Interview
Patrick Cescau
2007 was a good year for Unilever, with good top line growth of 5.5%, with a strong fourth quarter. We were able to increase our underlying profitability, operating margin was up 20 basis points. That’s a good result because it’s a result which reflects the progress that we have achieved over the past two years in transforming Unilever.
Steve Sedgwick
Are we now seeing a break-out in terms of sales revenues? For a long time, you’ve been stuck between 3% and 5%. Now, you’re showing figures which are remarkably higher than that.
Patrick Cescau
We feel confident that, in 2008, we’ll be able to maintain growth at the upper end of our 3 to 5% range, despite a more challenging economic environment. This confidence is borne from the changes we’ve made to Unilever. We are now a fitter, leaner, more aggressive company, and that will continue in 2008.
Steve Sedgwick
At the same time, Unilever’s had a difficult equation with the margins versus sales growth. Are you getting that balance right now? Are you seeing margin growth as well?
Patrick Cescau
The main reason for my satisfaction in 2007 is that we’ve not only been able to grow competitively but also increase the margin. Quarter four is interesting, because we grew 6%, we improved margin by 20 basis points and, in addition, we increased our advertising spending by 60 basis points.
Steve Sedgwick
On the other side of the margin equation, there are huge cost increases in the price of many commodities. Is this hurting your business and your business model?
Patrick Cescau
We expect the pressure to continue in 2008, well into the year. We have been, against this background, taking pricing action, but also, we’ve been increasing the rate of savings. In fact, we have been able, through the productivity and the restructuring efforts, to offset most of these commodity costs.
Steve Sedgwick
Has the slow-down we’re seeing in the global economy, and especially in the US, affected your business?
Patrick Cescau
We see, certainly, a more challenging environment in 2008. I will not be drawn into recession, hard landing, soft landing. We see a kind of slow-down in the US, however, we have not been affected for probably two reasons. The first one, our footprint in developing and emerging markets, which are showing very good, strong economic fundamentals. The second is that the sort of daily usage products that we’re selling are still needed. Even at times where discretionary money is tight, people will want to eat and wash. The strength of our portfolio means that we are able, at different price points and with different brands, to satisfy the needs even in dire economy times.
Steve Sedgwick
You’ve had years of restructuring at Unilever. Do you feel you’ve got the right product mix now, or do you need more disposals and acquisitions to get that mix right?
Patrick Cescau
We announced in August that we’ll dispose of some €2 billion of businesses, the biggest one being the American laundry, and the process is underway. We’ll continue to look for both disposals and acquisitions which strengthen our portfolio.
Steve Sedgwick
That was Patrick Cescau. He was on good form today, actually, and rightly so. The shares are taking a beating, but it’s a company which is now combining extraordinary sales growth, way above the previous estimates. It’s getting margin growth which, at the moment, with higher commodity prices, is no mean feat. Of course, they are cutting a significant amount of jobs: 20,000 cited in August of last year, but as I say, the market’s a very hard task master today on the back foot.
