HINDUSTAN UNILEVER LIMITED

(Formerly known as Hindustan Lever Limited)

2007 14
Report of the Directors and Management Discussion & Analysis
To the Members,
Your Directors have pleasure in presenting the Seventy
Fifth Annual Report of the Company along with Audited
Accounts for the year ended 31st December, 2007.
1. PERFORMANCE OF THE COMPANY
1.1 Results
For the year 2007, your Company achieved an overall
turnover growth of 13.3%; both Home and Personal Care
(HPC) and Foods businesses grew by 12.3% and 20.2%
respectively. Prot After Tax registered a growth of 14.9%.
The summarised gures are given below :
(Rs. in Lakhs)
2007 2006
Turnover, net of excise 13717,75 12103,39
Prot before tax 2184,53 1861,68
Tax on prots (415,47) (322,01)
Exceptional items 156,41 315,70
Net prot 1925,47 1855,37
Dividend (incl. tax on distributed
prots)
(2331,62) (1511,38)
Transfer to General Reserve (200,00) (191,00)
Prot & Loss account balance
carried forward
197,50 803,65
Earnings Per Share for the year 2007 at Rs. 8.73, reects
the growth of Net Prot (after exceptional items) by 3.8%.
The Board of Directors have recommended a nal dividend
of Rs. 3/- per share. Total dividend to our Shareholders for
2007 stands at Rs. 9/- per share, and includes the interim
dividend of Rs. 3/- per share paid in August 2007 and
Rs. 3/- per share paid in November 2007 as Special Platinum
Jubilee Dividend to commemorate your Companys 75th
year of operations in the Country.
1.2 Turnover
Turnover, net of excise, in respect of continuing businesses
increased by Rs.1,614 crores and is 13.3% higher than
previous year. This increase results from more volumes
sold, better mix of products, and selective price increases
effected during the year. The details of Sales, net of excise,
and other revenue by segments are given below:
(Rs. in Lakhs)
2007 2006
Sales Others* Sales Others*
Soaps, Detergents
& Scourers
6328,80 45,72 5563,41 32,48
Personal Products 3614,76 57,06 3309,65 50,14
Beverages 1520,40 12,38 1325,96 4,78
Foods 532,98 4,76 380,46 4,45
2007 2006
Sales Others* Sales Others*
Ice Creams 158,49 2,15 134,42 2,65
Exports 1342,26 1278,89
Others 226,88 58,39 120,11 60,14
Less : Inter
segment revenue (6,82) (9,50)
Total 13717,75 180,46 12103,39 154,64
* Others represents service income from operations,
relevant to the respective businesses.
1.3 Summarised Prot and Loss Account
(Rs. in Lakhs)
For the year ended
31st December,
2007 2006
Net sales 13717,75 12103,39
Other operational income 224,82 191,46
Total 13942,57 12294,85
Operating expenses (11832,05) (10455,33)
PBDIT 2110,52 1839,52
Depreciation (138,36) (130,16)
PBIT 1972,16 1709,36
Interest income (net) 212,37 152,32
PBT 2184,53 1861,68
Taxation (415,47) (322,01)
PAT (before exceptional
items)
1769,06 1539,67
Exceptional items (net of tax) 156,41 315,70
Net prot 1925,47 1855,37
2. RESPONSIBILITY STATEMENT
The Directors conrm that:
a) in the preparation of the annual accounts, the
applicable accounting standards have been followed
and that no material departures have been made from
same;
b) they have selected such accounting policies and
applied them consistently and made judgements and
estimates that are reasonable and prudent so as to
give a true and fair view of the state of affairs of the
Company at the end of the nancial year and of the
prots of the Company for that period;
c) they have taken proper and sufcient care for the
maintenance of adequate accounting records in
accordance with the provisions of the Companies Act,
1956, for safeguarding the assets of the Company
and for preventing and detecting fraud and other
irregularities; and
2007
HINDUSTAN UNILEVER LIMITED
(Formerly known as Hindustan Lever Limited)
15
d) they have prepared the annual accounts on a going
concern basis.
3. CORPORATE GOVERNANCE
Your Company has been practising the principles of good
corporate governance over the years and lays strong
emphasis on transparency, accountability and integrity.
A separate section on Corporate Governance and a
Certicate from the Auditors of the Company regarding
compliance of conditions of Corporate Governance as
stipulated under Clause 49 of the Listing Agreement(s)
with the Stock Exchange(s) form part of the Annual
Report.
In terms of sub-clause (v) of Clause 49 of the Listing
Agreement, certificate of the CEO/CFO, inter alia,
conrming the correctness of the nancial statements,
adequacy of the internal control measures and reporting
of matters to the Audit Committee in terms of the said
Clause, is also enclosed as a part of the Report.
4. PLATINUM JUBILEE YEAR
17th October, 2007 marked the beginning of your
Companys 75 years of operations in India. Your Company
has had the privilege of being an integral part of Indias
commercial and social landscape, touching the lives of
over 700 million Indians, every single day. Our diversied
portfolio of powerful brands has been built over the years
with meaningful innovations, outstanding quality and
great consumer experiences. Many of these brands are
household names and icons in the categories in which
they operate.
Over the last 75 years, your Company has always been
guided by the belief that "What is good for India is good
for Hindustan Unilever", thereby integrating social good
with business goals. This solemn belief will continue to
guide us in everything that we do for the next 75 years
and beyond.
On this occasion, your Directors wish to convey their
sincere gratitude to all the shareholders, customers,
employees, business partners, Governments and all
other stakeholders in the Company, for their trust and
goodwill that helped your Company attain its current
stature. Their unstinting support and understanding
have been the key to the Companys success over these
75 years. Your Directors look forward to this continued
support as we strive to fulll our vision of making a
difference to the life of every Indian.
5. NEW CORPORATE I DENTI TY OF THE
COMPANY
Approval from Shareholders of the Company (in the
74th Annual General Meeting held on 18th May, 2007)
and from the Government for the change of name to
Hindustan Unilever Limited have been obtained; your
Companys new corporate identity represented by
the new logo and name 'Hindustan Unilever Limited'
has come into effect. The new name reects the right
balance between the Indian heritage of the Company and
the synergies of its global alignment with Unilever. The
new logo symbolizes the Companys mission of Adding
Vitality to Life.
6. BUY BACK OF EQUITY SHARES OF THE
COMPANY
The Board of Directors in their meeting held on 29th
July, 2007 approved buy back of Companys fully paid
up equity shares of Re. 1/- each, at a price not exceeding
Rs. 230/- per equity share, up to an aggregate maximum
amount of Rs. 630 crores, i.e. within the limit of 25% of
the total paid-up equity share capital and free reserves of
the Company as on 31st December, 2006. The approval of
the shareholders for the buy back was obtained through
postal ballot, the results of which were declared on
14th September, 2007.
The buy back was made out of free reserves and the
share premium account of the Company through open
market purchases through the Bombay Stock Exchange
Limited and National Stock Exchange of India Limited
using their nationwide electronic trading facilities, as
per the provisions contained in the SEBI (Buy Back of
Securities) Regulations, 1998. The buy back offer was
open from 3rd October, 2007 to 31st January, 2008.
The cumulative number of Equity Shares bought back
under the scheme is 3,02,35,772 shares for a total
consideration of Rs. 626.27 crores, at an average price of
Rs. 207.13 per share. The paid-up capital of the Company
after the extinguishment of shares bought back under
the scheme stood at Rs. 217.75 crores comprising
2,17,74,63,355 equity shares of Re.1/- each.
7. MANAGEMENT DISCUSSION AND ANALYSIS
(MD&A)
In order to avoid duplication and overlap between the
Directors Report and Management Discussion and
Analysis, your Directors present a composite summary
of performance of the various businesses and functions
of the Company.
HINDUSTAN UNILEVER LIMITED
(Formerly known as Hindustan Lever Limited)
2007 16
7.1 Home and Personal Care Business (HPC)
The HPC business is made up of Fabric Wash, Household
Care, Personal Wash and Personal Care categories
which include products like toothpaste, shampoo, skin
care, deodorants and colour cosmetics. In the face of
an intense competitive scenario, the business for the
third consecutive year grew in double digits, and ahead
of market. The business had to cope with the challenge
of severe cost pressures on account of unprecedented
increase in crude petroleum prices and steep escalations
in vegetable oil costs. High crude prices impacted a range
of input prices like chemicals, packaging and freight. Cost
increases were successfully tackled through active cost
reduction programmes across the entire supply chain and
judicious price increases. Overall margin of the business
was well managed and improved over 2006.
Brands constitute one of the most valuable assets of your
Company. Proper and adequate investment in brands
is therefore critical. The business continued to invest
appropriately in advertising and promotional activities.
To enhance the effectiveness of these expenditures,
world class quantitative tools such as Advertising Budget
Guidelines, Minimum Invest Levels, Market Activities
Costing and Dynamic Resource Allocation were used
and fully leveraged. Your Board is appreciative of Unilever
for providing unlimited access to such outstanding
Intellectual Properties for the benet of your business.
7.1.1 Soaps and Detergents
Soaps and Detergents segment recorded a robust
growth of 13.9%. This is a notable achievement, given
that this segment has been facing the brunt of cost and
competitive pressures.
Fabric Wash
This category continued to be vigorously contested
amongst the players. Very good growth was achieved
on the strength of an excellent brand portfolio; Surf, Rin,
Wheel and Sunlight addressed the needs of consumers
at different income levels. All these brands did very well
and the Company's overall market share for the category
improved.
Fabric Wash witnessed severe cost pressures for the
fourth consecutive year. Crude oil prices continued to
rule high. Robust supply chain savings helped partly
mitigate the cost impact, and selective price corrections
were implemented. Margins were thus managed well in
the context of cost and competitive constraints.
Rin Supreme Bar was successfully migrated to Surf
Excel Bar. Strong growth achieved during the year is a
clear evidence of this success. Surf franchise recorded
strong sales performance with the turnover crossing
Rs. 1000 crores for the rst time. The relaunch of Sunlight
with superior wash properties enabled it to reinforce
its competitiveness in strong markets like West Bengal
and Kerala.
Wheel is the largest detergent brand in India, with volume
of sales exceeding 8 lakhs tonnes. Wheel continued
to grow strongly on the excellent value it offers to
consumers. The popular Smart Shrimati programme
entered its second season with record viewership and
participation which helped Wheel grow ahead of the
market and gain market share.
Household Care Products
Dish wash, led by Vim, continued to grow well. The Vim
Dish wash Liquid launched in 2006 has been extended
nationally and has been one of the key contributors to
growth. Domex offers a powerful proposition for oor
and toilet cleaning and is being established through
marketing initiatives and consumer communication. The
brand performed well, albeit on a small base.
Personal Wash
Personal wash category performed well with brands like
Lux, Lifebuoy, Hamam and Dove recording good growth.
The category however faced cost pressure due to very
steep increase in vegetable oil prices (increased almost
50% over the previous year) partly due to diversion of
oils for production of bio fuels. Margins were managed
through a series of actions such as buying efciencies,
savings in supply chain and selective price increases.
Lux grew very well during the year on the back of variants
like Haute Pink and Crystal Shine. The brand continued
to gain market share. Hamam grew signicantly ahead
of the market helped by the Ubtan variant launched in
2006.
Lifebuoy Pink did well to sustain its growth during the
year. New variants like Lifebuoy Care and Deo-fresh
contributed to the overall good performance of the brand.
Dove, in the premium soap category, strengthened its
position further, helped by good marketing actions.
Overall market shares marginally declined, with gains in
Lux being, offset in some other brands.
Protecting our market share and margins in the face
of continued increase in input costs and a signicant
escalation in competition will be the key challenge for
the business in 2008.
2007
HINDUSTAN UNILEVER LIMITED
(Formerly known as Hindustan Lever Limited)
17
7.1.2 Personal Products
Personal product categories like Hair Care, Skin Care,
Toothpaste, Deodorants and Colour Cosmetics offer high
potential for your Company. Per capita consumption is
currently low in these categories and is poised to grow
with increasing income levels and awareness in personal
hygiene and grooming.
Competitive activity remained high across the board, with
existing players offering a varied choice of brands and
propositions and new players entering the arena. Your
Company responded proactively to these challenges.
Overall growth achieved during 2007 was satisfactory,
with performance in the second half signicantly better
compared to the modest performance of the first
half. The category was also affected by supply chain
disruptions in third quarter, which are now resolved.
Overall margins improved over 2006.
Hair
Hair Care continues to be an attractive category given
the potential for higher consumption. Your Company
strengthened its leadership position by growing its
market share through the year by a combination of new
product launches and re-launch of existing products on
improved benet platforms and affordable price-point
offerings. The premium Dove range of shampoos and
conditioners was launched during the second quarter
of 2007. A combination of high quality advertising and
active eld marketing, helped the brand to perform well
and achieve excellent results in the rst full year.
Clinic Plus continued to grow strongly and strengthened
its position as the single largest shampoo brand. The
brand was re-launched in the fourth quarter of 2007.
Clinic All Clear was also relaunched and a new mens
range was introduced. Sunsilk performed well and is
poised to gain from further innovation in 2008.
Skin
2007 was an exciting year for the Skin category. The Fair
and Lovely (FAL) Multivitamin re-launch in the second
quarter was very successful and helped the brand to
regain growth in the second half of the year. There is
signicant opportunity in the top end skin category
with rise of per capita income, urbanization and growth
of modern and specialist channels for distributing top
end products. Investment in Ponds, as the premium
Skin Care brand, was scaled up considerably and
several new innovations were brought to the market.
Pond's consumers now have a range of products based
on world class technology to meet their anti-ageing,
moisturizing and skin lightening needs. Vaseline and
Lakme Skin performed satisfactorily. Your Directors
believe given the low per capita consumption levels, the
Skin Care category has high potential and through our
portfolio of brands, backed up by a strong Research and
Development programme, your Company is well placed
to capitalise on opportunities.
Toothpaste
Close-up continued to do well recording growth ahead of
the market for the second year in a row, led by a number
of good activation programmes and launch of special
edition variants. Pepsodent Kids was launched in the
fourth quarter. This along with the new rural pack launch
and a new variant offering in the rst quarter of 2008
should support accelerated growth in the year ahead.
The category however was impacted by shortage of
stocks for about three months in the year on account of
the lock-out in Doom Dooma factory in Assam. Supplies
have become normal with the lifting of the lock-out and
the category is well positioned for improved performance
in 2008.
Colour Cosmetics and Deodorants
Colour cosmetics under Lakme range achieved good
growth for the year. The launch of 9 to 5 premium
range, together with good trade and consumer activation
helped in strong performance. The winter range of Lakme
Free Spirit launched in the third quarter did well in the
market.
Deodorants market is in a nascent stage with signicant
upside potential for future. Both Axe and Rexona brands
achieved good growth.
Kimberly Clark Lever Pvt. Ltd. (KCLL)
KCLL is a joint venture between your Company and
Kimberly Clark Corporation, USA. The turnover of
this company continues to grow strongly with good
underlying volume growth in both infant care and
feminine care products. Brands like Huggies and Kotex
continued to gain strong ground in their categories.
During the year, new products were introduced at various
price points aimed at developing the market.
7.2 Foods
The Foods Division of your Company comprises
Beverages, Processed Foods, Ice-Creams and Modern
Foods businesses. The Division recorded strong growth
in 2007.
7.2.1 Processed Foods
The packaged foods business sustained the momentum
of the last two years and delivered a strong performance
in 2007.
HINDUSTAN UNILEVER LIMITED
(Formerly known as Hindustan Lever Limited)
2007 18
Kissan is one of the most trusted foods brands among
Indian consumers. The re-launch of Kissan during 2006
has helped to provide strong growth momentum to
the brand during this year. A new variant in ketchup,
Chatakdar was launched in December quarter giving
a signicant thrust to the Kissan portfolio.
The entire range of Knorr portfolio has been re-launched
during the year with enhanced consumer benets. Knorr
soups enjoy a large share in the soups market. To expand
the market and leverage our position, your Company has
introduced a new range of Chinese meal-maker products;
this has been very well received by the consumers.
The staples business of Annapurna grew modestly.
Salt sales were solid and in an high commodity cost
environment, protability improved over last year. In
December Quarter, Bertolli Olive Oil was added to the
portfolio of processed foods. Bertolli Olive oil is imported
and positioned to serve health conscious consumers.
Your Company has dedicated resources to drive growth
in Foods Sales to institutions like restaurants, hotel chains
etc. Although currently small, the business is progressing
well, and has the potential for scale up by leveraging
the existing supply chain and product development
capabilities of Foods Division.
Step change and continuous improvements in supply
chain in Foods have helped to deliver freshness in our
products to the consumers. This will continue to be an
important aspect of Foods business for your Company.
With a strong momentum behind all brands and
categories, your Company looks forward to 2008 with
condence and excitement to drive Processed Foods.
7.2.2 Beverages
Tea
Packet tea market continued to be extremely competitive
with national, regional and local players vying for
increased share and volumes. The business performed
well during the year, with all brands under the Brooke
Bond franchise achieving growth. Value market shares
either improved or were steady across brands except
Brooke Bond Taaza, resulting in marginal erosion of
our overall value share. Prices of garden tea remained
steady during large part of the year. In 2007, Brooke
Bond 3 Roses and Brooke Bond Red Label were re-
launched with improved propositions. A new concept
tea Taj Mahal Dessert Teas has been launched to
add excitement and image to the premium segment of
our tea portfolio. Lipton continued to grow strongly in
out-of-home vending channel through acquisition of
some major national and regional clients and by strong
activation at key consumer points. Advertising spends
were increased across all tea brands.
Tea represents the largest share in the Foods portfolio.
Focus on brands, consumer benets through price point
packs, quality, freshness and appropriate promotions will
continue in this category.
Coffee
The business had yet another excellent year led by
strong growth in 'Bru' Instant Coffee. Strong trade and
consumer communications helped us to consolidate our
leadership in the branded coffee market which includes
roasted and ground coffee. Bru Cappuccino continued to
attract new consumers. During the year, your Company
has introduced ice cappuccino coffee which received
good consumer acceptance and results.
Coffee bean prices witnessed significant increases
during the year causing pressure on prot margins for the
category. Protability was managed with strong efciency
improvements and judicious price increases. However,
overall margins were lower compared to last year.
Your Company will continue to focus and invest in Bru.
7.2.3 Ice-creams
Building on the success over the last few years,
Ice- creams business witnessed a very good year in
2007, achieving signicant sales growth. The business
continued to improve its underlying protability with
scale and efciencies. Focus on availability, affordability
and acceptability was pursued. Unilever has excellent
innovation capabilities in the category on a global scale,
which is leveraged fully for the benet of the business.
During the year, Moo, a milk based ice-cream product
was introduced in stick and brick formats, positioned on
a nutrition and vitality platform to address the calcium
requirements of children. Further, a range of innovations
such as 'Cornetto Flirty Strawberry' and 'Cornetto Cookies
and Cream' and 'Caramel Crunch' have been introduced
in the impulse and in-home segments.
7.2.4 Modern Foods
Modern Foods was merged with the Company during
the current year. Manufacturing operations are being
carried out in six large towns with brand franchisee
arrangements in many other parts of the country.
Significant investments in product quality, safety,
distribution, cost saving programmes and innovation
have been made since the acquisition of the business
in 2000. Unviable operations have been restructured
or pruned, resulting in elimination of losses and
achievement of positive operating margin. Modern, as
a Foods brand, continues to command good equity with
2007
HINDUSTAN UNILEVER LIMITED
(Formerly known as Hindustan Lever Limited)
19
consumers. It is your Companys intention to examine
various alternatives to leverage the brand better in the
area of Processed Foods.
During 2007, Modern business delivered growth through
a combination of higher volumes, better product mix and
price corrections where called for.
7.3 Customer Management
During the year, your Company worked on consolidating
its strong position with customers and channels in general
trade. There was a special focus on setting up world
class distributor management system to derive better
values from Companys sales strategies and operations.
This focus has ensured that the Customer Management
system is best equipped to ensure speed to deliver brand
innovations and activation schemes to market.
Your Company continued to invest in building capabilities
and improving processes for the organised retail
environment (Modern Trade) which is expanding rapidly
across the Country. This retail format provides consumers
with a different shopping experience. Therefore, the
Company is committing resources to understand the
changing shopping habits and to deliver apt solutions to
grow the business across categories. Your Company is
leading many initiatives in the areas of customer service,
category management and merchandising to deliver best
practices in this area.
As Modern Trade in India is evolving very rapidly, your
Companys strategy for winning in this growing retail
market is to win at the point-of-purchase with shoppers
and deliver best-in-class service to our Modern Trade
customers. Your Company entered into a joint venture
with Smollans Holdings of South Africa to develop and
increase the capabilities required to meet the overall
merchandising demands in Modern Trade. This JV will
bring in world class execution excellence in the market
and build the right capabilities to deliver the Companys
sales and marketing strategy in Modern Trade.
The emerging hybrid customer structure (comprising
General Trade, Modern Trade and Specialised stores)
requires new route to market approaches to service
customers and distributors. The Company is equipping
itself with capability and revitalising the distribution and
customer service network to face the challenges of
the new market dynamics. This will ensure that we are
competitive and meet customer service expectations
fully.
Your Company is also investing heavily in IT application
systems in Sales and Distribution area to improve speed
of information, quality of service and productivity of
human resources substantially. This is further covered
under Section 14 of this report.
7.4 Supply Chain
Indian customer landscape has changed with the
signicant increase in the contribution of Modern Trade
to the FMCG market and high expectations of General
Trade from the Company. To meet the needs of this
change, your Company has placed greater focus on
customer service. A Customer Service Excellence team
has been set up within the Supply Chain function to
partner closely with Customer Development. This is to
ensure the delivery of outstanding service to customers
and a high level of availability on shelf of your Companys
products. With the market getting segmented, it will also
build our capability to service the emerging needs of
different types of sales channels. Thus, we shall win with
customers and be their most preferred partners.
Total Productivity Management (TPM), a worldwide tool to
minimize wastages and increase efciencies by reducing
breakdown time, is rmly embedded in the work culture
of the organization. This has enabled the performance of
factories to improve continuously. Gains in productivity
and cost efficiencies, improved responsiveness to
changes in the market demand and high levels of quality
as delivered on shelf are being achieved.
Substantial investments have been made to increase
capacities in Kalwa and Nasik factories to support
aggressive growth plans in Foods category. Doom
Dooma factory after a brief industrial relations problem
has turned around and is now progressing towards being
a vibrant and productive factory.
An organizational effort to reduce costs resulted in your
Company meeting the challenge of rising input costs with
strong cost efciency programmes covering the entire
Supply Chain. There were targeted projects in areas
like buying, logistics, energy and capacity utilisation to
generate sustained cost savings to partly mitigate the
input cost ination.
7.5 Exports Business
Export businesses had a good year, growing by 5%,
despite the pressure of the rupee appreciation; in Dollar
terms, the growth was in excess of 15%. During the
year, some of the activities were restructured to prune
costs and improve productivity. Product portfolios were
rationalized to exit from low value added segments.
Exports comprising Home and Personal Care, Food and
Beverages and Specialties are now managed under one
structure to drive synergies and to share expertise across
businesses. These steps will improve the underlying
performance of exports going forward.
HINDUSTAN UNILEVER LIMITED
(Formerly known as Hindustan Lever Limited)
2007 20
7.5.1 Home and Personal Care (HPC) Exports
The HPC Exports portfolio continued its growth
momentum of many years. Skin, Oral and Hair categories
grew handsomely aided by executing innovations
required by customers as well as creating capacity in
time for improved exibility and better customer service.
Unilever Companies across geographies like Europe
and Middle East continue to be our major customers,
accounting for greater than 80% share of HPC Exports.
The Pears brand, which is marketed by your Company
globally, grew strongly with the key markets of UK and
GCC showing robust growth.
Your Company consolidated its position as a major
sourcing hub for Unilever. A state-of-the-art modern plant
has been commissioned at Kandla, for producing top end
Skin Care products, within a record time of 8 months.
Kandla also obtained USFDA approval and is working
towards Canadian MOH certication. These will enable
your Company to deliver and service high quality/high
value added skin care products to the developed markets.
Business is making signicant investment in Kandla for
augmenting capacities for skin and oral categories and
for modernizing the plant and processes.
7.5.2 Foods and Beverages (F&B) Exports
The F&B portfolio achieved a modest growth. The
business was impacted by global crop and commodity
price trends. Value added tea bags portfolio grew well
and your Company emerged as a key supplier to Unilever
global sourcing network for original tea besides securing
approval to supply instant tea to Europe and US. Instant
tea plant at Etah will implement this project. Plans to
increase instant coffee sales to newer geographies are
progressing and will be activated next year. Operational
efciencies and plant productivity gains have contributed
to improving underlying margins.
7.5.3 Specialty Exports
During 2007, your Company exited from low value added
Shrimps and Castor exports as a part of the restructuring
exercise to improve the overall quality of the portfolio.
Resultant decrease in sales is expected to be made up
over time through FMCG exports i.e. HPC and F&B.
Marine Exports
Adverse factors like high antidumping duty, non trade
barriers, lower availability of sea caught shrimps and
appreciation of rupee have all made the shrimps business
totally unviable. Consequently the shrimps processing
units at Aroor and Kuthiathode in Cochin, Kerala were
closed in October 2007 and the employees voluntarily
separated. The Marine Business will, for the time being,
continue with more value added Surimi and Crabsticks
Exports.
The proposal, already approved by the members (through
postal ballot) to divest the marine portfolio will be
implemented in due course. Management is engaged in
the task of identifying a suitable buyer for the remaining
Surimi and Crabstick business. In the meantime, steps
are being taken to improve its performance.
Castor Exports
Your Company exited from exports of castor and castor
derivatives in December quarter 2007, given that they
are largely commodity oriented, with poor margins and
without any sustainable advantage. These exports do not
have any brands or xed assets nor any committed long
term customers. Phasing out of tax incentives for exports
and poor sales realisation have rendered these businesses
unsustainable even from a long term perspective.
Rice Exports
The business reported good growth with branded rice
growing higher helped by markets in GCC, North America
and Mauritius. Higher prices for Basmati during the year
impacted the margins adversely. Some price increases
were effected and steps were also taken to reduce xed
costs.
7.5.4 Leather (Pond's Exports Limited)
Leather Exports business is carried out by Ponds Exports,
a 100% subsidiary of your Company. The Industry had a
difcult year. Expected benet of higher order ows due
to the antidumping duty on Chinese and Vietnamese
exports to EU did not fully materialise. The appreciating
rupee also adversely affected competitiveness.
The Uppers segment did well and continued to deliver
savings from restructuring of facilities carried out earlier.
This segment currently services large requirements
of brands like Gabor and is hopeful of adding new
customers from Europe. The outlook for Uppers,
therefore, appears satisfactory.
The Shoes segment faced difficulties due to the
anticipated orders not coming from key customers, who
preferred to source from cheaper locations. The business
is striving to nd new international customers and also to
service the emerging domestic retail chains. The business
has plans to tie up with a design centre in China to provide
a stream of new designs which will potentially increase
orders both from, existing and new customers.
Plans include implementation of an industry specic ERP
system in March quarter of 2008, which will improve staff
productivity and material usages. Business is working to
2007
HINDUSTAN UNILEVER LIMITED
(Formerly known as Hindustan Lever Limited)
21
restructure costs and improve execution. The shareholders
have already approved the disposal of this business and
efforts are ongoing to nd a suitable buyer.
7.6 Water
Your Company has developed and launched Pureit, an
in-home drinking water purication system. Pureit is the
culmination of a series of technological breakthroughs. It
puries water as safe as boiled water, providing children
and families with complete protection from all waterborne
diseases like diarrhoea, jaundice, typhoid and cholera. It
is the only purier in the world that provides this level of
safety without depending on cooking gas, electricity and
pressurised tap water. It is affordable and given that 80%
of all diseases are water-related with children being the
most affected, Pureit ensures that safe drinking water is
now within reach of the common man.
Pureit was test marketed in Tamil Nadu during the last
two years and the consumer response has been very
encouraging. Pursuant to that, the water business built up
a unique distribution system and its overall capability with
respect to manufacturing, supply chain, and customer
service. During 2007, the product was launched in
Karnataka, Andhra Pradesh, Kerala, Maharashtra, West
Bengal and Delhi with good response. The rollout of
Pureit to other States is continuing and is planned to be
completed in the coming year.
Your Directors are pleased with the outcome of this
innovation and look forward to advancing this business
in the future.
7.7 Hindustan Lever Network
In 2007, the Network business was aligned with Home
and Personal Care division. During the year the business
focused on redening its strategy in line with its vision,
to empower the modern Indian woman by serving her
with superior beauty and healthcare products for herself
and her family, through customised and professional
services.
Accordingly, the network channel has been repositioned,
to offer premium products in the two growing categories
of Beauty Solutions and Health & Wellness, under two
core brands viz. Aviance and Ayush, respectively. This is
an important channel and the key challenge is now to drive
the business to scale through outstanding execution.
7.8 Project Shakti - Changing Lives in Rural
India
Hindustan Unilevers Project Shakti is a rural initiative that
targets small villages with a population of less than 5000.
It is a unique win-win initiative that empowers women
in rural India even as it benets the business. Project
Shakti impacts society in three favourable ways Shakti
Entrepreneur program creates livelihood opportunities
for underprivileged rural women; Shakti Vani program
improves quality of life by spreading health and hygiene
awareness and; iShakti community portal empowers
rural community by creating access to information.
Parallely, Project Shakti benefits your business by
signicantly enhancing its direct rural reach, and by
enabling Companys brands to communicate effectively
in regions not touched by any media.
Shakti Entrepreneur program recognizes the role of
micro-credit in alleviating poverty. However, such micro
credit also requires appropriate investment opportunities.
Shakti creates protable micro-enterprise opportunities
for rural women. Supported by micro-credit, rural
women become Shakti entrepreneurs (Shakti Ammas)
as direct-to-home distributors in rural markets with
earning good returns. This micro-enterprise has low
risks as HUL products distributed by them are some of
Indias most trusted brands relevant to rural consumers.
Your Company also invests in training the entrepreneurs,
helping them become condent and business literate
to be capable of running their own small enterprises.
By the end of the year 2007, the network had grown to
more than 45,000 Shakti Ammas covering 100,000 plus
villages across 15 states in the country and reaching
over 3 million homes.
Poor hygiene practices are the largest cause of common
diseases such as diarrhoea due to which over ve lakh
children die each year in rural India. Shakti Vani program
attempts to educate the rural community about basic
hygiene. Shakti women are appointed as Vanis and
trained to communicate in social forums such as schools
and village get-togethers. The Vani program covers
areas such as sanitation, good hygiene practices and
women empowerment. Brand messages are embedded
in all of these communications thus creating a platform
for brands to connect with rural consumers. Over the
past three years, we have covered more than 50,000
villages.
Project Shaktis third intervention, iShakti, provides the
rural community with a computer based information
portal on key areas such as agriculture, health, vocational
training, legal procedures and education. The computers
are equipped with the iShakti software, which is based
on a unique dialogue-interactive technology developed
and patented by Unilever. Users can surf across various
content areas, accessing information or posting queries
which are then answered by experts. This year the same
kiosks were used to provide value added services in the
HINDUSTAN UNILEVER LIMITED
(Formerly known as Hindustan Lever Limited)
2007 22
eld of education. Services like spoken English programs
and computer education have been received well in the
pilot villages.
In the next three years, your Company aims to cover
500,000 villages, with 100,000 Shakti entrepreneurs
reaching out to over 600 million people in rural India.
7.9 Beauty and Wellness Division
Your Company has formed a Beauty and Wellness
division, merging Ayush Therapy Centre and Lakme
Beauty Salon. The merger generates synergies in
operations such as franchisee management, back end
processes, ground support and common HR services.
Market for beauty services is estimated to be at Rs.
1500 crores in 2007, of which the organised market is at
Rs. 440 crore and is growing strongly at 25% per
annum.
Lakme is the largest organised player in the beauty market.
Lakme Salon business grew in excess of 30% in 2007
and added 24 new salons. There are 105 salons spread
across 30 cities, both, Company and franchisee owned.
Franchisees are supported with training and marketing
for which royalties are paid to your Company.
The total wellness market is estimated to be at Rs. 700
crores of which the authentic ayurveda market is at
Rs. 200 crores, growing at 20% per annum. The market
is fragmented and localised with regional players owning
chains of ayurvedic centres. This market also has top
end spas which offer premium rejuvenation services,
also growing strongly.
Currently, Ayush has 45 Therapy Centres in 7 cities.
Ayush has a technical collaboration with the renowned
Arya Vaidya Pharmacy in Coimbatore, which help us
with service development and innovations. The business
is expected to grow well with increasing consumer
awareness and spends on such activities.
8. RESEARCH & DEVELOPMENT AND
TECHNOLOGY
Your Company has a long-standing culture and history
of delivering high consumer business value through
superior technology for its brands. This sustained high
performance has helped build a strong foundation for
our business and also differentiated our brands strongly.
The technology drive in your Company is a journey
that began with the great vision of Sir Henry Turner
way back in 1950s when he initiated the Countrys rst
major Research and Development (R&D) operation in
the Company.
The strong research foundation, laid in the 1950s, on
which the Companys research was built, its expansion
over the ensuing years and technology woven as an
inseparable part of business have all combined to
produce a steadily accelerating stream of high-value
deliveries to our consumers.
The most recent testimony to the value of R&D is
the launch of Pureit brand and our foray into in-home
purication of water. The challenge of cost effectively
fulfilling the social requirement of protection from
diseases that are caused by microbial contamination in
drinking water was executed successfully by the R&D
team. This technology stands out in any scrutiny to rank
among the best in a global context. Notwithstanding
the excellent standards set by your Companys current
proposition in the market, a series of exciting new
inventions are in the pipeline for further advances in the
in-home water purication business.
Providing skin care benets, and meeting the aspirations
of millions in this region, was yet another notable
contribution. High quality R&D has been pursued to
innovate further in this important area of business and
consumer interest. Signicant progress has been made
in understanding the environmental effects on skin
quality and on the ways and means to minimize their
adverse impact.
Providing superior cleaning in laundry and household care
has been the focus of research. Development of several
novel consumer excitable propositions are in progress.
A major R&D emphasis for us in recent times has been
in the area of Naturals and Ayurveda. After exploring
our country's vast traditional knowledge base, the
best sustainable offerings are identied and rened, to
provide specic performance benets to consumers in
the areas of Home and Personal Care as well as Foods.
Ayush Therapy Centres and Ayush range of products,
Ayurvedic Fair and Lovely and Nature Care tea have all
been the result of these efforts.
Foods R&D continues to be focused on providing
food options with the combination of superior aroma
and taste, with specic enhancements in health and
nutritional benets to consumers. A series of new and
superior products are under development helped by
Unilevers formidable global research and development
in this domain.
Overall, R&D continues to occupy the centre stage in
the scoping and conduct of business for your Company.
The Company has recently consolidated most of its
research at Bangalore, securing synergy from intellectual
resources in different scientic disciplines and different
2007
HINDUSTAN UNILEVER LIMITED
(Formerly known as Hindustan Lever Limited)
23
category research groups of HPC and Foods. The
Bangalore research centre has been expanded with
signicant additional world-class laboratory space. The
Company's major strength continues to be the ability to
attract, develop and retain scientists who are best-in-
class by virtue of their pedigrees and performance.
Recognition of the outstanding capabilities and
performance of the Bangalore Discovery Laboratory, and
the HPC/Foods Design and Deploy groups in Mumbai/
Bangalore, has led to a signicant expansion in the
content as well as the context, of the work done by these
groups. India is now a premier global R&D domain for
Unilever, performing leading research and development
to advance its brands and categories. All this work is of
high relevance to the Company businesses. In addition
to the professional growth of people and creation of
new products, their global role also facilitates further
advances, through synergistic links to the other major
Unilever laboratories.
9. ENVIRONMENT, SAFETY AND ENERGY
CONSERVATION
Safety and Environment Performance has been integral to
the business performance of your Company and continue
to receive focus throughout the year. Our vision is to
be a zero-injury organization. Unilevers Framework
safety and environmental standards, which are aligned
to international standards of ISO 14001/OHSAS 18001,
have been implemented across the Company. Effective
implementation of these standards is supported by
your Companys occupational safety programme based
on the behavioral safety management techniques. This
is accepted world wide as the best way to achieve
sustained safety improvement. We continue to focus
on behavioural safety aspects of employees and visitors
along with continual improvements in engineering
controls and safety management systems. All these
efforts have resulted in signicant improvement in the
Companys safety record and we continue to have one
of the lowest accident rates among Unilever Companies
worldwide.
In the past, many of the Companys manufacturing
units have been recognized by various organizations for
their exemplary performance on safety. Continuing this
trend during the year, Aroor factory received the National
Safety Council award in the medium size industry
category while Cochin tea factory received the safety
performance award in the medium scale non-engineering
non-chemical factory category.
Your Company has been focussing on improving
environmental performance and has drawn up an
ambitious plan to reduce the environmental impact of
operations including reduction in greenhouse gases.
This has resulted in a lower environmental load in key
parameters which are monitored very closely every
month. Your Company received 1,50,000 CERS (carbon
credits) for an innovative soap manufacturing process
which consumes signicantly lower energy and water.
This technology was developed in-house and patented by
the Company. Your Company was the rst in Unilever to
receive carbon credits. The Company is also focusing on
alternative sources of renewable fuels and has installed
a bio-mass based boiler at Chiplun factory. Rainwater
harvesting projects have been progressed further at
the manufacturing sites, helping to conserve ground
water. Other ongoing sustainability projects such as
greening of barren land in and around our factories and
vermi-composting of waste into value added fertilizer
supplements are progressing well.
10. HUMAN RESOURCES
The Human Resource (HR) agenda for the year 2007
was focused on three key areas - embarking on human
resource transformation program, building organizational
and individual capabilities and signicantly enhancing
people productivity to drive sustainable business
growth.
HR transformation program is a business change program
and impacts ways of working in Unilever companies
across the world. At the core of this program are world
class info-tech platform & solutions to efciently manage
Human Resources transactions. The HR function has
been simplied into three distinct streams Business
Partners, Expertise Teams and Corporate Services. The
IT platforms would rely on self service mode thereby
enhancing the productivity of HR Management by freeing
up their time from managing routine and transactional
workload. In the course of 2008, your Company expects
to progressively move to this new way of working.
The belief great people create great organizations
has been at the core of the Companys approach to its
people. Your Company made signicant investments
for training in the areas of marketing, excellence in
customer service and building expertise and capabilities
for organised retail trade. A step in this direction is the
formation of a JV with Smollan Holdings of South Africa,
referred in Section 7.3.
Arising from the focus in driving a holistic capability
program, over 300 training programs were delivered
through classrooms. 2007 also saw a signicant amount
of sharing of Unilever best practices in building functional
expertise through Global Learning Academies. In 2007,
Unilever introduced an e-learning platform which
offers a bouquet of 3000 courses on a self learning
HINDUSTAN UNILEVER LIMITED
(Formerly known as Hindustan Lever Limited)
2007 24
mode via computer and internet. These programs can
be accessed by a Unilever employee anywhere in the
world, at anytime.
During 2007, TPM gains were further consolidated
as four of our sites underwent audits for TPM award,
of which Khamgaon unit is now the second in HUL
to be accredited with the prestigious Special award.
Employee Relations in the Company continued to be
largely positive. During the year, nine productivity linked
Long Term Settlements were nalised through bilateral
negotiations beneting over 2000 employees.
In 2007, ve units underwent restructuring; extensive
efforts towards relocation of the affected employees
were undertaken. Except a few who have opted to
separate by taking a fair and generous package, other
employees willingly relocated to other units of the
Company thereby ensuring job security for them. All
restructuring initiatives were supported by liberal VRS
packages and relocation facilitated through relocation
schemes.
There were three unfortunate incidents of disturbances in
our otherwise cordial Industrial relations. At Baddi Factory
(in Himachal Pradesh) and at the Companys detergents
factory at Pondicherry, workmen resorted to illegal
strikes which were resolved timeously and without major
disruption with the intervention of local labour authorities.
The third incident was at Doom Dooma factory (in
Tinsukhia, Assam); sixteen members of the Management
and Ofcers were subjected to illegal connement by a
section of workmen resulting in indiscipline and lack of
security in the workplace. Management had no option
but to respond to the illegal strikes of the workmen by
declaring a lock out as per law. The lock out commenced
on 15th July, 2007 and was lifted on 3rd September, 2007
with an agreement arrived at between the Management
and the Union before the Conciliation Ofcer.
In line with our commitment towards afrmative action,
the Special Apprenticeship Program was introduced
through which over 75 Interns have got one year
internship in our factories and sales network. As a
responsible corporate, your Company has accepted to
abide by the Code evolved by Confederation of Indian
Industries (CII) for afrmative actions in private sector.
The year 2007 saw your Company being recognized by
the Industry for its cutting edge and best in class talent
practices. One of the key recognitions that came our way
was in the eld of leadership - Top Company for Leaders
award conferred by Fortune and Hewitt Associates - 1st in
Asia Pacic and 4th in the Globe. This is great testimony
to its strong leadership development programmes that
have been an integral part of your Company over the
last 75 years.
Information as per Section 217 (2A) of the Companies
Act, 1956, read with the Companies (Particulars of
Employees) Rules, 1975, forms part of this Report.
However, as per the provisions of Section 219(1)(b)(iv) of
the Act, the report and accounts are being sent excluding
the statement containing the particulars to be provided
under Section 217(2A) of the Act. Any member interested
in obtaining such particulars may inspect the same at
the Registered Ofce of the Company or write to the
Company Secretary for a copy thereof.
The information required under Section 217(1)(e) of
the Companies Act, 1956, read with the Companies
(Disclosure of Particulars in the Report of the Board of
Directors) Rules, 1988 is appended hereto and forms
part of this report.
11. MERGERS/ACQUISITIONS/JOINT VENTURES
AND DISPOSALS
11.1 Divestment of Sangam Direct
In March 2007 "Sangam Direct" a non-store home delivery
retail business, operated by Unilever India Exports
Limited (UIEL), a fully owned subsidiary of your Company
was transferred to Wadhavan Foods Retail Pvt. Limited
(WFRPL) on a slump sale basis.
In 2001, the Sangam business was conceptualized and
test marketed in Mumbai to experiment with the direct
to consumer channel combining the twin benets of
convenience and value. The business comprised a
dedicated call centre with trained personnel for order
procurement using customized ERP systems to distribute
through a network of re-distribution agents. It reported
a turnover of about Rs. 26 crores for the calendar year
2006. The decision for a larger roll out was put on hold
in the context of evolving/changing retail scenario in
the Country. Although the business met many of its
milestones successfully, your Company felt that it was
not in its strategic interest to continue to be present
in this format of organized retail and that the business
would have a better opportunity to realise its full potential
through the Wadhavan group.
11.2 Amalgamation of Modern Foods Industries
(India) Limited and Modern Foods and
Nutrition Industries Limited with Hindustan
Unilever Limited
Your Company had sought approval from the shareholders
and the Courts to merge the above Companies as of
30th September, 2006. While the shareholder approvals
were received in 2006, your Company received approvals
from the High Courts of Mumbai and Delhi in March
Quarter 2007. Thus the two companies have been
merged with your Company w.e.f. 1st October, 2006.
2007
HINDUSTAN UNILEVER LIMITED
(Formerly known as Hindustan Lever Limited)
25
11.3 Demerger of the non-operational facilities in
Shamnagar, Jamnagar and the Janmam land
into separate companies
Your Company had undertaken demerger of its non-
operational facilities in Shamnagar, Jamnagar and Nilgiris
district into three independent and separate companies,
being 100% subsidiaries of the Company known as
Shamnagar Estates Pvt. Limited, Jamnagar Properties
Pvt. Limited and Daverashola Estates Private Limited
(Formerly known as Hindustan Kwality Walls Foods
Private Limited).
Following the approval of the shareholders, the Honble
High Court at Bombay have also approved this and the
demerger is effective from 29th March, 2007.
11.4 Joint venture with Smollan Holdings
Your Company has entered into a strategic tie-up
through a Joint Venture (JV) with Smollan Holdings of
South Africa, which aims to build long term capabilities
and bring in-store execution focus in servicing the
Companys Modern Trade customers. Smollan Holdings
is one of the leading in-store execution and field
services companies internationally. It has leading edge
capabilities in servicing Modern Trade focused on shelf
lling, logistics for merchandising materials and in-store
execution.
The new company has been named as Hindustan
Unilever Field Services Private Limited (HUFS) and will
work exclusively on behalf of the Company in Modern
Trade channel only. The operations will begin with the
existing Modern Trade in-store execution team of the
Company moving into HUFS.
12. EMPLOYEE STOCK OPTION PLAN (ESOP)
Details of the shares issued under ESOP, as also
the disclosures in compliance with clause 12 of the
Securities and Exchange Board of India (Employee
Stock Option Scheme and Employee Stock Purchase
Scheme) Guidelines, 1999 are set out in the Annexure
to this Report.
None of the management employee or Whole-time
Director have received options exceeding 5% of the
value of the options issued for the year ending December
2007.
Likewise, no employee has been issued share options,
during the year equal to or exceeding 1% of the issued
capital of the Company at the time of grant.
Adoption of the Global Share Performance Scheme
in place of ESOP
Pursuant to the approval of the members at the Annual
General Meeting held on 29th May, 2006, the Company
adopted the 2006 HLL Performance Share Plan. The
Plan has been registered with the Income Tax authorities
in compliance with the relevant provisions of SEBI
(Employee Stock Option Scheme and Employee Stock
Purchase Scheme) Guidelines, 1999. As per the terms of
the Performance Share Plan, employees are eligible for
the award of conditional rights to receive equity shares
of the Company at the face value of Re. 1/- per share.
These awards will vest only on the achievement of certain
performance criteria measured over a 3 year period.
169 Employees including Whole-time Directors were
awarded conditional rights to receive a total of 2,35,950
equity shares at the face value of Re. 1/- each.
13. CORPORATE RESPONSIBILITY
As in the earlier years, your Company continued to involve
itself in social welfare initiatives across the Country, both
through charity and social investment around issues
like education, health, nutrition and initiatives for the
economic upliftment of the underprivileged.
In addition to initiatives like Shakti, your Company has
commenced a pilot in its tea business, in partnership with
an NGO (Partners in Change) to source tea directly from
small producers and thereby improve their livelihood.
The effort of the Company in improving water availability
through soil conservation and water harvesting methods
has borne good results. In the Parkhed region (near
Khamgaon factory), we have been successful in
demonstrating the effectiveness of the model which is
now ready for roll out. In Kharchond, Silvassa the area
under irrigation has increased, thereby improving the
economic condition of the villagers in the region.
The Company believes that brands must be at the
forefront of driving social change. The extension of the
Lifebuoy Swasthya Chetna programme to 43000 villages
with a view to improve hygiene standards and thereby
reduce the risks of infant mortality through diarrhoea is
a case in point.
Your Company has formalized a brand imprint protocol,
which will help every brand to assess the opportunities
for social contribution and integrate the same in the
overall brand strategy.
While much has been done, the issues facing society
are complex and expectations from stakeholders are
increasing. Your Company is alive to the challenges and
remains rm in its belief that it is possible to do good
while doing well and that running a successful business
and creating positive social impact are not separate
objectives.
14. INFORMATION TECHNOLOGY
Your Company has continued to invest signicantly in
Information Technology and leverage it for business
value.
Information technology in the area of sales and customer
development has been one of the key thrusts. All
redistribution stockists operate on a common transaction
HINDUSTAN UNILEVER LIMITED
(Formerly known as Hindustan Lever Limited)
2007 26
system fully integrated with our systems. This capability
has enabled us to collaborate with customers on a near
on-line basis and signicantly improve our eld execution
and customer service. We have also leveraged IT to
collaborate with the emerging Modern Trade Channels
to enhance efciencies and service levels.
Signicant progress has been made in building and
implementing an enterprise-wide SAP transaction
capability. This was accompanied by re-engineering and
simplication of business processes to improve agility
and customer service. In 2007, SAP based transaction
systems were successfully rolled out for all customer
facing order-to-cash processes. A signicant aspect of
this program has been the replenishment based ordering
and servicing on SAP for all our customers. The capability
development for the balance processes covering Supply
Chain and Central Financials is underway. By the end
of 2008, your Company will have an end-to-end SAP
platform that will provide a robust foundation to address
several emerging business needs.
Your Company continues to invest in IT infrastructure to
support business applications. We have a robust virtual
private network using MPLS technology, supplemented
by VSATs for remote locations. We have leveraged the
excellent and growing telecom network in the country
to provide high bandwidth terrestrial links to all our
operating units. This has enabled us to coordinate
activities effectively across geographically dispersed
locations.
Information Security and reliable disaster recovery
management continue to be a critical focus area
especially as most business processes become fully
IT-enabled. We carry our regular exercises to reassure
ourselves on the same.
Your Company views IT as a strategic tool to enhance
busi ness val ue and enabl e new ways of doi ng
business.
15. FINANCE AND ACCOUNTS
Your Company continued its focus on cash generation
and delivered a strong operating cash ow during the
year. This was driven by good business performance,
efciencies and cost savings across Supply Chain and
a continued efcient collection system. Your Company
managed investments prudently by deployment of cash
surplus in a balanced portfolio of safe and liquid debt
market instruments; returns earned were higher than
market benchmarks. An amount of Rs. 1399 crores was
used up during the year by way of a Special Platinum
Jubilee Dividend (Rs. 773 crores including DDT) and
Share Buy Back (Rs. 626 crores). Capital Expenditure
during the year was at Rs. 372 crores (2006, Rs. 151
crores) and was in the areas of capacity expansion,
information technology, energy and other cost savings.
The total amount of xed deposits taken by the company
as of 31st December, 2007 was nil. There was no
outstanding towards unclaimed deposit payable to
depositors as on 31st December, 2007.
In terms of the provisions of Investor Education and
Protection Fund (awareness and protection of investor)
Rules 2001, Rs. 298 lakhs of unpaid/unclaimed dividends,
interest on debentures and deposits were transferred
during the year to the Investor Education and Protection
Fund.
Return on Net Worth (RONW), Return on Capital
Employed (ROCE) and Earnings Per Share (EPS) for the
last ve years are given below :
For the year ended
31st December,
2003 2004 2005 2006 2007
RONW (%) 82.8 57.2 61.1 68.1 80.1
ROCE (%) 60.2 45.9 68.7 67.0 79.4
EPS of Re.1 (after
exceptional items) 8.05 5.44 6.40 8.41 8.73
Economic Value Added (EVA)
Economic Value Added for the last ve years is given
below:
Years EVA Average Capital Employed
2003 1,429 3,780
2004 887 3,704
2005 1,014 2,560
2006 1,125 2,677
2007 1,340 2,785
The above EVA has been computed under conservative
assumptions.
Segment-wise results
Your Company has identied seven business segments in
line with the Accounting Standard on Segment Reporting
(AS-17). These are: (i) soaps and detergents, (ii) personal
products, (iii) beverages, (iv) foods, including culinary
and branded staples, (v) ice-creams, (vi) exports, and
(vii) others, including chemicals and agri-products. The
audited nancial results of these segments are given as
a part of nancial statements.
Risk and Internal Adequacy
Your Company has a low debt equity ratio and in fact
had a surplus cash and investments of Rs. 1554 crores
as on end December 2007 and is well placed to take
care of any of its borrowings. Your Company is a large
net foreign exchange earner and the transactions are
2007
HINDUSTAN UNILEVER LIMITED
(Formerly known as Hindustan Lever Limited)
27
generally always fully covered with strict limits placed
on the amount of exposure, if any, at any point in time.
There are no materially signicant exchange rate risks
associated with the Company.
Your Companys internal control systems are well
commensurate with the nature of its business and
the size and complexity of its operations. These are
routinely tested and certied by Statutory as well as
Internal auditors and cover all the ofces, factories and
key areas of business. All signicant audit observations
and follow-up actions thereon are reported to the Audit
Committee. Audit Committee reviews the adequacy
and effectiveness of the Companys internal control
environment and monitors the implementation of
audit recommendations including those relating to
strengthening the Companys risk management policies
and systems.
Outlook
The Indian economy has grown at a healthy 8% + level
for the last three years and is expected to continue to
grow at these levels. This growth is driven by a strong
performance by the industry and service sectors, with
agriculture slated to register a positive growth of 3%.
Our plans assume continued economic and market
growth. It is believed that in spite of the fears of a global
recession, Indian domestic demand will provide sufcient
llip and resilience to GDP growth. We are however
cognizant of the inationary pressures which have been
signicant for the last few years, largely led by global
petroleum and commodity price increases. The Company
will continue its relentless focus on cost management,
savings and efciencies, besides examining the need
for appropriate price corrections if and when needed to
manage margins.
Cautionary Statement
Statements in this Report, particularly those which relate
to Management Discussion and Analysis, describing
the Companys objectives, projections, estimates
and expectations may constitute forward looking
statements within the meaning of applicable laws and
regulations. Actual results might differ materially from
those either expressed or implied.
16. DIVIDEND
The Board of Directors have recommended a final
dividend of Rs. 3/- per equity share of the face value of
Re. 1/- each for the year 2007, amounting to Rs. 653.24
crores . The Company has earlier during the year declared
an interim dividend of Rs. 3/- per share which was paid
on 22nd August, 2007 and a special Platinum Jubilee
Dividend of Rs. 3/- per share which was paid on 22nd
November, 2007.
The nal dividend, subject to approval of shareholders,
will be paid to the shareholders whose names appear on
the Register of Members reference to the book closure
from 19th March, 2008 to 3rd April, 2008 (inclusive of
both dates).
The total dividend for the year including the proposed
final dividend is Rs. 9/- per share and amounts to
Rs. 2,331.62 crores including the Dividend Distribution
Tax.
17. SUBSIDIARY COMPANIES
During the year, Brooke Bond Real Estates Private Limited
and Hindustan Unilever Field Services Private Limited
became wholly owned subsidiaries of your Company.
A statement pursuant to Section 212 of the Companies
Act, 1956 relating to subsidiary companies is attached
to the accounts.
In terms of approval granted by the Central Government
under Section 212(8) of the Companies Act, 1956, the
Audited Statements of Accounts and the Auditors
Reports thereon for the year ended 31st December,
2007 along with the Reports of the Board of Directors
of the Companys subsidiaries have not been annexed.
The Company will make available these documents upon
request by any member of the Company interested in
obtaining the same. However, as directed by the Central
Government, the nancial data of the subsidiaries have
been furnished under subsidiary companies particulars
forming part of the Annual Report. Further, pursuant
to Accounting Standard 21 issued by the Institute
of Chartered Accountants of India, Consolidated
Financial Statements presented by the Company in this
Annual Report includes the nancial information of its
subsidiaries.
18. BOARD OF DIRECTORS
Mr. V. Narayanan, who was appointed as the Non-
Executive Director of the Company will be retiring on
the conclusion of the ensuing Annual General Meeting
on attaining the age of 70 years in accordance with the
policy of the Company, and therefore will not be seeking
re-appointment. The Board places on record its deep
appreciation for the distinguished services rendered by
Mr. V. Narayanan during his tenure as a Director of the
Company, initially as the Chairman of Audit Committee
and now for the past 3 years, as the Chairman of
Remuneration/Compensation Committee.
HINDUSTAN UNILEVER LIMITED
(Formerly known as Hindustan Lever Limited)
2007 28
To fill up the vacancy caused by the retirement of
Mr. V. Narayanan, the Company proposes to appoint
Dr. R. A. Mashelkar as Non-Executive Independent
Director of the Company in accordance with Section 269
and Article 111 of the Articles of Association. Notice has
been received from a member pursuant to Section 257
of the Companies Act, 1956, together with necessary
deposits of Rs. 500/- proposing the appointment of
Dr. R. A. Mashelkar to the Board of Directors.
In accordance with the Articles of Association of your
Company, all other Directors of the Company will retire
at the ensuing Annual General Meeting and being eligible
offer themselves for re-appointed.
Brief resumes of the Directors proposed to be appointed/
re-appointed as required under Clause 49 of the listing
agreement are provided in the Notice of the Annual
General Meeting forming part of the Annual Report.
19. MANAGEMENT COMMITTEE
The day-to-day management of your Company is
vested with the Management Committee comprising
business and functional heads, who work under the
overall superintendence and control of the Board. The
Management Committee is headed by Mr. Douglas Baillie
as the Chief Executive Ofcer.
During the year, Mr. Sanjay Dube, Executive Director
- Sales and Customer Development and a member of
the Managing Committee was appointed Chairman,
Poland and Baltics, Unilever, with effect from 1st June,
[Link] Board places on record its appreciation for the
extensive contribution of Mr. Sanjay Dube to the sales
and customer development function of the Company.
Pursuant to his appointment as the Whole-time Director,
Mr. Sanjiv Kakkar has taken charge of the Sales and
Customer Management portfolio of the Company and
has been appointed as Executive Director - Sales and
Customer Development in place of Mr. Sanjay Dube.
Mr. Shrijeet Mishra, who was VP Activation - Asia AMET
in Singapore, has replaced Mr. Sanjiv Kakkar as Executive
Director-Foods and is appointed as a member of the
Management Committee w.e.f. 1st June, 2007.
Mr. Ashok Gupta and Ms. Leena Nair were appointed as
Executive Directors, heading the Legal and HR functions
respectively to form part of the Management Committee
effective from 1st June, 2007.
20. AUDITORS
M/s. Lovelock & Lewes, statutory auditors of the
Company retire and offer themselves for re-appointment
as the statutory auditor of the Company pursuant to
Section 224 of the Companies Act, 1956.
21. APPRECIATION
Your Directors wish to place on record their appreciation
to employees at all levels for their hard work, dedication
and commitment. The enthusiasm and unstinting
efforts of the employees have enabled the Company to
remain at the forefront of the industry despite increased
competition from several existing and new players.
Your Directors would like to acknowledge the tremendous
contribution by the parent Company, Unilever in providing
your Company with the very latest innovations and
marketing inputs in almost all the categories in which we
operate. This has enabled the Company to provide higher
consumer satisfaction through continuous improvement
in existing products and bring in the latest products from
Unilever portfolio backed by global research. Unilever has
also supported your Company extensively to follow and
adopt world class business processes in all functional
areas like Customer Development, Supply Chain Planning
and Execution, Finance and Human Resources.
22. TRADE RELATIONS
The Board place on record their appreciation for the
support and co-operation your Company has been
receiving from suppliers/re-distribution stockists,
retailers and others associated with the Company as
its trading partners. Your Company has always looked
upon them as partners in its progress and has happily
shared with them the rewards of growth. It will be the
Companys endeavour to build and nurture strong links
with trade based on mutual respect and co-operation
consistently aligned with consumer interests.
23. ACKNOWLEDGEMENT
Your Directors take this opportunity to thank all investors,
clients, vendors, banks, regulatory and government
authorities and stock exchanges, for their continued
support. Your Directors also wish to place on record their
appreciation of the contribution made by the business
partners/associates at all levels.
On behalf of the Board
Harish Manwani
Chairman
Mumbai
13th February, 2008