Assignment on

Financial Analysis Unilever Global Company

Course Title: Principle Of Finance
Course Code: FIN 211

Submitted to:
Nazmul Hasan
Lecturer
Department of Business Administration
Ranada Prasad Shaha University

Submitted By:
Proma Sarker
ID: 21100008 | Batch: 21st

Department of Business Administration

Date of Submission:

31/12/2021

Ranada Prasad Shaha University

Table of Contents
1) Introduction – What is a financial statement analysis?......................................................3

2) Objective – Why Manager needs to analysis Financial Staement ....................................3

3) Overview of the Company ................................................................................................3

4) The significant recent events .............................................................................................5

5) Auditor report.....................................................................................................................6

6) Financial highlights of last five years ……………………………………………………………7

7) Tools of Analysis ..............................................................................................................7

a) Horizontal analysisof last two years ..............................................................9

b) Trend Analysis of last two years……………………………………………

c) Vertical Analysis of last two years……………………………………………..

8) SWOT Analysis

9) Conclusion and Recommendation

10) References
 Introduction – What is a financial statement analysis?
 Financial statements are written records that convey the business activities and the financial
performance of a company. Financial statements are often audited by government agencies,
accountants, firms, etc. to ensure accuracy and for tax, financing, or investing purposes. Financial
statements include:
 Balance sheet
 Income statement
 Cash flow statement.

 Financial statements are written records that convey the business activities and the financial
performance of a company.
 The balance sheet provides an overview of assets, liabilities, and stockholders' equity as a
snapshot in time.
 The income statement primarily focuses on a company’s revenues and expenses during a
particular period. Once expenses are subtracted from revenues, the statement produces a
company's profit figure called net income.
 The cash flow statement (CFS) measures how well a company generates cash to pay its debt
obligations, fund its operating expenses, and fund investments.

 Objective – Why Manager needs to analyze Financial Statement :

 Financial statements can be used by managers to track performance, budgets, and other metrics,
and as tools to make decisions, motivate teams, and maintain a big-picture mindset.
In today’s sometimes volatile economy, business managers are frequently asked to make process
decisions that help the company’s capital work harder or to decrease overhead costs. Good
managers have many tools at their disposal to accomplish these goals, provided they have a good
understanding of the company’s financial position. Familiarity with the basic types of financial
statements and the ability to interpret the numbers behind them are essential to sound business
decision-making.
While there are some differences between nonprofit and for-profit entities, all businesses
typically prepare these three most common financial statements — the balance sheet, the income
statement, and the cash-flow statement. These documents are prepared according to generally
accepted accounting principles and presented in a standardized format.
  The significant recent events:
Today, Unilever announced its results for the first quarter of 2021. Underlying
sales are up 5.7%, reflecting how our continued focus on operational excellence is
delivering improved competitiveness.

 Underlying sales growth of 5.7%, with 4.7% volume and 1.0% price
 Turnover decreased by 0.9%, driven by a negative currency-related impact of 8.0%
 Quarterly shareholder dividend of €0.4268 per share and share buyback program of
up to €3 billion to commence in May

Today, we announced our results for the full year 2020, which show underlying
sales growth of 1.9%. We focused on driving competitive growth through an
execution against our five growth fundamentals and delivered a step up in
competitive performance.

 Underlying sales growth was 1.9%, with 1.6% volume and 0.3% price
 Turnover decreased 2.4%
 Underlying operating profit decreased 5.8%, but increased by 0.7% at constant
exchange rates
 Underlying earnings per share decreased 2.4% but increased 4.1% at constant
exchange rates
 Diluted earnings per share of €2.12
 Free cash flow up €1.5 billion to €7.7 billion
 Dividend maintained through the year and increased in the fourth quarter by 4% to
€0.4268 per share
 Unified the group legal structure under a single parent company
 Auditor report :
Alan Jope: Chief Executive Officer statement
“Unilever has delivered a strong first half, with underlying sales growth of 5.4%
driven by our continued focus on operational excellence.
We are making good progress against the strategic choices outlined earlier this year,
including the development of our portfolio into high-growth spaces. Prestige Beauty
and Functional Nutrition grew strongly and we recently announced the acquisition of
digitally-native skincare brand Paula’s Choice. The operational separation of our Tea
business is substantially complete. Our e-commerce business grew 50% and the
channel now represents 11% of sales.
Competitive growth is our priority, and we are confident that we will deliver
underlying sales growth in 2021 well within our multi-year framework of 3-5%,
despite more challenging comparators in the second half. We have seen further cost
inflation emerge through the second quarter. Cost volatility and the timing of landing
price actions create a higher than normal range of likely year-end margin outcomes.
We are managing this dynamically and expect to maintain an underlying operating
margin for 2021 around the flat.”
Our markets: The operating environment across our markets has seen some
improvements but remains volatile. Restrictions on daily life continue around the
world, impacting channel dynamics, sales mix, and consumer behavior. Although
renewed restrictions in India impacted the market in the second quarter, they were
less severe than in the same period last year. In China, normalization has continued,
but market growth is still below pre-Covid-19 levels. The North America and Europe
markets declined in the second quarter as we lapped the surge in demand for in-home
food and hygiene products in the same period of 2020. In difficult macroeconomic
conditions, markets are growing in Latin America but market conditions in South
East Asia remain challenging. In Indonesia, large parts of the country have entered
lock-down following a sharp rise in Covid-19 cases.
Unilever overall performance: We continue to be guided by our five strategic choices:
• develop our portfolio into higher-growth spaces;
• win with our brands as a force for good, powered by purpose and innovation;
• accelerate in the USA, India, and China and leverage the strength of our emerging
market;
• lead in the channels of the future; and
• build a purpose-led, future-fit organization and growth culture.
These strategic choices and our sharp focus on operational excellence have delivered
the first-half underlying sales growth of 5.4%, with volume growth of 4.0% and 1.3%
from the price. Underlying sales growth in the second quarter was 5.0%, including a
price of 1.6%, which accelerated through the quarter as our pricing actions landed in
markets.
Emerging markets grew 8.3%, driven by continued recovery in China and strong
performance in South Asia, both growing double digits. Performance in South East
Asia was mixed, with Indonesia declining high single-digit. Latin America grew high
single-digit, led by price growth. Developed markets grew 1.5%, as North America
and Europe each grew low single digit. In North America, food solutions and Prestige
Beauty contributed to growth as the out-of-home eating and health and beauty
channels reopened. We saw a relative decline in food consumed at home and flat
growth in hygiene products, as we lapped the spike in demand in the prior year. In
Europe, volume growth was supported by a recovery in out-of-home ice cream. Price
declined in Europe as we lapped a period of lower promotional intensity in some
markets. Ecommerce grew 50% and is now 11% of sales.
Turnover increased 0.3% including a positive impact of 1.4% from acquisitions net of
disposals and a negative impact of 6.1% from currency-related items.

 Financial highlight of last 5 years

 Unilever Global Company

Highlights (31 December)

2020 2019 2018 2017 2016

Turnover (€ million) 21,124 21,868 50,982 53,715 52,713

Operating profit (€ million) 8,303 8,708 12,535 8,857 7,801

Core operating profit (€ million)* 9,367 9,947 9,359 9,400 8,624

Profit before tax (€ million) 8,758 9,368 12,383 8,153 7,469

Net profit (€ million) 6,591 7,960 9,808 6,486 5,547

Diluted earnings per share (€) 3.1 4.6 3.48 2.15 1.82

Core earnings per share (€)* 2.70 2.50 2.36 2.24 2.03

 Tools of Analysis:
 SWOT Analysis
 STRENGTHS:
Strong Business Model:
One of the leading strengths of Unilever is its strong and highly sustainable business
model. The pandemic proved its business model’s resilience. Unilever’s business
model is highly adaptive, which allows it to maintain lower operating costs and
overcome disasters like the pandemic. Overall, its strong business model has helped
the company maintain its market leadership and retain its growth momentum.
Large Product Portfolio:
Another leading strength of Unilever is its large product portfolio. The company sells
a large array of around 400 household names in various corners of the globe. Several
of these brands are leaders in their categories and popular worldwide.There are
several iconic brands in its portfolio. According to a report Unilever published a few
years ago,
Global presence and distribution network:
Unilever is a truly global brand with a strong global presence.Its products are
available across 190 countries. More than 2.5 billion people on the planet use
Unilever products daily. The company employs a large network of around 25 million
retailers to sell its products worldwide.
Strong focus on marketing and promotions:
As a consumer goods brand, Unilever faces heavy competition from several global
and local players. The company maintains a heavy focus on marketing and
promotions to retain its market leadership and growth rate. It utilizes several
channels, including digital and traditional channels, to promote its brand and
products. The company spent € 7.1 billion on marketing and promotions in 2020.
HR management:
Unilever also excels in terms of managing its human capital. The CEO of the
company is Alan Jope. Unilever employed 150,000 people approximately in 2020. It
is also recognized as the FMCG graduate employer of choice in over 50 countries.
Unilever’s performance in terms of achieving gender balance is also excellent. It has
achieved a 50/50 ratio in terms of gender balance among 10,000 managers.
Focus on innovation:
Unilever’s focus on innovation is also one of the key factors enabling faster growth
for the business. The company has established a culture that fosters creativity and
innovation. It also devotes a large sum each year to research and development to
develop and improve products and processes. In 2020, the company spent 800 million
Euros on research and development. Its focus on innovation is also a key source of
competitive advantage for the brand. Through a continuous focus on innovation,
Unilever has strengthened its competitive edge in the global market.\
Economies of scale:
Unilever also uses economies of scale to achieve social good through its CSR
activities. Through its strong manufacturing and supply chain capabilities, the
company has achieved economies of scale, helping it control its operating costs and
grow its profitability. The company produces a large range of products in enormous
amounts. Large and multinational consumer goods companies can achieve impressive
profit margins in this way. Economies of scale are also a key factor helping Unilever
beat the heavy competitive pressure in the global market.
Highly sustainable business:
Unilever has adopted a highly sustainable operating model. It focuses heavily on
sustainability in its products and processes. The company uses 100% renewable grid
electricity globally. In 2020, it used 67% sustainably sourced agricultural raw
materials for production. Climate action and waste management are also some key
focus areas for the business in terms of sustainability.
Improving free cash flow:
Unilever’s free cash flow has continued to improve over the past several years. Its
free cash flow in 2018 was €5.4 billion, and it grew to €6.1 billion and then to €7.7
billion in 2020.
Free cash flow is significant for big businesses.
It allows them to pursue opportunities that maximize shareholder value. Investors
love companies with plenty of free cash flow.
 WEAKNESSES:
A large array of products with too many substitutes:
Unilever’s product portfolio is quite extensive. The company targets a wide range of
customers through its large and diverse product portfolio. However, the market is full
of substitutes, and the switching costs for consumers are low. Maintaining customer
loyalty becomes difficult due to these factors and requires a huge investment in
marketing and promotions.
Lack of forward integration:
Unilever is a large and global brand that employs 25 million retailers to sell its
products worldwide. The company lacks forward integration capabilities, and so the
retailers enjoy a lot of control over sales. Several big brand retailers have also started
their private label brands that compete with Unilever products. If Unilever can
manage to grow its retail chain, the company will enjoy higher profitability.
Currently, it depends on the retailers for sales heavily.
Lack of diversification:
Currently, Unilever makes and sells three categories of products, mainly including
beauty and personal care, foods and refreshment, and home care .However, the
product portfolio of the brand is full of similar or matching products with low
differentiation. The company has not diversified its product portfolio much. The
result is higher competitive pressure.

 OPPORTUNITIES:
Emerging markets:
Emerging markets are full of opportunities for Unilever. The company has currently
maintained a strong presence in emerging markets. For example, India offers a large
base of middle-class consumers. The rise of the middle class in the emerging markets
has brought new opportunities for Unilever. Consumers shop using both online and
traditional channels. Unilever must improve its digital sales and distribution
capabilities in emerging markets to enjoy stronger sales.
Sustainable and health-friendly products:
Globally, consumers are now more attracted to health-friendly and sustainable
products. The pandemic has also accelerated the movement towards such products
and brands. Unilever must focus on growing its array of health-friendly and
sustainable products and brands to find faster growth and expand its customer base.
Demographic changes:
Demographic changes have brought new challenges and opportunities globally. The
Millennial generation has different needs and preferences compared to the baby
boomers. Companies like Unilever need to research millennials’ tastes and
preferences to create and sell products matching their expectations. The millennials
currently represent the largest part of FMCG company’s customer base, like to use
digital channels for shopping and connecting with their preferred brands. Unilever
should grow its digital channels for sales, marketing, and customer engagement to
benefit from the demographic trends.
Digital technology, Cloud technology, and social media:
Digital technology and other leading technologies like cloud technology drive higher
growth for businesses across various industry sectors. However, cloud technology has
several more advantages that can enable Unilever to unlock more benefits and grow
its competitive edge. Unilever has partnered with Arzeda to use its cloud computing
capabilities and software tools, which can help it further its research into enzymes.
Unilever can also use these technologies to manage data and analytics or other
purposes like marketing, managing customer experience, and customer engagement.
It should also increase its focus on digital technology and social media for sales,
promotions, and customer engagement.
Diversification:- The FMCG sector is marked by intense competition, and there are
just too many substitutes in the global market for Unilever products. The company
must focus on diversification to differentiate its brand from rivals.
 THREATS:
Heavy competition:
The competition in the FMCG industry has kept intensifying. Higher competitive
pressure causes the operating costs of Unilever to grow. The company has to invest
more in marketing, innovation, and maintaining product quality. With higher
competitive pressure, the focus on differentiation also needs to be higher. Apart from
that, the pressure on prices and profit margins is also higher with higher competition
in the sector.
Regulatory threats:
Worldwide, the government regulation of various industry sectors including FMCG
has grown a lot in recent years. Businesses like Unilever need to remain compliant
with all the relevant laws and regulations to avoid hefty fines and loss of image.
Currency fluctuations:
Brands like Unilever operating in a global environment are subject to several risks,
including currency risks. Fluctuations in currency exchange rates can cause profits
and margins to fall.
Rising operating costs:
The operating costs of Unilever have continued to grow, driven by an increase in the
prices of raw materials. Packaging costs and transportation costs have also increased.
These factors are affecting Unilever’s bottom line. Despite raising its products’
prices, the company has not been fully able to absorb the impact of the rising prices
of raw materials, packaging, and transportation, causing its profitability to fall. In
2021, Unilever’s underlying operating margin fell as cost inflation sped up in the
second quarter. The company was already expecting higher inflation this year, but it
was way above the company anticipated. Unilever has pushed up prices in countries
like Brazil and Argentina, but it will have to increase the prices under its contract
with the retailers gradually in some European nations. Cost volatility has also resulted
in an uncertain outlook over margins this year for the company.
A few last words:
Unilever is a leading consumer goods company with a strong market presence
worldwide. The company sells a vast array of products, among which are many well
known brand names. Apart from its consistent focus on innovation for market growth,
the company has also been investing in marketing and promotions for faster growth.
Unilever has also maintained a strong focus on organizational culture and HR
management, which have enabled the brand to achieve a stronger competitive
position. The company sells its products to customers worldwide through millions of
retailers. It has not developed a direct to consumer distribution system. While its
product portfolio is quite large, it is not highly diversified. The demand for
sustainable and healthy products has increased with time and therefore Unilever must
increase its focus on widening its portfolio of such products. Unilever must also
increase its focus on the use of digital technology, social media and other latest
technologies to grow its market penetration and customer retention rates.
 Conclusion and Recommendation

 Conclusion: Unilever has been in the business of consumer fulfillment for many
decades and hence, we are confident that it can tide over the present gloomy
conditions in the FMCG segment. Having said that, we conclude the article with a
cautionary note of not taking the threat from the Asian FMCG majors lightly as
they understand the continent better and at the same time are mastering the
intricacies of the global marketplace.

 Recommendation: This SWOT analysis of Unilever highlights a number of

internal and external strategic factors that managers must include in strategy
development. For example, the weaknesses of limited business diversification and
imitable nature of products are significant because they influence business
stability and performance. In this regard, a recommendation is to diversify
Unilever’s business through acquisition of related firms not in the consumer
goods industry. Also, Unilever needs to consider product innovation as an
opportunity to boost business performance. It is recommended that the company
must use its strengths, such as economies of scale, for product innovation to
address competition and the threat of imitation.

 References:
1. Introduction: https://www.investopedia.com/terms/f/financial-statements.asp

2. The significant recent events: https://www.unilever.com/news/press-and-

media/press-releases/2021/strong-full-year-results-demonstrate-unilevers-
resilience-and-agility/
https://www.unilever.com/news/press-and-media/press-releases/2021/first-
quarter-results-operational-excellence-is-delivering-improved-
competitiveness/

3. Financial highlight of last 5 years

https://www.unilever.com/investors/annual-report-and-accounts/archive-of-
annual-report-and-accounts/?year=2016&datetype=date-
range&monthfrom=1&yearfrom=2016&monthto=12&yearto=2020
4. SWOT Analysis: https://notesmatic.com/swot-analysis-of-unilever-2021/#c

5. Conclusion: https://www.managementstudyguide.com/swot-
analysis-of-unilever.htm

6. Recommendation: http://panmore.com/unilever-swot-analysis-
recommendations

7.