Unilever PLC — FY2021 Form 20-F
Reporting period: Year ended December 31, 2021. This is an annual report, not a standalone Q4 filing; it does not provide a clear set of Q4-only financial results. The Group reports under IFRS as issued by the IASB.
Business context and results
Unilever sells consumer goods in about 190 countries across Beauty & Personal Care, Foods & Refreshment, and Home Care. Management described 2021 as a difficult trading year marked by continued COVID-19 disruption, supply constraints and sharply higher input costs.
| Metric | FY2021 | FY2020 | Change or context |
|---|---|---|---|
| Turnover | €52.4bn | €50.7bn | +3.4%; underlying sales growth (USG) was 4.5%, versus 1.9% |
| Underlying sales growth | 4.5% | 1.9% | Volume +1.6%; price +2.9% |
| Operating profit | €8.7bn | €8.3bn | Operating margin 16.6%, versus 16.4% |
| Underlying operating profit | €9.6bn | €9.4bn | +2.9%; underlying margin 18.4%, down 10 basis points |
| Net profit | €6.6bn | €6.1bn | Basic EPS €2.33, versus €2.13; underlying EPS €2.62, versus €2.48 |
| Cash flow from operating activities | €10.3bn | €10.9bn | Lower year over year |
| Free cash flow | €6.4bn | €7.7bn | Declined as 2020’s favorable working capital and lower capital spending did not recur |
| Net debt | €25.5bn | €20.9bn | Net debt/underlying EBITDA 2.2x, versus 1.8x |
| Cash and cash equivalents | €3.4bn | €5.5bn | Year-end balance |
| Dividends paid | €4.5bn | €4.3bn | 2021 dividend declared: £1.46 per ordinary share |
Divisions and material changes
- Beauty & Personal Care: Turnover €21.9bn; USG 3.8%; underlying operating margin 21.7%, unchanged. Prestige beauty and functional nutrition grew strongly; skin cleansing eased from elevated prior-year demand.
- Foods & Refreshment: Turnover €20.0bn; USG 5.6%; underlying operating margin 17.4%, up from 17.0%.
- Home Care: Turnover €10.6bn; USG 3.9%; underlying operating margin 13.4%, down from 14.5%, as inflation reduced gross margin.
- Input-cost inflation, particularly in raw materials, packaging and distribution, reduced gross margin by 120 basis points. Pricing and €2bn of savings helped offset the pressure; Unilever continued investing in brand and marketing.
- Acquisitions and disposals contributed a net 1.3% to turnover; currency movements reduced turnover by 2.4%. Acquisitions included Paula’s Choice and Onnit.
- Unilever agreed to sell its global tea business, ekaterra, for €4.5bn cash-free and debt-free, with completion expected in the second half of 2022 subject to approvals and consultation. The transaction excludes tea operations in India, Nepal and Indonesia and the Lipton ready-to-drink joint ventures.
Cash, debt and liquidity
Net cash used in investing activities was €3.2bn, including acquisitions and higher capital expenditure. Net cash used in financing activities was €7.1bn, including €3.0bn of share repurchases and €4.5bn of dividends paid. Borrowings increased to support buybacks and acquisitions. Unilever reported undrawn committed facilities of $8.0bn and additional €1.5bn revolving facilities, and said financing arrangements were adequate for short- and long-term needs. Management’s multi-year framework targets net debt/underlying EBITDA of around 2x; the reported 2021 ratio was 2.2x.
Outlook, risks and contingencies
- Management expected another positive year of top-line growth in 2022, but did not provide a specific 2022 sales-growth forecast in the cited outlook. Its multi-year USG framework is 3% to 5%.
- Unilever expected input-cost inflation to rise further in 2022 and underlying operating margin to decline that year. Pricing and savings were expected to help reverse the decline over 2023 and 2024.
- The company planned to introduce five category-focused Business Groups from mid-2022. Management identified execution and change management as risks; costs were to remain within its €2bn restructuring investment plan for 2021–2022.
- The Board said it would not pursue similar large-scale acquisitions to the proposed GSK Consumer Health transaction in the foreseeable future, prioritising organic growth, bolt-on acquisitions and selective disposals.
- Principal risks include brand relevance and competition, climate change and plastic packaging, customer relationships, talent, supply-chain disruption, commodity inflation, product safety, cybersecurity, transformation, economic and political instability, tax and regulation. The company noted heightened risks associated with COVID-19. It judged itself viable over a three-year assessment period.
- Brazilian indirect-tax contingent liabilities totaled €3.5bn, including €2.549bn related to a corporate reorganisation dispute. Management considered the likelihood of the authorities prevailing low and did not provide for these contingent matters. Two cases representing about €904m could move to judicial courts in 2022, potentially requiring a deposit or guarantee.
- The audit opinion was unqualified. The auditor identified the Brazilian indirect-tax contingent-liability assessment as a critical audit matter. The audit of internal controls was effective, but excluded certain 2021 acquisitions representing 3.8% of Group assets and 0.4% of turnover.
Most important facts for investors to verify
- Whether pricing and savings can offset further cost inflation without materially weakening volumes, margins or competitiveness.
- How the €25.5bn net debt balance and 2.2x leverage develop, including after the tea-business disposal and planned capital returns.
- Completion timing, proceeds and final terms of the €4.5bn ekaterra sale.
- Developments in the Brazilian tax litigation, including any required deposits, guarantees or changes in the assessed exposure.
- Underlying measures and outlook against IFRS results; USG, underlying margin, free cash flow and leverage are non-GAAP measures.