution in the Middle East, the Pepsi Lipton Tea Partnership in the US
and Pepsi Lipton International Ltd for the rest of the world.
ASSOCIATES
There are no trading balances due to or from associates.
Langholm Capital II was launched in 2009. Unilever has invested €65 million
in Langholm II, with an outstanding commitment at the end of 2021 of €1
million (2020: €2 million). During 2021, Unilever received €32 million
(2020: €nil) from its investment in Langholm Capital II.
DIRECTORS' RESPONSIBILITY STATEMENT
Each of the Directors confirms that, to the best of his or her knowledge:
· The Unilever Annual Report and Accounts 2021, taken as a whole,
is fair, balanced and understandable, and provides the information necessary
for shareholders to assess the Company's position and performance, business
model and strategy;
· The financial statements which have been prepared in accordance
with international financial reporting standards (IFRS) as issued by the
International Accounting Standards Board (IASB), and UK-adopted international
accounting standards give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Company and the undertakings
included in the consolidation taken as a whole; and
· The Strategic Report includes a fair review of the development
and performance of the business and the position of PLC and the undertakings
included in the consolidation taken as a whole, together with a description of
the principal risks and uncertainties that they face.
Name Function
Nils Andersen Chairman
Andrea Jung Vice-Chairman / Senior Independent Director
Alan Jope Chief Executive Officer
Graeme Pitkethly Chief Financial Officer
Laura Cha Non-Executive Director
Judith Hartmann Non-Executive Director
Adrian Hennah Non-Executive Director
Susan Kilsby Non-Executive Director
Ruby Lu Non-Executive Director
Strive Masiyiwa Non-Executive Director
Youngme Moon Non-Executive Director
John Rishton Non-Executive Director
Feike Sijbesma Non-Executive Director
Safe Harbour
This announcement 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. Forward-looking statements also include, but are not limited to,
statements and information regarding the Unilever Group's (the 'Group')
emissions reduction targets and other climate change related matters
(including actions, potential impacts and risks associated therewith). 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 or
outcomes.
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 could cause actual results to differ materially are: Unilever's
global brands not meeting consumer preferences; Unilever's ability to innovate
and remain competitive; Unilever's investment choices in its portfolio
management; the effect of climate change on Unilever's business; Unilever's
ability to find sustainable solutions to its plastic packaging; significant
changes or deterioration in customer relationships; the recruitment and
retention of talented employees; disruptions in our supply chain and
distribution; increases or volatility in the cost of raw materials and
commodities; the production of safe and high quality products; secure and
reliable IT infrastructure; execution of acquisitions, divestitures and
business transformation projects; economic, social and political risks and
natural disasters; financial risks; failure to meet high and ethical
standards; and managing regulatory, tax and legal matters. A number of these
risks have increased as a result of the current Covid-19 pandemic.
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 Group's expectations with regard thereto or any
change in events, conditions or circumstances on which any such statement is
based.
9 March 2022.
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