Unilever PLC — FY2022 Form 20-F summary
Reporting period: Fiscal year ended December 31, 2022. Although the request metadata refers to 2022 Q4, this filing is an annual report and the supplied text does not provide standalone fourth-quarter financial results. The consolidated statements are prepared under IFRS.
Financial performance
| Metric | FY2022 | FY2021 |
|---|---|---|
| Turnover | €60.1bn | €52.4bn |
| Underlying sales growth | 9.0% | 4.5% |
| Underlying price growth / volume growth | 11.3% / (2.1)% | 2.9% / 1.6% |
| Operating profit | €10.8bn | €8.7bn |
| Underlying operating profit | €9.7bn | €9.6bn |
| Operating margin / underlying operating margin | 17.9% / 16.1% | 16.6% / 18.4% |
| Net profit | €8.3bn | €6.6bn |
| Diluted EPS / underlying EPS | €2.99 / €2.57 | €2.32 / €2.62 |
| Cash flow from operating activities / free cash flow | €10.1bn / €5.2bn | €10.3bn / €6.4bn |
| Closing net debt | €23.7bn | €25.5bn |
Turnover rose 14.5%, including a 6.2% favorable currency impact; underlying sales growth was broad-based across the five Business Groups. Higher pricing substantially offset input-cost inflation, but volumes declined. Management reported material-cost inflation of €4.3bn. Underlying operating profit increased slightly, while underlying operating margin fell 230 basis points, mainly because of higher raw-material, packaging, processing and distribution costs.
Reported operating profit included a €2.3bn gain on the sale of the global Tea business and €1.2bn of other non-underlying items, including €0.8bn of restructuring costs. The sale generated €4.6bn cash proceeds. The reported net profit and EPS therefore include significant disposal-related effects; underlying EPS declined 2.1%, reflecting higher finance costs and tax, partly offset by the lower share count after buybacks.
At year-end, cash and cash equivalents were €4.3bn and total liabilities were €56.1bn. Unilever reported undrawn committed facilities of $5.2bn and €2.55bn and said its financing arrangements were adequate for short- and long-term requirements. Dividends paid were €4.3bn; €1.5bn of a planned €3bn share buyback was completed in 2022.
Material changes versus FY2021
- Underlying sales growth accelerated to 9.0% from 4.5%, driven by price increases; underlying volumes shifted from 1.6% growth to a 2.1% decline.
- Reported operating margin improved to 17.9% from 16.6%, largely reflecting the Tea disposal gain, while underlying operating margin declined to 16.1% from 18.4%.
- Free cash flow fell to €5.2bn from €6.4bn; operating cash flow was broadly stable, with working-capital movements, higher tax and capital expenditure weighing on cash generation.
- Net debt decreased to €23.7bn from €25.5bn, supported by free cash flow and disposal proceeds, partly offset by dividends, buybacks and currency movements.
- The Compass Organisation took effect July 1, replacing the prior matrix structure with five Business Groups: Beauty & Wellbeing, Personal Care, Home Care, Nutrition and Ice Cream.
- Unilever sold ekaterra, its global Tea business, and acquired a further 67% of Nutrafol, bringing its total ownership to 80%.
Outlook, commentary and risks
Management described 2023 as likely to remain challenging: inflation was expected to ease later in the year but remain historically high, with potential pressure on consumer confidence and spending and a possible global recession. Priorities were to drive organic top-line growth, continue competitive investment in brands, R&D and capital expenditure, and balance pricing and savings against volume and competitiveness. The filing text does not provide a clear quantitative 2023 sales or margin outlook.
Principal risks include changing consumer preferences and competition; input-cost and commodity volatility; supply-chain disruption; economic and political instability, including effects of the Russia-Ukraine war; climate change and water scarcity; plastic packaging; business transformation; product safety; cybersecurity and data privacy; and legal, tax and regulatory matters. Unilever identified increased risk in business transformation, climate change and economic and political instability.
Notable items and contingencies include a €192m impairment of Dollar Shave Club, €89m relating to a Laundress product recall and market withdrawal, and €42m of asset write-downs related to Russia and Ukraine. The Russian business represented 1.4% of Group turnover and 2% of net profit and had approximately €900m of assets at year-end; management noted risks to continued operations and asset values.
Total disclosed contingent liabilities were €5.0bn, including €4.36bn of Brazilian tax matters. The largest item is a €3.29bn assessment relating to a 2001 corporate reorganisation. Unilever considers the likelihood that Brazilian authorities will ultimately prevail to be low, but acknowledges there is no guarantee of success. KPMG identified this matter as a critical audit matter. The financial-statement audit opinion was unqualified; the internal-control audit excluded Nutrafol, representing 1.6% of assets and 0.3% of turnover.
Climate targets and related disclosures are subject to estimation and evolving Scope 3 data. The company reported a 2% rise in emissions within the scope of its net-zero target, despite reductions in operational emissions, and cautioned that its emissions data may change as measurement improves.
Important facts for investors to verify
- Reconcile reported profit and EPS to underlying results, particularly the €2.3bn Tea disposal gain and other non-underlying items.
- Assess the sustainability of pricing-led growth, the volume decline, and the extent to which inflation and pricing continue to affect margins in 2023.
- Review free-cash-flow conversion, working-capital and inventory trends, capital expenditure, and the use of disposal proceeds for debt reduction, dividends and buybacks.
- Track the outcome and potential cash or collateral requirements of the Brazilian tax disputes, especially the €3.29bn corporate-reorganisation assessment.
- Monitor execution and costs of the Compass reorganisation, portfolio changes, and integration and performance of Nutrafol and other growth businesses.
- Evaluate exposure to Russia-related impairment, commodity and supply-chain risks, and progress against climate, plastic and nutrition commitments, noting the stated data limitations.