UPL financial results for 1H (Jan - Jun), 2010

Financial Results for the First Half (January - June), 2010

In its meeting held today, the 19th of August 2010 at 10:30 Hrs at Karachi, our Board of Directors has approved the Condensed Interim Financial Information of the Company for the half year ended June 30, 2010.

Rampant smuggling of tea under the guise of the Pakistan Afghanistan Transit Treaty impacted earnings for the first half 2010, down by 3.2%. In rest of the business, earnings rose by 12.1%. The Company delivered a broad based sales growth of 19.6%, largely through volume and strengthening of competitive position.

In addition to smuggling of tea, rising input costs and devaluation of the rupee impacted gross margin, down 400bps over the same period last year. However, impact on the bottom line was cushioned by significant reduction in overhead expenses, financial costs and scale from additional volume.

Home and Personal Care

The segment continues to strengthen leadership despite stiff competition. Strong campaigns for Fair & Lovely, Ponds and Lux delivered positive results. Sunsilk and Lifebuoy recorded double digit growth. Surf continued along its growth trajectory.

Beverages

More than half the tea consumed in Pakistan is smuggled. Afghanistan, a country of 25 million “imports” more tea than Pakistan, a country of 175 million. The government annually loses more than Rs. 8 Billion in taxes. We have been lobbying for tariff reduction to eliminate the incentive to evade. By bringing about 100,000 tons of smuggled tea into the official net, government revenues will increase. In addition to the problem of smuggling, rising global raw tea prices impacted profitability.

Ice Cream

Ice Cream sales volume grew by 29.9%. A successful cost effectiveness program enabled the business to pass on benefits to consumers through price reductions. Innovations such as Cornetto double chocolate and Badami performed extremely well. Ice Cream profitability improved over same period last year as a result of better cost absorption.

Spreads

The Spreads business delivered a sales growth of 20%. Maintaining consumer focus by driving affordability and capitalising on key price points also yielded positive results.

Future Outlook

The country is facing the worst flood in its 63 year history. Millions have been displaced and the road network is severely disrupted. Rehabilitation will take time. Towards relief and rehabilitation, our parent company, Unilever has pledged €1 million (Rs. 110 million). Additionally we are working through local authorities and distributors through cash and product donations. An employee contribution program has also been initiated; sum collected will be matched by the Company.

Rampant smuggling of tea and counterfeiting continues to affect sales and profitability. The company faces a challenge to improve consumer value in the face of rising input costs. Law and order conditions and power crisis could further impact distribution, in particular that of Ice Cream.

QUARTER ENDED

HALF YEAR ENDED

June 30, 2010

June 30, 2009

June 30, 2010

June 30, 2009

(Rupees in millions)

11,249

9,120

21,504

17,980

(7,604)

(5,640)

(14,692)

(11,544)

3,645

3,480

6,812

6,436

Less: Distribution costs

(2,330)

(2,101)

(4,275)

(3,816)

Less: Administrative expenses

(323)

(252)

(581)

(519)

Less: Other Operating expenses

(76)

(76)

(148)

(157)

Less: Restructuring cost

(50)

-

(50)

 

Add: Other operating income

60

72

110

112

Profit from operations

926

1,123

1,868

2,056

Finance costs

(25)

(133)

(71)

(241)

Profit before taxation

901

991

1,797

1,815

Less: Taxation

(296)

(323)

(610)

(588)

Profit after taxation

605

667

1,187

1,227

Earning per share - basic and diluted (Rupees)

45.54

50.20

89.30

92.27

Interim Divinded

In view of the financial results for the half year January to June 2010, the Directors have recommended an Interim Dividend of Rs.89/- or 178% per ordinary shares of Rs. 50/- (half year January to June 2009, Rs.92/- or 184% per ordinary share). This will be payable to Members on the number of ordinary shares held by them at the close of business on 27 September 2010.

Closure Of Share Transfer Books

The Share Transfer Books of the Company will be closed from 21 September to 27 September 2010 (both days inclusive), and will re-open on 28 September 2010. Transfers in good order, received at the Company’s Share Registration Office c/o Famco Associates (Private) Limited, State Life Building No. 1-A, I.I. Chundrigar Road, Karachi, by the close of business on 20 September 2010 will be treated in time for the purpose of payment of Interim Dividend to the transferees.

Pakistan

Unilever Pakistan Limited
Avari Plaza
Fatimah Jinnah Road
Karachi 75530

+92 21 566 0870
fareshteh.aslam@unilever.com

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