SOURCE: Unilever

February 08, 2007 02:04 ET

Unilever announces Fourth Quarter and Annual Results 2006

London/ Rotterdam -- (MARKET WIRE) -- February 8, 2007 --

                        FOURTH QUARTER AND ANNUAL RESULTS 2006 

KEY FINANCIALS
(unaudited)

     Fourth Quarter 2006       EUR million         
Current   Current   Constant                                         
rates     rates     rates                                            
                               Continuing operations:
9 727      0%        3%        Turnover                              
1 062      5%       10%        Operating profit                      
1 042     20%       25%        Pre-tax profit                        
  898     30%       35%        Net profit from continuing operations 
2 100    185%      195%        Net profit from total operations      

 0.29     31%       35%        EPS from continuing operations (Euros)
 0.71    196%      206%        EPS from total operations (Euros)     


EUR million                          Full Year 2006
                               Current Current  Constant
                                 rates   rates     rates
Continuing operations:
Turnover                        39 642      3%        3%
Operating profit                 5 408      7%        6%
Pre-tax profit                   4 831      7%        7%
Net profit from continuing 
operations                       3 685     10%       10%
Net profit from total 
operations                       5 015     26%       26%

EPS from continuing 
operations (Euros)                1.19     11%       10%
EPS from total 
operations (Euros)                1.65     27%       27%



HIGHLIGHTS

Focus on business priorities results in growth across all regions

 Change programme delivering improved operational effectiveness

Full Year Financials

*  Underlying sales growth of 3.8%.

*  Operating margin of 13.6%, up from 13.2% in 2005.

*  Savings delivered ahead of plan, but commodity 
   costs higher than expected.  Further increase in 
   advertising and promotions.

*  Net profit from continuing operations up 10%.  Net 
   profit from total operations up by 26% including a 
   profit of EUR1.2 billion from the sale of
   European frozen foods businesses in the fourth quarter.

*  Strong ungeared free cash flow of EUR4.2 billion.

*  Proposed final dividend of EUR0.47 per NV ordinary 
   share and 32.04p per PLC ordinary share, raising the 
   total regular dividend per share by 6% for both NV and PLC.  
   Additional 'one-off' dividend of EUR750 million paid in the 
   fourth quarter as previously announced.

Fourth Quarter Financials

*  Underlying sales growth of 3.4% against a strong
   comparator.

*  Operating margin of 10.9%, after charging EUR469 million 
   of restructuring costs, partly offset by one-time gains 
   of EUR266 million from changes in pension plans and 
   healthcare plans.  High investment in market research and 
   development in support of another strong innovation 
   programme for 2007.

Operational Highlights of the Year

*  Focus on personal care, developing and emerging markets, 
   and Vitality delivering strong growth and share gains 
   in priority areas.

*  Growth in Europe of 1%.

*  Market competitiveness restored - market shares stable 
   in aggregate.

*  Change programme delivering tangible results - better 
   execution in customer management and marketing; good 
   progress in the move to 'One Unilever' around the world; 
   faster roll-out of high impact innovations; research and
   development capabilities being enhanced.

GROUP CHIEF EXECUTIVE COMMENT

The improved performance in 2006 shows that the wide-ranging changes made to the business over the last two years are working. I am particularly pleased that this improvement is broad-based, with every region and category contributing. The new organisation and the implementation of 'One Unilever' are improving Unilever's operational effectiveness; bringing faster decision making, better local execution and enabling us to allocate resources more effectively across our portfolio.

The work we have done in setting clear priorities and implementing change has made Unilever a stronger business, able to build on its local strengths and better exploit the power of being global. However, there is much more to be done and there are many exciting opportunities ahead of us.

In 2007 we will continue to focus on our growth priorities in order to build sustainable advantage for our portfolio and a structural improvement in our growth rate in the long term; and we intend to go further, faster and deeper in our drive to improve margins.

I am confident that we are well on track to achieve our long-term targets.

2007 Outlook

We expect the business and competitive environment in 2007 to be broadly unchanged, with consumer demand remaining modest in Europe but robust elsewhere. Prospects for home and personal care input costs are more favourable than in 2006 but there has been no let-up in the rise of foods commodity prices.

Against this background, and with a strong innovation programme, we expect to deliver underlying sales growth in 2007 within our 3-5% longer term target range. Savings programmes are expected to drive an improvement in operating margin to over 13.6%, after charging restructuring costs of 0.5 to 1 percent of sales.

Strategy and long term financial targets

At the heart of Unilever's strategy is a concentration of resources on areas where we have leading positions and on high growth spaces, especially in personal care, in developing and emerging markets and in Vitality. While the focus is on developing the business organically, acquisitions and disposals also have a role to play in accelerating the portfolio development.

To execute this strategy the business has been reorganised to simplify the management structure and to improve capabilities in marketing, customer management and research and development. The result is better allocation of resources, better execution, faster decision-making and greater focus on efficiency. The new organisation, augmented by the successful 'One Unilever' project, allows us to leverage our scale both globally and locally.

Unilever's long term ambition is to achieve top-third total shareholder return and our targets reflect this. Over the period 2005 - 2010 we target ungeared free cash flow of EUR25-30 billion. Disposals made in the past two years, with no significant acquisitions to date, have reduced the cash generation over the period by just over EUR1 billion. Return on invested capital is targeted to increase over the 2004 base of 11%. We expect underlying sales growth of 3-5% and an operating margin in excess of 15% by 2010 after a normal level of restructuring of 0.5 to 1 percent of sales. We are lowering our longer term guidance for the tax rate from around 28% to around 26%.

Patrick Cescau, Group Chief Executive                8 February 2007

ENQUIRIES

Media: Contacts                                 
UK +44 20 7822 6805 tim.johns@unilever.com      
NL +31 10 217 4844                              
tanno.massar@unilever.com

Investors:  Investor Relations team
UK +44 20 7822 6830  investor.relations@unilever.com
US +1 201 894 2615 investor.relations-NewYork@unilever.com

There will be a web cast of the results presentation available at: www.unilever.com/ourcompany/investorcentre/results/quarterlyresults/default.asp


                      UNILEVER FOURTH QUARTER AND ANNUAL 
                               RESULTS 2006:
                           PRELIMINARY STATEMENT
In the following commentary we report underlying sales growth (USG) at constant exchange rates, excluding the effects of acquisitions and disposals. Turnover includes the impact of exchange rates and acquisitions and disposals. Unilever uses 'constant rate' and 'underlying' measures primarily for internal performance analysis and targeting purposes. We also use the movements in Ungeared Free Cash Flow and Return On Invested Capital to measure progress against our longer-term value creation goals. Unilever believes that such measures provide additional information for shareholders on underlying business performance trends. Such measures are not defined under IFRS or US GAAP and are not intended to be a substitute for GAAP measures of turnover, profit and cash flow. Further information about these measures is available on our website at www.unilever.com/ourcompany/investorcentre.

1. SUMMARY OF BUSINESS PERFORMANCE FOR THE YEAR

Underlying sales grew by 3.8% in the year and by 3.4% in the fourth quarter against a strong comparator. Each quarter of the year has seen growth in the 3-5% range, in line with our markets and with market shares broadly maintained in each region. Most of the growth continues to come from volume increases, but the year saw a return to positive pricing (+0.9%).

Our business in Europe returned to growth of 1% in 2006. We are now more competitive and have also benefited from a modest pick-up in consumer demand. There were encouraging improvements in the UK and Germany. The Netherlands grew well, but France remains a difficult market for us.

The Americas grew by 3.7%. Sales in the US were ahead by 2.4% with good progress in hair care and deodorants, but lower sales in laundry and ice cream. Our businesses in South America grew strongly, but Mexico was disappointing.

Asia Africa continues to be a major driver of Unilever's growth across both foods and home and personal care with sales up 7.7% in the year. Almost all countries contributed, with very strong performances from China, India and Indonesia.

Savings programmes delivered slightly ahead of plan, but significantly higher costs held back profitability. Commodity costs rose more sharply than expected and were up by over EUR600 million in the year. Productivity savings and a return to positive pricing ensured gross margins were maintained at last year's levels, although this was below our expectations.

Overhead costs were broadly in line with our plans for the year. The move to a single operating company in each market, under the 'One Unilever' programme, is bringing simpler, lower-cost, structures. However, savings from the programme in the year were offset by cost inflation, especially in Asia Africa and planned investments in infrastructure. Substantial further savings opportunities have been identified and as we go forward we expect to see overheads fall as a percentage of turnover.

Investment in advertising and promotions was increased by nearly EUR300 million, mainly in advertising, and was carefully focused behind our priorities for growth.

There were significant one-time gains reflecting changes in pension plans and healthcare plans in the fourth quarter. These were offset by additional restructuring, largely in order to move quickly to eliminate overheads in Europe following the frozen foods disposal.

The sale of European frozen foods businesses was completed in the quarter with a net profit of EUR1.2 billion.

2. FINANCIAL COMMENTARY

2.1 Turnover

Turnover increased by 3.2% in the year. This included 3.8% of underlying sales growth and 0.3% from favourable currency movements, with disposals accounting for the difference.

In the fourth quarter, turnover was lower by 0.3%. Underlying sales grew by 3.4%, while currency effects, particularly the weakening of the US dollar, reduced turnover by 3.0%, again with disposals accounting for the difference.

2.2 Operating profit

Full Year

Operating profit increased by 7% in the year.

The operating margin for the year was 13.6%, up by 0.4 percentage points on 2005. This was after charging restructuring, disposals and impairment costs equivalent to 1.3 percentage points of sales (compared with 1.5 percentage points last year). It also included EUR266 million of one-off gains from changes to US healthcare and UK pensions plans in the fourth quarter, equivalent to 0.7 percentage points of sales. Before these items, and the profit on the US office sale in the second quarter of 2005, the operating margin would have been 0.3 percentage points lower than last year.

Gross margins have been held steady through the year, with supply chain savings programmes, pricing action and a positive mix fully offsetting around EUR600 million of higher input costs.

Investment in advertising and promotions increased by nearly EUR300 million, from 12.8% to 13.1% of sales.

Fourth Quarter

Operating profit increased by 5% in the fourth quarter.

The operating margin was 10.9%, with a high charge for restructuring, disposals and impairments, equivalent to 4.4 percent of sales, offset by the gains on healthcare and pension plans equivalent to 2.7 percent of sales. Before these items the operating margin would have been 0.1 percentage point higher than last year.

Advertising and promotion was 0.5 percentage points lower in the fourth quarter than last year, reflecting the planned different phasing this year. Market research and development costs were again high in the fourth quarter, in support of another strong innovation programme for 2007.

2.3 Finance costs and tax

Costs of financing net borrowings were 17% lower for the year than in 2005, benefiting from a lower overall level of net debt.

Pensions financing, which was a net expense of EUR53 million in 2005, showed a net income of EUR41 million in 2006, reflecting an improved asset base.

As already announced, in the third quarter we took a provision of EUR300 million relating to preference shares, and this is included in financing costs.

The tax rate for the year was 24%, compared with 26% last year, and including the benefits of a better country mix. The fourth quarter rate was unusually low at 14% and included a substantial benefit from higher tax deductibility on the provision taken in the third quarter in relation to preference shares. We expect a rate of around 24% again in 2007 and are lowering our longer term guidance from around 28% to around 26%.

2.4 Joint Ventures and Associates

Share of net profit from joint ventures was ahead of last year due to continued growth in the partnerships between Lipton and Pepsi for ready-to-drink tea.

Share of net profit from associates included a profit from a placement of equity by one of our venture capital fund investments in the fourth quarter.

2.5 Net profit and Earnings per share

For the full year, net profit from continuing operations grew by 10% and EPS on the same basis was up by 11%.

In the fourth quarter, net profit and EPS from continuing operations increased by 30% and 31% respectively helped by the low tax rate in the quarter.

Net profit including discontinued operations increased by 26% in the year, with a net profit of EUR1 170 million on the sale of frozen foods businesses in the fourth quarter. EPS on this basis increased by 27% for the year.

2.6 Dividends and share buy-backs

The 2006 interim dividend was paid on 4 December 2006 at EUR0.23 per share for NV and 15.62p for PLC. In addition a one-off dividend of EUR750 million was paid at the same time. The Boards will recommend to the Annual General Meetings final dividends of EUR0.47 per ordinary share of Unilever N.V. and 32.04p per ordinary share of Unilever PLC. This will bring the total regular dividend, excluding the additional one-off payment, to EUR0.70 per share for NV and 47.66p for PLC, an increase of 6% in each case.

We are planning to buy back EUR1.5 billion of shares in 2007.

2.7 Cash flow

Cash from operating activities was EUR0.3 billion lower than in 2005 due to significantly higher contributions to pension schemes. There was a further improvement in the level of working capital, with a reduction of EUR0.1 billion, in addition to a EUR0.2 billion reduction last year.

Income tax paid was substantially lower through a combination of tax relief on the higher pension contributions, structural improvements in the tax rate and timing differences. As a result, net cash flow from operating activities was EUR0.2 billion higher than last year.

Net capital expenditure was EUR0.1 billion higher than a year ago as investment was stepped up behind growth priorities.

Ungeared Free Cash Flow increased by EUR0.2 billion to EUR4.2 billion.

Net debt reduced from EUR10.5 billion at the start of the year, to EUR7.5 billion at the end of the year. This was driven by the combination of cash generated by the business, proceeds of disposals (particularly of frozen foods businesses in the fourth quarter), and the effect of the weaker US dollar.

2.8 Return on Invested Capital

Return on invested capital increased from 12.5% in 2005 to 14.6% in 2006. Both years included significant profits on disposals of discontinued operations. Excluding these, the return on invested capital increased from 11.3% to 11.5%.

2.9 Balance sheet

The two most significant changes to the shape of the balance sheet are the reduction in net funding deficit on pensions and post retirement healthcare schemes, and the reduction in net debt.

Improvements in asset yields and increased contributions have caused pension assets for funded schemes in surplus to rise by EUR0.7 billion. Net pensions and post retirement liabilities have declined by EUR1.8 billion mainly due to the combination of increases in discount rates and changes to scheme benefits, offset by higher life expectancies. There have been consequent movements in deferred tax balances.

Cash generated by the business and from the sale of the frozen foods business has funded an additional one-off dividend of EUR0.75 billion in December and a reduction in net borrowings.

For most other items, changes in translation rates had a greater impact than underlying movements. Most notably, goodwill and intangible assets were reduced by EUR0.8 billion largely due to exchange rates.

2.10 Pensions and healthcare plans

The overall funding shortfall before tax has significantly reduced from EUR5.6 billion at the end of 2005 to EUR3.1 billion at the end of 2006. Within this, there is now an aggregate surplus of EUR0.3 billion on our funded plans, reflecting a combination of strong equity returns, increased contributions and higher real interest rates, partly offset by increased life expectancy assumptions. The value of our unfunded obligations has reduced from EUR4.2 billion to EUR3.4 billion due to the rise in interest rates, favourable exchange rate movements and changes to various retiree medical benefits.

We made a number of changes in 2006. In particular, in the US retiree healthcare plan we introduced an annual cap on the benefits which each participant can claim. In the UK we updated assumptions on pension commutations and now reduce some deferred pensions if they are taken early, to align with market practice.

3. OPERATIONAL REVIEW

3.1 Full Year Performance - Europe

                 Fourth Quarter 2006                                 
      2006       2005          %            %                        
                          change   Underlying                        
                                 sales growth                        
     3 615      3 618      (0.1)          0.1 Turnover (EUR million) 

       5.3        4.4                         Operating Margin (%)   
                                              Includes:
      (7.3)      (3.7)                        - RDIs*                
       3.3                                    - Gain on UK Pensions  

*  Restructuring, business disposals and impairments.

                                      Full Year 2006
                            2006    2005     %            %
                                         change   Underlying
                                                sales growth
Turnover (EUR million)    15 000  14 940    0.4          1.0

Operating Margin (%)        12.7    13.8
Includes:
- RDIs*                     (2.2)   (0.9)
- Gain on UK Pensions        0.8

*  Restructuring, business disposals and impairments.

Growth

Much work has been done to make our business in Europe more competitive. There has been a single-minded drive to improve the value we offer to consumers and stronger innovation, more targeted at the core of our portfolio. At the same time, the implementation of 'One Unilever', the building of capabilities and changes in leadership are resulting in better execution.

These changes, together with improved consumer demand, returned the region to modest growth. Underlying sales grew by 1% in the year, entirely from volume, and by 0.1% in the fourth quarter, against a relatively strong comparator. Market shares were broadly stable, with gains in ice cream, soups, deodorants and body-care but losses in laundry, hair care and tea.

The UK, our largest European business, returned to growth in the year, with good results across most foods and personal care categories. Laundry sales declined but there were promising signs of progress in recent market shares with Persil regaining its position as the country's leading laundry brand.

The Netherlands had a strong year as it benefited from going to market as a single company being a pioneer of the 'One Unilever' programme. Highlights were rapid growth for Lipton, Dove, Rexona and Axe. France remained a difficult market for us and sales were lower in spreads, laundry and hair care. New management is in place and there was an improvement in the second half year. Sales in Germany held up better in 2006, and there was good growth in personal care, but some turnover in Lipton ice tea was lost following changes in rules for bottle returns.

Central and Eastern Europe continued to do well, driven by double-digit growth in Russia.

Innovation

Our 2006 innovation programme in foods has seen our brands embrace Vitality across all categories, with new products designed to deliver the health benefits that our consumers are seeking. Rama/BlueBand Idea!, a spread with added nutrients that are beneficial to children's mental development, was launched in nine countries. The AdeS brand of healthy soya-based drinks has been brought from Latin America to the UK as AdeZ. A range of Knorr bouillon cubes with selected natural ingredients and a better, richer taste has been rolled out across the region and Vie 'one shot' fruit and vegetable drinks are now available in ten countries. Meanwhile, the global 'Choices' programme is being rolled out. The front-of-pack logo helps people identify products which meet international benchmarks for trans fat, saturated fat, salt and sugar content.

Product launches in home and personal care with clear functional or emotional benefits are being rolled out rapidly across the region. A range of new Dove launches in several categories in 2006 included 'Summer Glow', a light moisturising body lotion with a unique combination of special Dove moisturisers and a hint of self tan. In household care, Domestos 5X with C-TAC kills germs on first contact and continues to do so even after flushes, while the power of Cif has been applied to a series of power sprays.

Profitability

The operating margin, at 12.7%, was 1.1 percentage point lower than a year ago, with higher net costs for restructuring, disposals and impairments, and a one-time gain of EUR120 million in the fourth quarter of 2006 from changes to the UK pensions plan. Before these items, the operating margin would have been 0.6 percentage points lower than in 2005. Margins in foods were lower than in 2005 as we absorbed significant increases in commodity costs which were only partly compensated by savings programmes.

3.2 Full Year Performance - The Americas

             Fourth Quarter 2006                                    
      2006       2005          %            %                       
                          change   Underlying                       
                                 sales growth                       
     3 448      3 521      (2.1)          4.3 Turnover (EUR million)

      16.7       16.7                         Operating Margin (%)  
                                              Includes:
      (3.4)      (1.6)                        - RDIs*               
       4.2                                    - US Healthcare gain  

*  Restructuring, business disposals and impairments.

                           Full Year 2006
                            2006    2005       %            %
                                          change   Underlying
                                                 sales growth
Turnover (EUR million)    13 779  13 179     4.6          3.7

Operating Margin (%)        15.8    13.0
Includes:
- RDIs*                     (1.0)   (3.4)
- US Healthcare gain         1.0

*  Restructuring, business disposals and impairments.

Growth

Underlying sales growth accelerated progressively through the quarters, with 3.7% for the year, and a healthy balance of volume and price.

Overall, we have maintained share in the US in markets which are growing at around 3%. Underlying sales growth in the US was 2.4%, additionally reflecting trade de-stocking in personal care in the first half of the year and in ice cream in the second half. Degree, Dove and Axe, our three main deodorants brands, all gained share, while the launch of Sunsilk drove growth in hair care. In laundry we initiated the move to concentrated liquids, but have lost further share in conventional detergents.

Bertolli frozen meals and Slim Fast gained share in the US as did Lipton ready-to-drink tea, in our joint venture with Pepsi. Our share for the year as a whole was also up in ice cream, but sales were down. The category has been heavily promoted in recent years but in 2006 the level of promotional intensity reduced. As a result, the trade bought less as they used up stocks.

Brazil picked up well after a slow start with very good innovation-driven performances in hair, deodorants and laundry, with Omo shares at their highest level for many years. Sales in Mexico were lower for the year, affected by a combination of a decline in the traditional retail trade and local low priced competition. In addition there were several operational issues which have been addressed and the business returned to growth in the fourth quarter. Elsewhere there was good growth in Argentina, Central America and Venezuela. Taken together, sales in Latin America were ahead by 5.8% with home and personal care continuing to do well but more modest growth in foods in the face of tough local competition.

Innovation

Products introduced in the year in the US included Wishbone salad 'spritzers', with one calorie per spray, further development of the Bertolli premium frozen meal range, and Lipton pyramid tea bags. Across the region, new Knorr soups and bouillons cater for local flavour and tastes and the highly successful AdeS nutritional drink has been extended with a 'light' variant, new fruit flavours and the launch of Soymilk in Brazil and Mexico.

We have strengthened our hair portfolio in the US with the launch of Sunsilk. This followed improvements to both the Suave and Dove hair care lines and the sale of the Aquanet and Finesse brands. After a good response to all Small & Mighty concentrated liquid detergents, we have applied the same technology to fabric conditioners to create Snuggle Exhilarations, a three-times more concentrated premium sub-range delivering superior fragrance. In Brazil, the Omo laundry brand has been further strengthened with a new top performance product and 'baby' and 'foam control' variants.

Profitability

The operating margin, at 15.8%, was 2.8 percentage points higher than a year ago, with lower costs for restructuring, disposals and impairments, and a one-time benefit in the fourth quarter of 2006 of EUR146 million from changes to US healthcare plans. In 2005 there was a gain on the sale of an office in the second quarter. Before these items the operating margin would have been 0.3 percentage points lower than last year. Innovation-driven mix, pricing and productivity offset higher commodity costs. Advertising and promotions was increased behind key launches.

3.3 Full Year Performance - Asia Africa

             Fourth Quarter 2006                                   
      2006       2005          %            %                      
                          change   Underlying                      
                                 sales growth                      
     2 664      2 618        1.8          7.0 Turnover (EUR million)

      11.1       10.2                         Operating Margin (%)  
                                              Includes:
      (1.6)      (0.3)                        - RDIs*               

*  Restructuring, business disposals and impairments.

                          Full Year 2006
                            2006   2005      %            %
                                        change   Underlying
                                               sales growth
Turnover (EUR million)    10 863 10 282   5.7           7.7

Operating Margin (%)        12.2   12.6 
Includes:
- RDIs*                     (0.3)     -
*  Restructuring, business disposals and impairments.
Growth

Markets remained buoyant in most of the key countries, though there was a slow-down in consumer spending in Thailand during the year.

Underlying sales growth of 7.7% was broadly based and our aggregate market shares remained stable.

India grew well across all major categories. A mix of global, regional and local brands are driving growth, notably Wheel and Surf Excel in laundry and Clinic in hair care. A second year of excellent growth in China stemmed from a combination of market growth, better distribution and innovations behind global brands such as Omo, Lux, Ponds, and the local toothpaste brand, Zhonghua.

Indonesia sustained good momentum, not only in the large home and personal care categories, but also in foods, through strong performances in ice cream and savoury. Thailand had a disappointing year through weak demand and intense competition, and a major programme of activities is under way to correct this.

There was a much improved performance in Australia with share gains in a number of categories. In Japan, the hair care market has seen another major brand launched by competition. Against this, Lux Super Rich, the leading brand, performed well, but Dove and mod's, our other two brands, lost share.

Savoury, ice cream, laundry and household care were the main drivers of strong growth in Turkey, while sales in Arabia were well ahead in every category.

In South Africa, aggressive price promotions by a local competitor have reduced our sales in laundry, but there was strong growth and share gains in foods categories.

Innovation

Innovation is increasingly being driven globally and regionally, rather than locally. The new Sunsilk range has been introduced in most major markets and in laundry the 'Dirt is Good' positioning is now in place across the region. Pond's age miracle cream, incorporating unique technology and designed specifically for the needs of Asian skin has been launched in the Philippines, Indonesia, Thailand and China. Meanwhile the latest global Axe/Lynx fragrance, 'Click' has been introduced in Australia and New Zealand.

As in the rest of the world, the foods innovation programme picked up the Vitality theme. Moo, a delicious vanilla and chocolate ice cream, with its high calcium content and fun packaging and shape, is both a wholesome and appealing option for kids. Healthy green tea innovations are being rolled out extensively, while in South Africa, Rama magarine now communicates the healthy oils in the product. At the same time, addressing the needs of lower income consumers, low-unit priced Knorr bouillon cubes, already successful in Latin America, were introduced to the region.

Profitability

The operating margin at 12.2% was 0.4 percentage points lower than a year ago. Before the impact of restructuring, disposals and impairments, the operating margin would have been in line with last year. The benefits to margin of strong volume growth and savings programmes were fully offset by higher commodity costs and other cost inflation which could not be fully recovered in pricing.

SAFE HARBOUR STATEMENT: 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 'expects', 'anticipates', 'intends' or the negative of these terms and other similar expressions of future performance or results, including financial objectives to 2010, 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 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, including, among others, competitive pricing and activities, consumption levels, costs, the ability to maintain and manage key customer relationships and supply chain sources, currency values, interest rates, the ability to integrate acquisitions and complete planned divestitures, physical risks, environmental risks, the ability to manage regulatory, tax and legal matters and resolve pending matters within current estimates, legislative, fiscal and regulatory developments, political, economic and social conditions in the geographic markets where the Group operates and new or changed priorities of the Boards. Further details of potential risks and uncertainties affecting the Group are described in the Group's filings with the London Stock Exchange, Euronext Amsterdam and the US Securities and Exchange Commission, including the Annual Report and Accounts on Form 20-F. These forward-looking statements speak only as of the date of this document. 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.

To view the full text of this press release, paste the following link into your web browser:

http://www.rns-pdf.londonstockexchange.com/rns/9137q_-2007-2-8.pdf


                      This information is provided by RNS
            The company news service from the London Stock Exchange