REG - Unilever PLC Unilever NV. - Annual Financial Report <Origin Href="QuoteRef">ULVR.L</Origin> <Origin Href="QuoteRef">UNc.AS</Origin> - Part 2
23/02/2016 15:50
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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 All acquisitions, disposals and global restructuring projects are sponsored by a member of the Unilever Leadership Executive. 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 install alternative providers. 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.
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.
EXTERNAL ECONOMIC AND POLITICAL RISKS AND NATURAL DISASTERS
Unilever operates around 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 The breadth of Unilever's 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 have given us experience of operating and developing our business successfully during periods of economic, political or social change.
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 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 2015, more than half of Unilever's 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 related economic, political and social volatility.
TREASURY AND PENSIONS
Unilever is exposed to a variety of external financial risks in relation to Treasury and Pensions. The relative values of currencies can fluctuate widely and could have a significant impact on business results. Further, because Unilever consolidates its 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. 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 counter-party 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 120 to 125.
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. Unilever may face liquidity risk, ie difficulty in meeting its obligations, associated with its financial liabilities. A material and sustained shortfall in our cash flow could undermine Unilever's credit rating, impair investor confidence and also
restrict Unilever's 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 counter-party 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.
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. Unilever's brands and reputation are valuable assets and the way in Our Code of Business Principles 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 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 Unilever Leadership Executive and by relevant Board committees and helps to determine the allocation of resources for future policy development, process improvement, training and awareness initiatives.
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 Unilever's corporate reputation and business results.
LEGAL AND REGULATORY
Compliance with laws and regulations is an essential part of Unilever's business operations. Unilever is subject to national and regional laws and regulations in such diverse areas as product safety, product claims, trademarks, copyright, patents, Unilever is committed 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 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. Our legal and regulatory 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. Our Global Tax Principles provide overarching governance and 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 our future business plans.
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. Tax, in particular, is a complex 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 & Profit Shifting project and the EU's action plan for fair and efficient
corporation taxation.
RELATED PARTY TRANSACTIONS
The following related party balances existed with associate or joint venture
businesses at 31 December:
Related party balances E million2015 E million2014
Trading and other balances due from joint ventures 116 105
Trading and other balances due from/(to) associates - -
JOINT VENTURES
Sales by Unilever group companies to Unilever Jerónimo Martins and Pepsi
Lipton joint ventures were E121 million and E69 million in 2015 (2014: E106
million and E51 million) respectively. Sales from Unilever Jerónimo Martins
and from Pepsi Lipton joint ventures to Unilever group companies were E46
million and E51 million in 2015 (2014: E46 million and E54 million)
respectively. Balances owed by/(to) Unilever Jerónimo Martins and Pepsi Lipton
joint ventures at 31 December 2015 were E121 million and E(5) million (2014:
E112 million and E(6) million) respectively.
ASSOCIATES
Langholm Capital Partners invests in private European companies with
above-average longer-term growth prospects. Langholm Capital II was launched
in 2009. Unilever has invested E55 million in Langholm II, with an outstanding
commitment at the end of 2015 of E20 million (2014: E40 million).
DIRECTORS' RESPONSIBILITY STATEMENT
Each of the Directors confirms that, to the best of his or her knowledge:
· The Annual Report and Accounts, taken as a whole, is fair, balanced and
understandable, and provides the information necessary for shareholders to
assess the Group's position and performance, business model and strategy;
· The financial statements which have been prepared in accordance with
International Financial Reporting Standards as adopted by the EU and as issued
by the International Accounting Standards Board (in the case of the
consolidated financial statements) and Financial Reporting Standard 101
'Reduced Disclosure Framework' (FRS 101) (in the case of the PLC parent
company accounts) and UK accounting standards and Part 9 of Book 2 of the
Dutch Civil Code (in the case of the NV parent company accounts), give a true
and fair view of the assets, liabilities, financial position and profit or
loss of the Group 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 the Group 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
Michael TreschowAnn FudgePaul PolmanNils Andersen Laura ChaVittorio Colao Louise FrescoJ HartmannMary MaHixonia NyasuluJohn RishtonFeike Sijbesma ChairmanVice-Chairman and Senior Independent DirectorChief Executive OfficerNon-Executive DirectorNon-Executive DirectorNon-Executive DirectorNon-Executive DirectorNon-Executive DirectorNon-Executive DirectorNon-Executive DirectorNon-Executive DirectorNon-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. These forward-looking statements are based upon current
expectations and assumptions regarding anticipated developments and other
factors affecting the Unilever Group (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 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; 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; the production of safe and high quality products; secure and
reliable IT infrastructure; successful execution of acquisitions, divestitures
and business transformation projects; economic and political risks and natural
disasters; financial risks; failure to meet high and ethical standards; and
managing regulatory, tax and legal matters.
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.
23 February 2016
This information is provided by RNS
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