REG - Unilever PLC - Annual Financial Report <Origin Href="QuoteRef">ULVR.L</Origin> - Part 2

UnileverAnnouncement

28/02/2017 16:20

- Part 2: For the preceding part double click  ID:nRSb1078Ya 

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
 of the expected benefits. Furthermore, disruption may be caused in other parts of the business.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
 ECONOMIC AND POLITICAL INSTABILITY Unilever operates around the globe and is exposed to economic and political instability that may reduce consumer demand for our products, disrupt sales operations and/or impact the profitability of our operations. Adverse The breadth of Unilever's portfolio and our geographic reach help to mitigate our exposure to any particular localised risk. 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 believe that many years of exposure to emerging markets have given us experience of operating and developing our business successfully during periods of economic and political volatility.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
 economic conditions may affect one or more countries within a region, or may extend globally. Government actions such as foreign exchange or price controls can impact on the growth and profitability of our local operations. In 2016, more than half of                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
 Unilever's turnover came from emerging markets which can offer greater growth opportunities but also expose Unilever to related economic and political 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       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 115 to 120.  
 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. 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 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
 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 Unilever's corporate reputation and business results.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
 LEGAL AND REGULATORY Compliance with laws and regulations is an essential part ofUnilever's business operations. Unilever is subject to national and regional laws and regulations in such diverse areas as product safety, product claims, trademarks,         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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
 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. 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 further potential tax reform                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
 in the EU and the United States.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
 
 
RELATED PARTY TRANSACTIONS 
 
The following related party balances existed with associate or joint venture
businesses at 31 December: 
 
 Related party balances                               E million2016  E million2015  
 Trading and other balances due from joint ventures   115            116            
 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 E118 million and E69 million in 2016 (2015: E121
million and E69 million) respectively. Sales from Unilever Jerónimo Martins
and from Pepsi Lipton joint ventures to Unilever group companies were E66
million and E51 million in 2016 (2015: E46 million and E51 million)
respectively. Balances owed by/(to) Unilever Jerónimo Martins and Pepsi Lipton
joint ventures at 31 December 2016 were E119 million and E(4) million (2015:
E121 million and E(5) 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 E57 million in
Langholm Capital II, with an outstanding commitment at the end of 2016 of E18
million (2015: E20 million). 
 
DIRECTORS' RESPONSIBILITY STATEMENT 
 
Each of the Directors confirms that, to the best of his or her knowledge: 
 
·     The Unilever Annual Report and Accounts 2016, 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) 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                                                                                                                                                                                                                                                                                                                          
 Marijn DekkersAnn FudgePaul PolmanGraeme PitkethlyNils Andersen Laura ChaVittorio Colao Louise FrescoJudith HartmannMary MaStrive MasiyiwaYoungme MoonJohn RishtonFeike Sijbesma  ChairmanVice-Chairman and Senior Independent DirectorChief Executive OfficerChief Financial OfficerNon-Executive DirectorNon-Executive DirectorNon-Executive DirectorNon-Executive DirectorNon-Executive DirectorNon-Executive DirectorNon-Executive DirectorNon-Executive DirectorNon-Executive Director 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. 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; the effect of climate change on Unilever's business; 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. 
 
28 February 2017 
 
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