UNILEVER
PLC
|
|
|
|
/S/ R SOTAMAA
|
BY R SOTAMAA
|
CHIEF LEGAL OFFICER AND GROUP SECRETARY
|
EXHIBIT
NUMBER
|
EXHIBIT
DESCRIPTION
|
99
|
Notice
to London Stock Exchange dated 28
February 2018
|
|
(Annual Financial Report)
|
DESCRIPTION OF RISK
|
BRAND PREFERENCE
As a
branded goods business, Unilever’s success depends on the
value and relevance of our brands and products to consumers around
the world and on our ability to innovate and remain
competitive.
Consumer
tastes, preferences and behaviours are changing more rapidly than
ever before, and Unilever’s ability to identify and respond
to these changes is vital to our business success.
Technological
change is disrupting our traditional brand communication models.
Our ability to develop and deploy the right communication, both in
terms of messaging content and medium is critical to the continued
strength of our brands.
We are
dependent on creating innovative products that continue to meet the
needs of our consumers and getting these new products to market
with speed. If we are unable to innovate effectively,
Unilever’s sales or margins could be materially adversely
affected.
|
PORTFOLIO MANAGEMENT
Unilever’s
strategic investment choices will affect the long-term growth and
profits of our business.
Unilever’s
growth and profitability are determined by our portfolio of
categories, geographies and channels and how these evolve over
time. If Unilever does not make optimal strategic investment
decisions, then opportunities for growth and improved margin could
be missed.
|
SUSTAINABILITY
The success of our business depends on finding sustainable
solutions to support long-term growth.
Unilever’s Vision to grow our business, while decoupling our
environmental footprint from our growth and increasing our positive
social impact, will require more sustainable ways of doing
business. In a world where resources are scarce and demand for them
continues to increase, it is critical that we succeed in reducing
our resource consumption and converting to sustainably sourced
supplies. In doing this we are dependent on the efforts of partners
and various certification bodies. We are also committed to
improving health and wellbeing and enhancing livelihoods around the
world so Unilever and our communities grow successfully together.
There can be no assurance that sustainable business solutions will
be developed and failure to do so could limit Unilever’s
growth and profit potential and damage our corporate
reputation.
|
CLIMATE CHANGE
Climate
changes and governmental actions to reduce such changes may disrupt
our operations and/or reduce consumer demand for our
products.
Climate
changes are occurring around the globe which may impact our
business in various ways. They could lead to water shortages which
would reduce demand for those of our products that require a
significant amount of water during consumer use. They could also
lead to an increase in raw material and packaging prices or reduced
availability. Governments may take action to reduce climate change
such as the introduction of a carbon tax or zero net deforestation
requirements which could impact our business through higher costs
or reduced flexibility of operations.
Increased
frequency of extreme weather (storms and floods) could cause
increased incidence of disruption to our manufacturing and
distribution network. Climate change could result therefore
in
making
products less affordable or less available for our consumers
resulting in reduced growth and profitability.
|
CUSTOMER RELATIONSHIPS
Successful
customer relationships are vital to our business and continued
growth.
Maintaining
strong relationships with our existing customers and building
relationships with new customers who have built new technology
enabled business models to serve changing shopper habits are
necessary to ensure our brands are well presented to our consumers
and available for purchase at all times.
The
strength of our customer relationships also affects our ability to
obtain pricing and competitive trade terms. Failure to maintain
strong relationships with customers could negatively impact our
terms of business with affected customers and reduce the
availability of our products to consumers.
|
TALENT
A
skilled workforce and agile ways of working are essential for the
continued success of our business.
Our
ability to attract, develop and retain the right number of
appropriately qualified people is critical if we are to compete and
grow effectively.
This is
especially true in our key emerging markets where there can be a
high level of competition for a limited talent pool. The loss of
management or other key personnel or the inability to identify,
attract and retain qualified personnel could make it difficult to
manage the business and could adversely affect operations and
financial results.
|
SUPPLY CHAIN
Our
business depends on purchasing materials, efficient manufacturing
and the timely distribution of products to our
customers.
Our
supply chain network is exposed to potentially adverse events such
as physical disruptions, environmental and industrial accidents or
disruptions at a key supplier, which could impact our ability to
deliver orders to our customers.
The
cost of our products can be significantly affected by the cost of
the underlying commodities and materials from which they are made.
Fluctuations in these costs cannot always be passed on to the
consumer through pricing.
|
SAFE AND HIGH QUALITY PRODUCTS
The
quality and safety of our products are of paramount importance for
our brands and our reputation.
The
risk that raw materials are accidentally or maliciously
contaminated throughout the supply chain or that other product
defects occur due to human error, equipment failure or other
factors cannot be excluded.
|
SYSTEMS AND INFORMATION
Unilever’s
operations are increasingly dependent on IT systems and the
management of information.
Increasing
digital interactions with customers, suppliers and consumers place
ever greater emphasis on the need for secure and reliable IT
systems and infrastructure and careful management of the
information that is in our possession.
The
cyber-attack threat of unauthorised access and misuse of sensitive
information or disruption to operations continues to increase. Such
an attack could inhibit our business operations in a number of
ways, including disruption to sales, production and cash flows,
ultimately impacting our results.
|
BUSINESS TRANSFORMATION
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, disposals and organisational transformation, to drive
continuous improvement in our business and to strengthen our
portfolio and capabilities. A number of key projects were announced
in 2017 to accelerate sustainable shareholder value creation.
Failure to execute such initiatives successfully could result in
under-delivery of the expected benefits and there could be a
significant impact on the value 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 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.
Unilever has more than half its turnover in 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
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 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 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, 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 Switzerland.
|
Related party balances
|
€ million
2017
|
€ million
2016
|
Trading and other balances due from joint ventures
|
124
|
115
|
Trading and other balances due from/(to) associates
|
-
|
-
|
Name
|
Function
|
Marijn
Dekkers
Ann
Fudge
Paul
Polman
Graeme
Pitkethly
Nils
Andersen
Laura
Cha
Vittorio
Colao
Judith
Hartmann
Mary
Ma
Strive
Masiyiwa
Youngme
Moon
John
Rishton
Feike
Sijbesma
|
Chairman
Vice-Chairman
and Senior Independent Director
Chief
Executive Officer
Chief
Financial Officer
Non-Executive
Director
Non-Executive
Director
Non-Executive
Director
Non-Executive
Director
Non-Executive
Director
Non-Executive
Director
Non-Executive
Director
Non-Executive
Director
Non-Executive
Director
|