Equity Research 14.06.

2018 <Consumer Goods>

<UNILEVER N.V.>
Rotterdam, Netherlands, Highlights
<UNA NA> “We believe that sustainable and equitable growth is the only way to
<Euronext Amsterdam> create long-term value for our stakeholders. That’s why we have
placed the Unilever Sustainable Living Plan at the heart of our
12-m rating business model.”
12m target price 52.07
Last Closing Price 47.74 Unilever N.V. manufactures and distributes food, beverages, home
as of May 31st and personal care products. It has business operations in 100
Upside Potential 9.1% countries and serves approximately 2.5 billion customers residing in
175 190 countries. It markets these products under 400 brands in both
domestic and international markets.
155
We issue a BUY recommendation with a target price of EUR 52.07
135
per share representing an upside of 9.1% from its May 31th, 2018
115
closing price of EUR 47.74.
Our recommendation lays on the following key investment highlights:
95 • A diversified business mix and product innovation, which allows
Unilever to fulfill the changing preferences' of customers.
75 • A strong growth in emerging markets specially for Home and
2013 2014 2015 2016 2017 Personal care segments.
Unilever N.V. DJEuro Stoxx 600 • Investment Risks: include business and operational, financial and
market risks that were assessed for impact and likelihood and
afterwards ranked in a risk matrix.
Trading Data and Key Metrics
• Robust financial outlook supported by M&A: Unilever had a strong
52-Week High/Low 52.31/42.13 year 2017 with sales growth to EUR 53,715 with a 1.90% increase
Market Cap. 139,997.6M and an increase in EBIT Margin of 1.6%..
Shares o/s 1,714.7M Recent News
Avg, Volume (mm) 4.739M • In May Unilever PLC and Unilever N.V. announce the beginning of
Beta (5Y) 0.92 a program to buy back shares with an aggregate market value of
Dividend Yield 3.06% up to €6 biillion.
Free Float 94.34% • Unilever completes acquisition of Quala”s beauty & personal and
EV / Sales 3.00 home care brands as for March 2018.
EV / EBITDA 15.20 • In February 2018, Unilever received a biding offer from Dr.Oetker
EV / EBIT 17.78 to acquire the Alsa baking and dessert preparation business.
P/E 22.12 • On February 5th, Unilever priced €2.0 billion bonds on European
markets
Lizette Navarro Key Ratios FY12 FY13 FY14 FY15 FY16 FY17
Equity Research Analyst Revenue growth % 10.5% (3.0%) (2.7%) 10.0% (1.0%) 1.9%
Gross Profit % 12.2% (0.3%) (3.3%) 12.0% 0.1% 3.0%
EBIT % 13.0% 15% 16% 14% 15% 16%
Net Profit % 8.5% 9.7% 10.7% 9.2% 9.8% 11.3%
Philipp Utz ROIC - 7% 7% 5% 5% 6%
Foto Equity Research Analyst ROE % - 31% 36% 32% 31% 39%
ND / EBITDA (x) 0.9x 1.0x 1.1x 1.3x 1.4x 2.0x
Interest Coverage (x) 13.0x 15x 16x 14x 15x 16x
Earnings per share EUR 1.54 1.71 1.82 1.73 1.83 2.16
Dima Solovei Payout Ratio % 61.8% 61.8% 61.7% 67.9% 69.6% 64.7%
Equity Research Analyst Dividend Yield % 3.3% 3.6% 3.4% 2.9% 3.2% 3.0%
Revenue / Employee 296,671 286,190 279,977 315,366 311,911 325,545

0
 Equity Research 14.06.2018 <Consumer Goods>

Business Description
Revenue per Segment 2017
18%
Unilever is a dual listed company consisting of Unilever plc based in
London and Unilever N.V., based in Rotterdam. It operates in the
39% Fast Moving Consumer Goods (FMCG) Industry making and selling
around 400 brands in more than 190 countries, giving Unilever a
unique position in emerging markets which generates 58% of the
23% turnover. Unilever operates and manages 306 factories in 69
countries and maintains a network of approximately 400 warehouses
20% in various global markets. Unilever operates through a network of
Home Care Personal Care distribution centers, group-operated facilities, satellite warehouses,
Foods Refreshments public storage depots, wholesalers, independent grocery stores, co-
Source: Company Information, Team estimates operatives and various food service providers. The company
classifies its geographic operations into three regions: Asia, Africa,
Revenue by Geographical the Middle East, Turkey, Russia, Ukraine and Belarus
Regions 2017
24% (Asia/AMET/RUB), the Americas, and Europe. Unilever\s largest
international competitors are Nestlé and Procter & Gamble. It also
faces competition in local markets or specific product ranges from
43%
numerous companies, including Danone, Henkel, L’Oréal., Reckitt
Benckiser Gruoup, Beiersdorf, Kraft Heinz, The Coca-Cola
Company, PepsiCo, Colgate-Palmolive and General Mills.

33% Unilever is organized into four main divisions: the largest being
Asia/AMET/RUB The Americas Europe Personal Care (39% of Turnover), followed by Foods (23%), Home
Source: Company Information, Team estimates
Care (20%) and Refreshment (18%). As of January 1st, 2018 Foods
and Refreshment are combined into a single segment.
EBIT Margins by Segment
75,000 9%
65,000 Home Care
55,000 7%
45,000
Produces and sells powder, liquids and capsules, soap bars and a
4% wide range of cleaning products. Offers tailored products that include
35,000
25,000 2% soap bars for lower income category consumers and other
15,000
5,000 -1% household products including bleach, home water purifiers and
surface cleaners.
Home Care accounts for 20% of the company's turnover and 13% of
Total Revenues Personal Care operating profit. Its two major global brands with a turnover of €1
Home Care Foods
Refreshment billion are Dirt is Good, which includes Omo and Persil and Surf.
Source: Company Information, Team estimates Other well-known brands are Domestos, Sunlight, Cif, Pureit, the
water purification brand and Blueari, the air purification business.
The Home Care segment has been steadily growing for the past
eight years with the CAGR almost doubling between periods 2008-
13 and 2014-16. Year 2016 saw some impressive results, when the
growth rate reached 5% in the global market.

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 Equity Research 14.06.2018 <Consumer Goods>

Revenue per segment (mio. Business Description

60,000 Euro)

Personal Care
40,000
Personal hygiene market consists of the retail sale of antiperspirants
20,000
and deodorants in spray, stick, roll-on, cream, gel, and solid formats.
Bath & shower, bubble-baths and bath time washing gels and lotions.
0 The segment also includes non-liquid products added to baths such
2012 2013 2014 2015 2016 2017 as bath bombs, beads, and salts. And soap, bar soaps and liquid
Personal Care Home Care soaps.
Foods Refreshment
The Personal Care segment is the largest category and accounts for
Source: Company Information, Team estimates 39% of Unilever’s turnover and 46% of operating profit. This segment
has leading global position in hair, skin cleansing and deodorants
Total Operating Profit (%) by and includes brands like Axe, Dove, Lux, Rexona and Sunsilk with a
Category
turnover of €1 billion. It also includes household names such as
100%
80%
TRESenmé, Signal, Lifebuoy and Vaseline. Its main markets are
60% US, India, Brazil and Indonesia.
40%
20% Refreshments (beverage and ice-cream)
0% Offers ice cream, tea-based beverages, weight management
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017

products and nutritionally enhanced products. Provides solutions for

professional chefs and caterers.
Personal Care Home Care The ice-cream market consist of artisanal ice-cream (dairy and
Foods Refreshment water-based); impulse ice-cream (single-serve tubs), packaged
Source: Company Information, Team estimates
cones, sandwiches and chocolate-coated ice-creams; and take-
home ice-cream (multiple serving tubs) and ice-cream cakes.
Revenue by Geographic
segment (mio. Euro) The segment contributes close to 20% of the company’s total
60,000 revenues and accounts for 15% of its operating profit.
50,000 Refreshment includes three brand with turnover of €1 billion,
40,000 Heartbrand, Magnum and Lipton, alongside household names
30,000
including Brooke Bond and Ben & Jerry’s. Its premium positioned
20,000
10,000
brands includes T2, Pure Leaf and Taj Mahal in tea and Grom and
0 Talenti in ice-cream.
2012 2013 2014 2015 2016 2017
Revenues Asia/AMET/RUB Foods
The Food segment accounted for 23% of Unilever‘s turnover and
The Americas Europe
Source: Company Information, Team estimates
26% of operating profit. The two main global Foods brands are Knorr
and Hellmann‘s, which accounted for almost two thirds of the
Total Operating Profit (%) by category turnover.
Geographical Region Foods continued a consistent and profitable growth in 2017 with
100% underlying sales up 1.0% and operating margin increasing to 18.2%.
80%
60%
The strongest growth was delivered in emerging markets, which
40% account for 46% of turnover with a CAGR of 7% based on the last
20% three years.
0%
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017

Asia/AMET/RUB The Americas Europe

Source: Company Information, Team estimates

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 Equity Research 14.06.2018 <Consumer Goods>

UNILEVER Group’s current structure Strategy

Continuous Improvement The company has implemented different

strategies to reduce spending and costs (zero-based budgeting
approach) throughout the organization.
Customer development is using virtual reality tools to test ahead new
launches in order to save in costs and cutting project times.

Market Place Unilever’s Category channel Development Leaders

and market professionals work closely in order to guarantee products
availability when and where consumers want them, in the format they
prefer. In E-commerce more than 800 people are working to build
Source: Company Information, business through numerous online channels.

Growth of demand for soap and Corporate Governance

cleansers, APAC region
12%
10% The Dual Structure Unilever N.V. and Unilever PLC are two parent
2017 2018
7% companies of the Unilever Group being incorporated under different
5% laws, Unilever N.V. under the laws of the Netherlands and Unilever
2% PLC under the laws of England and Wales. Since Unilever Group
-1% was formed in 1930 both companies, N.V. and PLC and their
Japan
Vietnam

India

Hong Kong
Thailand

South Korea

New Zealand

Pakistan
Taiwan
Malaysia

Singapore

China
Indonesia

Philippines

Australia

-3% subsidiaries have been operating as a single economic entity.

Nevertheless, the shareholder constituencies and the stock
exchange listing are being kept separately, thus, prohibiting
shareholders to convert or exchange the shares of one parent
company into shares of the other parent company, but enjoying the
Single-person households in
mio. U.S. same rights in the Group. This was guaranteed by the Foundation &
Equalization Agreements.
40 By end-2018 the dual structure of Unilever NV and PLC will stop to
35 exist. Unilever will have a single head office in the Netherlands. By
30
unifying to a single entity, Unilever’s (1) strategic flexibility on
25
20 portfolio changes (including M&A and/or demergers) increases, (2)
15 capital structure is more transparent for investors and (3) reduces
10 administrative load. Nevertheless Unilever will continue to be listed
5 in London, Amsterdam and New York.
2007
1960
1975
1985
1991
1993
1995
1997
1999
2001
2003
2005

2009
2011
2013
2015

Both NV and PLC are subject to different laws, regulations and

corporate governance requirements. It is therefore, Unilever’s
practice to comply with the most relevant best practice codes.

Industry Overview and Competitive Positioning

Home Care
Latin America is giving positive signals, as Brazil, the third largest
consumer in the world recovers from its severe recession,
urbanisation continues and concern for personal and family hygiene
increases. Previously stagnating region scaling up on home care
purchases, growth 13.1% in 2017.

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 Equity Research 14.06.2018 <Consumer Goods>

Another high-potential market for home care products – Middle East

U.S. Home Care Market - Revenue and Africa – have grown 9.1% percent. Western Europe and North
and Growth
€ 22,000 1.5% America hold their leading shares in global home care products
consumption, growing at a slow pace of 1.1% - 1.8%. Already well-
€ 21,500 1.0% defined and established markets, they are expected to remain
€ 21,000 0.5% relatively stable over time. In Asia, growing wages are expected to
boost people’s purchasing power.
€ 20,500 0.0%

€ 20,000 -0.5% New product features are sought

Taking a qualitative perspective, we see, how the trend for healthy
lifestyle, originally seen in food and beverages, then spread onto
Total Revenue YoY Growth
personal care, has now finally reached the home care segment. Both
brand and a parent company are expected to use ecologically safe
Home Care Contribution to EBIT ingredients and promote sustainability of supply chain.
Margin
75,000 15%
Historically low palm oil prices should facilitate growth in the
60,000 13% production and consumption volumes while also keeping costs
45,000 10% adequately low.
8% Observations show how chemicals previously only used in
30,000 5%
15,000 3% professional environments, such as sanitizers and disinfectors, now
0 0% appear in consumer baskets – a clear indication that household
cleaning became a regular chore.
Fragrance has become a purchasing driver across a wide range of
Revenues Home Care
Other Revenues home care products and consumers are seeking experiential and
HC EBIT Margin
Home Care Contribution to EBIT Margin sophisticated scents enhancing the indoor living space. Consumers
already associate fragrance to cleanliness in beauty and personal
Palm Oil Price in U.S. dollars care and in a similar manner in home care, perceptual cleanliness
and hygiene are increasingly correlated to fragrance.
$1,000
The traditional gender roles of men and women have changed
$900 significantly and has led men to fend more for themselves at home
$800 and take on a greater share of housework. Additionally young men
$700 and women are more likely than ever to live alone as they delay
$600
marriage, which means they have higher levels of disposable
income to spend on their image and wellbeing.
$500
A trend observed in U.S. is will soon be the case for China as well,
Jan 14

Jan 15

Jan 16

Jan 17

Jan 18
Jul 14

Jul 15

Jul 16

Jul 17

as an effect of one-child-policy, previously run by the state. Also,

since young people are now living separately, an increase in living
area per person will push the demand for house cleaning products.
Five largest Home Care product
consumers. In million EUR
7% Personal Care
11%
Personal Care more generally consists of the following
39%
subsegments: cosmetics, skin care, personal hygiene, hair care,
12%
fragrances and oral care. Unilever mainly operates in the
subsegment Personal Hygiene offering skin care and hair care
31% products, deodorants and oral care products. Overall the Personal
China United States Hygiene market had a value of 44.5 billion USD in 2016 and grew by
Brazil Japan a CAGR of 4.6% between 2012 and 2016.
United Kingdom

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 Equity Research 14.06.2018 <Consumer Goods>

Global Personal Hygiene market The quest for growth

(bn. USD) Growth rates are expected to decelerate, which forces companies to
50 5.00% be more selective if they want to maintain high growth. The mass
40 market especially in developed countries is relative mature and will
30
show modest growth numbers. Higher growth rates can be expected
4.00% in more premium segments like organic products with multiple
20
10
benefits. The increased demand is driven by two factors, one being
increased demand from millennials and more efficient targeting of this
0 3.00%
2012 2013 2014 2015 2016 consumer group. The other factor is increased disposable income that
moves consumers globally from the mass market to the more
Global personal hygiene market
Growth premium segments. This development will be particularly strong in
Source: MarketLine emerging markets. Another relevant aspect for the overall demand for
Personal Care products in those markets is improved hygiene
Personal hygiene market 2016
practices. As a consequence, the Asia-Pacific market is expected to
by category (%)
grow by a CAGR of 4.8% by the end of 2021 compared to a CAGR of
30% 2.2% in the US.
36%

With a little help from millennials and emerging markets

Related to the increased demand coming from millennials are the
expected high growth rates in men’s grooming. Moreover, until
33%
recently Personal Care products have been relatively unaffected by
Anti-Perspirants & Deodorants the trend towards e-commerce. However, a transformation is on its
Soap way improving online sales figures and China is a likely role model
Bath & Shower Products
Source: MarketLine where e-commerce is over 30% of its Consumer Products sales vs.
Personal hygiene market geography
almost zero in 2012. Unilever is the biggest company in the Personal
segmentation 2016 (%) Hygiene subsegment making up 25% of the market. Crucial for
24% Unilever’s success are the existing strong brand names like Axe, Dove
28%
or Rexona which have a loyal consumer base globally. This improves
Unilever’s bargaining power with big retailers because consumers
2% ultimately demand for these brands. Moreover, those brands can be
characterized as premium and address millennials very well. Besides
that Unilever has a unique position in the above mentioned emerging
19% 27% markets generating 58% of Unilever’s total turnover. In order to benefit
Europe Asia-Pacific even more from the upward trend in the Asian market Unilever
United States Middle East
Rest of the World
acquired Carver Korea a South-Korean skin-care company with sales
Source: MarketLine of €321 million in 2016.
Market share 2016
Unilever is ready to take off
25%
Through Carver Korea strong premium image in the region it is likely
that Unilever will also be able to expand its business in China.
Another attempt to participate in the higher growth segments is the
57% acquisition of Dollar Shave Club for about $ 1 billion. The company
7%
had a 16% share of US razor blade market. With this acquisition
6% Unilever instantly was placed 2nd after Procter & Gamble in one of its
Unilever
4%
Colgate-Palmolive Company competitor’s most profitable markets.
Procter & Gamble
Beiersdorf Ag
Other
Source: MarketLine

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 Equity Research 14.06.2018 <Consumer Goods>

Global Tea & Coffee market

value
Moreover, Dollar Shave Club already has an even stronger position
120,000 12% in the online market. Through this move Unilever addressed the
100,000 10% potential in men’s grooming market and the increased importance of
80,000
8% e-commerce. Additionally, Unilever can also benefit from cross
60,000
6% selling its existing Personal Care products along with the razors.
40,000
20,000 4%
0 2% Refreshment
This segment saw revenue declines in recent years before bouncing
2018
2011
2012
2013
2014
2015
2016
2017

2019
2020

back in 2017. The company’s market share in the refreshments

$ million % Growth space declined from 5% in 2012 to around 3% in 2016. This was due
Source: MarketLine
to rising competition globally. Unilever saw increasing competition
from organic good brands and alternative diet product so tis Slim-
Ice Cream Market Share in 2016 Fast brand. Meanwhile, the company’s ice-cream sales also took a
dive, as consumers became more health conscious. In fact, global
8%
ice-cream sales fell 16.7% year-over-year in 2016. However, there
84% 4% 3% was a strong growth in luxury products such as gelato and dairy-free
1% products made with soy milk. These higher-priced, high-margin
products helped Unilever’s Refreshments business bounce back in
2016. The company is also building its presence in the premium tea
category with brands such as T2, Pure Leaf and other specialty teas,
in order to boost growth in the beverage market as well.
Unilever Nestle
Artisanal Producers General Mills, Inc.
other Foods
Source: Company Information, The global packaged food market is segmented on the basis of
Ice-cream market outlook 2016-21 product type and geography. Based on product type, the packaged
200,000 4.50% food market share analysis is categorized into sixteen major food
products namely - ready meals, baked foods, breakfast cereals,
150,000
4.00% soup, baby food, potato chips, nuts, instant noodles, pasta, biscuits,
100,000 chocolate confectionary, cheese, yogurt, ice creams, ‘sauces,
3.50% dressings & condiments’, and non-alcoholic drinks.
50,000
Packaged Food market size is expected to garner $3.03 trillion by
0 3.00% 2020, registering a CAGR of 4.5% during the forecast period 2015 -
2020. Food can be described as any substance that is consumed to
provide nutritional support to the body.
million % Growth The Asia-Pacific region’s growth has largely been driven by the
Source: Company Information,
frozen food segment, which is both the largest and the fastest
Foods market value outlook (bn. growing, with growth rates nearing 6% year on year. Part of this
EUR)
growth is explained by the increasing preference towards Western
80 3.5%
food in the region; thus, making it one of the lucrative markets for
3.0%
60 2.5%
investments and expansions.
2.0% The performance of the market is forecast to follow a similar pattern
40 with an anticipated CAGR of 3% for the five-year period 2014 - 2019,
1.5%
20 1.0% which is expected to drive the market to a value of $66,729.5m by
0.5% the end of 2019. Comparatively, the European and Asia-Pacific
0 0.0% markets will grow with CAGRs of 3.4% and 3.9% respectively, over
2014 2015 2016 2017 2018 2019 the same period, to reach respective values of $29,062.6m and
EUR bn % Growth
Source: Company Information,
$13,451.7m in 2019.

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 Equity Research 14.06.2018 <Consumer Goods>

Investment Summary
Industry & growth potential Business model

Having observed promising prospects for the company, we issue a

BUY recommendation with a 12-months target price of EUR 52.07
Limited Highly diversified
per share. This represents an upside of 9.1% from its closing price of
market risk
6
business model
1 EUR 47.74 on May 31st, 2018. Our target price is based on 5-Y DCF
model and is supported by the findings we obtained through DDM
5 2
Tata Steel merger
One of the biggest
producer of
and EV/EBITDA trading multiples. The key investment drivers for our
Below industry
creates steel giant
valuation 4 3
consumer goods
recommendation are:

Key investment drivers

More than 400
Growth potential
brands worldwide
• Strategy for growth: As household incomes are expected to
continue growing in APAC region, where the company generates
58% of its turnover, we anticipate increasing demand for the
Unilever’s 1-year share price
Unilever products, especially in Home and Personal Care
history
segments. The series of strategic investments and acquisitions
54 €
EUR52.07 will continue strengthening Unilever’s diversified position across
52 € the entire business mix.
50 € • Responding to customer needs: Premium line introduced in
48 € Personal Care and region-specific products in Home Care
46 € address health-conscious millennials as well as troubled regions
EUR47.74
44 € of Africa. Foods & Refreshments reshape their mix in response to
42 € the change in lifestyle for many customers.
40 € • New sales channel: After successfully entering the market for e-
06/201709/201712/201703/201806/2018
commerce with Dollar Shave Club, Unilever expects to generate
EUR 1bn through online sales in China.
EBIT Margin Comparison • Addressing customer wishes: Responding promptly to changes
30% in needs and wants of the consumers, Unilever ensures for itself a
25% loyal customer base worldwide. Introduction of high-price high-
margin premium line in Personal Care is targeted at millennials,
20% while many microbrands in Home Care cater to the specific needs
15% of troubled regions in Africa and Latin America. Developments in
Foods & Refreshments reflect the demand for healthier nutrition
10% and on-the-go lifestyle.
2013 2015 2017 2019 • Healthy financials: Returning almost EUR 6Bn in the share-
0.25 Unilever NV
buyback program signals a positive outlook for the shareholders,
Median
as the company will probably adopt the practice for the future.
WACC & g DCF Less equity pushed ROE further to 42% while the recent issuance
of EUR 8Bn worth of bonds increased the financial leverage to
52.07 0.3% 0.5% 1.0% 1.5% 2.0%
capture maximum returns in the upcoming years.
5.0% 58.89 61.46 69.01 78.72 91.66
5.5% 52.25 54.30 60.22 67.63 77.16 Key risks to our investment thesis:
6.1% 45.88 47.49 52.07 57.65 64.59
• Since much of the revenues are earned in foreign markets,
Unilever might see some exchange rate loses, with no efficient
6.5% 42.18 43.57 47.46 52.13 57.83 hedging strategy in place.
7.0% 38.29 39.44 42.67 46.49 51.08

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 Equity Research 14.06.2018 <Consumer Goods>

Financial Analysis
Revenue (bn. €) Ratios & Key Indicators 2012 2013 2014 2015 2016 2017
56 15% In % of revenue
54 Revenue 51,324 49,797 48,436 53,272 52,713 53,715
10% 10%
52 Cost of materials % -41% -40% -41% -40% -40% -40%
50 5% EBITDA % 16% 17% 19% 16% 17% 19%
48 2% Staff costs % -12% -12% -12% -12% -12% -12%
-3% 0%
46 -1% D&A + impairm. Losses % 2% 2% 2% 3% 3% 3%
-3%
44 -5% EBIT % 13% 15% 16% 14% 15% 16%
2013 2014 2015 2016 2017 Tax rate in % of EBIT 25% 25% 27% 27% 25% 19%

Revenue Revenue Growth Interest expenses % 1% 1% 1% 1% 1% 1%

Source: Company Information, Team estimates Liquidity KPIs
Current Ratio (x) 0.8 0.7 0.6 0.6 0.7 0.7
Effects of Turnover growth (%)
12% 10% Quick Ratio (x) 0.4 0.4 0.3 0.3 0.4 0.4
8% 2% Cash Ratio (x) 0.2 0.1 0.1 0.1 0.2 0.1
4% -1% Net Working Capital (WC) -5,824 -5,970 -6,831 -7,098 -7,532 -5,577
0% Profitability Ratios
-4% Gross Profit margin % 41% 42% 41% 42% 43% 43%
-3% -3%
-8% Operating Profit margin % 13% 15% 16% 14% 15% 16%
2013 2014 2015 2016 2017 ROA % 11% 11% 10% 10% 10%
USG
Exchange Rates ROIC % 7% 7% 5% 5% 6%
Disposals ROE % 31% 36% 32% 31% 39%
Acquisitions
Turnover growth Cash Return on Assets % 14% 12% 15% 13% 12%
Source: Company Information, Team estimates
Financial Ratios
LT-Debt / Assets (x) 0,3 0,2 0,2 0,3 0,3 0,3
EBIT Margin Comparison
30% LT-Debt / Equity (x) 0,7 0,7 0,8 0,8 0,9 1,3
25% Total Debt / Equity (x) 0,9 1,0 1,2 1,2 1,3 2,0
Interest Coverage (x) 13,0 14,9 16,2 13,4 13,5 14,4
20%
Equity Ratio % 33% 32% 28% 30% 29% 23%
15%

10% Massive revenues come with volatility

Unilever‘s revenues show significant variation, with gains in 2017
that helped to beat the 2015 record revenue. One of the main
Peer Group Unilever NV reasons for the high volatility are the effects of exchange rates. For
Median example, 6% of the 10% revenue growth spike in 2015 can be
FCF Generation attributed to a positive currency impact of the weak Euro. Despite the
9,000 mentioned volatility Unilever managed to consistently pass the 50
billion Euro turnover hurdle more recently.
6,000
3,000 Other than the currency risk the costs of materials are very well
0 diversified through Unilever’s broad product portfolio. Consequently,
the dependence on a single supplier or raw material is rather limited.
-3,000
2013 2014 2015 2016 2017 This is represented in the constant ratio of cost of materials to
D&A revenue, which is roughly 40% every year. Moreover, the staff costs
CAPEX are very much in line with Unilever’s revenue development too and
NOPLAT
Change in Working Capital make up about 12% of revenues.
Source: Company Information, Team estimates

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 Equity Research 14.06.2018 <Consumer Goods>

Profitability (bn. €) Boosting profitability twofold

60 15.0% Whereas, there might still be some potential to cut on costs of goods
50
40 10.0%
sold and thus to improve gross profit margins, great progress has
30 been made in most other profitability ratios. For example the return
20 5.0% on equity jumped from 31% to 42% in 2017. There were two main
10
effects. On the one hand Unilever repurchased shares worth 5 billion
0 0.0%
Euro. From our perspective this will rather remain a unique action for
the foreseeable future. On the other hand and influencing profitability
Revenue Net Income more generally was the cost reduction due to Unilever’s zero based
Profit Margin budgeting. This helped to reduce selling, general and administrative
expenses by 300 m Euro while growing business. At the same time it
Source: Company Information, Team estimates also reduced research and development expenses without having
Activity Ratios (days) negative impacts on growth. This suggests that efficiency in R&D is
150 enhanced rather than performance reduced.

94 94 102 100
100 88 Buy low
Unilever uses its reputation to borrow money cheaply with an
53 52 50 52 49
50 average after tax cost of debt of 1.57%, which results in modest
21 21 20 22 23
liquidity KPIs, a negative working capital and a high leverage. In fact
0 Unilever increased its current financial liabilities by 2.8 billion Euros
2013 2014 2015 2016 2017 and its overall financial liabilities by almost 8 billion Euro in 2017,
mainly by issuing bonds. Besides increasing leverage this move
DIH DSO DPO helps Unilever to take advantage of the current low interest
Source: Company Information, Team estimates environment.

Unilever style: get your dates of payment right

Total Debt / Equity (bn. €) Furthermore, the difference between DPO and DSO highlights
30 2.5 Unilever strong market position, by showing the trust of the suppliers
25 2.0 in Unilever to let DPO increase to 100 days. On the other side, the
20
1.5
comparatively low DSO of 23 days undermines Unilever’s ability to
15 collect money. Reducing DIH from 53 in 2013 to 49 in 2017 provides
1.0
10 evidence of increased efficiency in the supply chain.
5 0.5
0 0.0 When comparing the profitability of Unilever to its Peer Group two
2012 2013 2014 2015 2016 2017 comments have to be made. The first and negative remark is
BV Total Debt Unilever drags behind its competitors, although only slightly, since
BV Equity
Total Debt / Equity (x) 2014. The second note however is that Unilever managed a
Source: Company Information, Team estimates turnaround and is increasing its profitability faster then its
competitors ever since 2014. This development can very well be
seen when comparing for example EBIT margins. Another thing that
should be emphasized in this context is that Unilever is significantly
larger than most of its peers. Which typically goes hand in hand with
lower profitability margins.

9
 Equity Research 14.06.2018 <Consumer Goods>

Valuation
Price Equity Bridge Price Target: EUR 52.07 Recommendation: BUY
180,000 169,607 1000
160,000 145,630
800 The Valuation Price Target is derived using 5-Y DCF model as the
Dil.
140,000 -27,228+4,009 -758 Shares
600 main source of value, and 20-Y DDM and relative multiples valuation
120,000 2,814 400
calculated to justify our price target. The issued BUY
100,000 51,75
200 recommendation offers a 9.1% share price growth potential.
80,000 0

Discounted Cash Flow Model (DCF)

For a large and mature company, such as Unilever, we have run a
DCF model because of rather predictable cash flows and well-
Source: Company Information, Team estimates defined business plan. Our model employs inputs such as to target
WACC Analysis
revenue growth and margins, level of cost reductions across the
Risk-free rate 2.2% entire enterprise and some guidance on CAPEX, all later calibrated
2-Y weekly 0.68 to reflect plausible scenario for Unilever given its specific
beta characteristics. The DCF model is most sensitive to the following
Market Return 9% factors:
Cost of Debt 2.10%
Cost of Equity 6.81%
Tax rate 25.45%
Weighted Average Cost of Capital (WACC) and terminal growth
Equity Ratio 86.2% rate
Debt Ratio 13.8% We use WACC of 6.1% as a discount rate with the firm’s Cost of
WACC 6.1% Equity (CoE) and Cost of Debt (CoD) weighted with Unilever’s
Source: Bloomberg, Thomas Reuters, Company Information current capital structure. The company has issued preference
DCF Forecast Assumptions in shares, which do not offer any economic benefits and therefore have
Bn EUR 25% zero value on the balance sheet. We do not, therefore include them
60 into calculation of the cost of capital. For CoE we used current yields
50
20% on 30-Y German bonds as a risk-free rate and historical returns of
40
DAX index. Peer-derived median 2-Y weekly beta was re-levered
30
20 15% with the company’s capital structure of 16% of Debt and 84% of
10
Equity. While we applied CAPM for computing CoE (6.81%), we
0 10% derive CoD (2.10%) by weighting Unilever’s long-term bonds
outstanding according to their maturities. We determine terminal
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022

value of the enterprise using Perpetuity Growth Method (PGM),

Revenues COGS using the growth rate of 0.50%. The terminal value accounts for
Source: Company Information, Team estimates
81.6% of the Enterprise Value.

DCF Forecast Assumptions (2) Revenue Growth and EBIT Margin

1.5 4.0%
We expect Unilever’s revenues to grow at 5-Y CAGR of 2.8%,
Thousands

3.0% significantly faster than in the previous 5-Y period, as the company
continues enhancing its presence in high-profit high-margin sectors,
-0.5 2.0%
such as Personal Care, and generates much of their sales from the
1.0% of APAC market.
-2.5 0.0%
2013
2012

2014
2015
2016
2017
2018
2019
2020
2021
2022

D&A CAPEX
CAPEX Margin
Source: Company Information, Team estimates

10
 Equity Research 14.06.2018 <Consumer Goods>

We expect Home and Personal Care segments to show higher

Terminal Value
growth rates and respectively higher EBIT-margin. We also expect
Scenario 1 20% Unilever to reach 18,5% at the end of the 3-Y detailed analysis
Scenario 2 25% period and then develop further to 20,5% over the rest of the
Scenario 3 29% forecasted interim period. Such upward development is possible due
to the introduction of ZBB and massive cost reductions in BMI &
Cost of equity 6.81%
Overheads it entails.

Mil. Shares Outst. 2,814 Dividend Discount Model

Unilever has been consistently rewarding its shareholders for almost
Dividend 2017 1.43
20 years and showed YoY of 8% on average in the last 5 years.
Amongst the recent decisions: paying out a large part of the cash
DPS Forecast, EUR
obtained from the Spreads business divestiture. We are every
1.5 positive on the outlook about dividend police stockholder can expect.
1.25
For the DDM model interest rate we used the CAP cost of equity
approach CoE (6.81%%) plus the number of outstanding shares
1
(2,814 Mil.) and the dividend of 2017 (EUR 1.43) as a starting point.
0.75
The DDM calculation assumes three different scenarios. The
0.5
scenarios are weighted according to their probability of occurrence.
0.25
We expect Unilever’s dividend per share to reach EUR 8.72 in 2037.
0 The DDM model approach results in a share price of EUR 50.84.
2022
2012
2014
2016
2018
2020

2024
2026
2028
2030
2032
2034
2036

Source: Company Information, Team estimates Relative Valuation – Trading Multiples (EV/EBITDA)
DPS, EPS, Payout Ratio The peer group is composed of international manufacturers and
distributors of Foods & Beverages, Home & Personal Care products,
2.4 72%
70% or both. The competitors were shortlisted based on their size (Large
2.0
68% Cap Stocks), business model, capital structure and EBITDA, leading
1.6 66% to the peer group of 12 companies. We used EV/EBITDA multiple,
1.2 64%
62% because we D&A costs do not significantly impact company Cash
0.8
60% Flows.
0.4 58%
0 56%
2012 2013 2014 2015 2016 2017
Enterprise Value / Price /
DPS - Common Stock a year LTM 2018E LTM 2018E LTM 2018E
Diluted EPS Share
Payout Ratio Revenue Revenue EBITDA EBITDA EPS EPS
Source: Company Information Unilever 3.2x 3.1x 17.0x 16.3x 34.0x 23.3x
Price Range LTM EV Nestlé S.A. 3.1x 3.0x 16.5x 13.5x 23.7x 21.8x
Danone SA 2.5x 2.4x 13.4x 11.8x 20.4x 18.4x
Henkel AG & Co. KGaA 2.4x 2.3x 13.5x 13.7x 19.0x 17.8x
P/E LTM
L'Oréal S.A. 4.0x 3.9x 17.2x 17.0x 27.6x 26.2x
EV/EBIT Y1 Reckitt Benckiser Group plc 5.5x 4.8x 17.0x 15.7x 21.2x 19.4x
EV/EBIT LTM
Beiersdorf Aktiengesellschaft 2.9x 2.8x 16.3x 14.6x 29.3x 27.4x
The Procter&Gamble Company 3.1x 3.8x 13.4x 12.5x 19.6x 22.0x
EV/EBITDA LTM
The Kraft Heinz Company 4.8x 4.7x 15.5x 13.5x 21.6x 20.0x
EV/Rev Y1 The Coca-Cola Company 6.2x 6.6x 20.0x 18.5x 21.7x 20.1x
PepsiCo, Inc. 2.5x 2.5x 13.3x 11.6x 18.7x 17.2x
EV/Rev LTM
Colgate-Palmolive Company 3.9x 3.7x 13.5x 12.5x 21.7x 19.7x
$30 $40 $50 $60 $70 $80 General Mills, Inc. 2.3x 2.2x 13.0x 13.8x 14.0x 13.9x
Source: Thomas Reuters

11
 Equity Research 14.06.2018 <Consumer Goods>

Investment Risks Matrix Investment Risks

Business and Operational Risks

High

F1 OP1:Ethical (Probability: low, Impact: medium)

The way Unilever operates, contribute to society and engage with
the world is always under analysis and could affect both Unilever’s
Probability

Medium

MK1
brand and reputation.
Mitigation: Guidelines are follow according the Code of Business
OP1 OP2 Principles and the Code Policies with regards to the behavior of all
Low

employees, suppliers, distributors and other third parties working in

Low Medium High
cooperation with Unilever.
Impact OP2:Legal and Regulatory: (Probability: low, Impact: High)
Source: Company Information, Tax, in particular, is an area that changes regularly leading to the risk
Porter’s Five Forces of tax exposure. Therefore, International tax reform is being
Buyer
monitored.
Power Mitigation: Unilever has a Tax Risk Framework in place which sets
5
4
out the controls to asses and monitor tax risk for direct and indirect
3 taxes. Proposed changes in taxation are being monitored and taken
2 Barriers to into account for future business plans.
Rivalry
1 entry
0 Market Risks
MK1:Economic and Political instability (Probability: medium,
Impact: high) Unilever operates around the globe and it is expose to
Threat of Suppliers adverse economic conditions that could affect one or more countries
substitutes Power
within a region as well as extend globally.
Source: Company Information, Mitigation: the range of Unilever’s portfolio and the geographic
Total Cash & Short Term Inv. presences help to mitigate the exposure to any particular localized
risk. During economic downturns the company is able to adapt its
4,500 portfolio to respond quickly and develop new offerings that suit
4,000 consumers’. Cash flows are updated regularly and when/where
3,500 necessary investment priorities are rebalance.
Financial Risk
3,000
F1:Treasury (Probability: medium, Impact: high)
2,500 Unilever consolidates its financial statements in euros, therefore it is
2,000 subject to exchange risk.
Liquidity risk resulting in a lower credit rating, diminish investor
confidence and restrict the ability to raise funds.
Source: Company Information, Exposed to market interest rate fluctuations on floating rate debt.
Counter-party risk with banks, suppliers, and customers in times of
market volatility.
Mitigation: Currency exposure are managed within defined limits
and by using forward foreign exchange contracts. Also some of the
exposure is hedge through the use of foreign currency borrowing or
forward exchange contracts.
Liquidity requirements are manage by maintain access to global deb
markets through short and long term debt..

12
 Equity Research 14.06.2018

Balance Sheet
Balance Sheet
ASSETS 2012 2013 2014 2015 2016 2017
Cash And Equivalents 2,465.0 2,285.0 2,151.0 2,302.0 3,382.0 3,317.0
Short Term Investments 711.0 934.0 599.0 596.0 565.0 521.0
Trading Asset Securities 56.0 20.0 21.0 124.0 181.0 171.0
Total Cash & ST Investments 3,232.0 3,239.0 2,771.0 3,022.0 4,128.0 4,009.0
Accounts Receivable 2,793.0 2,852.0 2,827.0 2,917.0 3,329.0 3,439.0
Other Receivables 217.0 217.0 281.0 230.0 1,190.0 1,538.0
Notes Receivable 2.0 100.0 180.0 269.0 208.0 277.0
Total Receivables 3,012.0 3,169.0 3,288.0 3,416.0 4,727.0 5,254.0
Inventory 4,436.0 3,937.0 4,168.0 4,335.0 4,278.0 3,962.0
Prepaid Exp. 549.0 516.0 540.0 561.0 504.0 452.0
Other Current Assets 918.0 1,261.0 1,580.0 1,352.0 247.0 3,306.0
Total Current Assets 12,147.0 12,122.0 12,347.0 12,686.0 13,884.0 16,983.0
Gross Property, Plant & Equipment 17,509.0 17,229.0 18,914.0 19,917.0 21,207.0 19,398.0

Accumulated Depreciation (8,064.0) (7,885.0) (8,442.0) (8,859.0) (9,534.0) (8,987.0)

Net Property, Plant & Equipment 9,445.0 9,344.0 10,472.0 11,058.0 11,673.0 10,411.0

Long-term Investments 519.0 512.0 695.0 592.0 491.0 502.0

Goodwill 14,619.0 13,917.0 14,642.0 16,213.0 17,624.0 16,881.0
Other Intangibles 7,099.0 6,987.0 7,532.0 8,846.0 9,809.0 11,520.0
Accounts Receivable Long-Term 172.0 207.0 265.0 413.0 306.0 265.0
Loans Receivable Long-Term 1.0 4.0 28.0 34.0 190.0 186.0
Deferred Tax Assets, LT 1,050.0 1,084.0 1,286.0 1,185.0 1,354.0 1,085.0
Other Long-Term Assets 1,137.0 1,336.0 760.0 1,271.0 1,098.0 2,452.0
Total Assets 46,189.0 45,513.0 48,027.0 52,298.0 56,429.0 60,285.0
LIABILITIES
Accounts Payable 7,084.0 6,995.0 7,636.0 8,296.0 8,591.0 8,217.0
Accrued Exp. 3,878.0 3,900.0 3,727.0 4,175.0 4,123.0 4,205.0
Short-term Borrowings 1,076.0 2,529.0 3,235.0 3,257.0 3,268.0 6,420.0
Curr. Port. of LT Debt 1,565.0 1,467.0 2,288.0 1,495.0 2,173.0 1,537.0
Curr. Port. of Cap. Leases 15.0 14.0 13.0 37.0 9.0 11.0
Curr. Income Taxes Payable 1,129.0 1,254.0 1,081.0 1,127.0 844.0 1,088.0
Other Current Liabilities 1,068.0 1,223.0 1,662.0 1,632.0 1,548.0 1,699.0
Total Current Liabilities 15,815.0 17,382.0 19,642.0 20,019.0 20,556.0 23,177.0
Long-Term Debt 7,378.0 7,301.0 7,000.0 9,696.0 11,011.0 16,342.0
Capital Leases 187.0 190.0 186.0 158.0 134.0 120.0
Pension & Other Post-Retire. 4,100.0 2,968.0 3,947.0 3,254.0 3,867.0 2,734.0
Benefits
Def. Tax Liability, Non-Curr. 1,414.0 1,524.0 1,534.0 1,744.0 2,061.0 1,913.0
Other Non-Current Liabilities 1,346.0 1,333.0 1,455.0 1,345.0 1,820.0 1,612.0
Total Liabilities 30,240.0 30,698.0 33,764.0 36,216.0 39,449.0 45,898.0
Common Stock 484.0 484.0 484.0 484.0 484.0 484.0
Additional Paid In Capital 140.0 138.0 145.0 152.0 134.0 130.0
Retained Earnings 20,964.0 20,468.0 20,560.0 22,619.0 23,179.0 26,648.0
Treasury Stock (4,002.0) (3,890.0) (4,125.0) (4,119.0) (4,164.0) (9,208.0)
Comprehensive Inc. and Other (2,194.0) (2,856.0) (3,413.0) (3,697.0) (3,279.0) (4,425.0)
Total Common Equity 15,392.0 14,344.0 13,651.0 15,439.0 16,354.0 13,629.0
Minority Interest 557.0 471.0 612.0 643.0 626.0 758.0
Total Equity 15,949.0 14,815.0 14,263.0 16,082.0 16,980.0 14,387.0
Total Liabilities And Equity 46,189.0 45,513.0 48,027.0 52,298.0 56,429.0 60,285.0

13
 Equity Research 14.06.2018

Balance Sheet as % of Balance Sheet Total

ASSETS 2012 2013 2014 2015 2016 2017
Cash And Equivalents 5.34% 5.02% 4.48% 4.40% 5.99% 5.50%
Short Term Investments 1.54% 2.05% 1.25% 1.14% 1.00% 0.86%
Trading Asset Securities 0.12% 0.04% 0.04% 0.24% 0.32% 0.28%
Total Cash & ST Investments 7.00% 7.12% 5.77% 5.78% 7.32% 6.65%
Accounts Receivable 6.05% 6.27% 5.89% 5.58% 5.90% 5.70%
Other Receivables 0.47% 0.48% 0.59% 0.44% 2.11% 2.55%
Notes Receivable 0.00% 0.22% 0.37% 0.51% 0.37% 0.46%
Total Receivables 6.52% 6.96% 6.85% 6.53% 8.38% 8.72%
Inventory 9.60% 8.65% 8.68% 8.29% 7.58% 6.57%
Prepaid Exp. 1.19% 1.13% 1.12% 1.07% 0.89% 0.75%
Other Current Assets 1.99% 2.77% 3.29% 2.59% 0.44% 5.48%
Total Current Assets 26.30% 26.63% 25.71% 24.26% 24.60% 28.17%
Gross Property, Plant & Equipment 37.91% 37.86% 39.38% 38.08% 37.58% 32.18%

Accumulated Depreciation -17.46% -17.32% -17.58% -16.94% -16.90% -14.91%

Net Property, Plant & 20.45% 20.53% 21.80% 21.14% 20.69% 17.27%
Equipment
Long-term Investments 1.12% 1.12% 1.45% 1.13% 0.87% 0.83%
Goodwill 31.65% 30.58% 30.49% 31.00% 31.23% 28.00%
Other Intangibles 15.37% 15.35% 15.68% 16.91% 17.38% 19.11%
Accounts Receivable Long-Term 0.37% 0.45% 0.55% 0.79% 0.54% 0.44%
Loans Receivable Long-Term 0.00% 0.01% 0.06% 0.07% 0.34% 0.31%
Deferred Tax Assets, LT 2.27% 2.38% 2.68% 2.27% 2.40% 1.80%
Other Long-Term Assets 2.46% 2.94% 1.58% 2.43% 1.95% 4.07%
Total Assets 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
LIABILITIES
Accounts Payable 15.34% 15.37% 15.90% 15.86% 15.22% 13.63%
Accrued Exp. 8.40% 8.57% 7.76% 7.98% 7.31% 6.98%
Short-term Borrowings 2.33% 5.56% 6.74% 6.23% 5.79% 10.65%
Curr. Port. of LT Debt 3.39% 3.22% 4.76% 2.86% 3.85% 2.55%
Curr. Port. of Cap. Leases 0.03% 0.03% 0.03% 0.07% 0.02% 0.02%
Curr. Income Taxes Payable 2.44% 2.76% 2.25% 2.15% 1.50% 1.80%
Other Current Liabilities 2.31% 2.69% 3.46% 3.12% 2.74% 2.82%
Total Current Liabilities 34.24% 38.19% 40.90% 38.28% 36.43% 38.45%
Long-Term Debt 15.97% 16.04% 14.58% 18.54% 19.51% 27.11%
Capital Leases 0.40% 0.42% 0.39% 0.30% 0.24% 0.20%
Pension & Other Post-Retire. 8.88% 6.52% 8.22% 6.22% 6.85% 4.54%
Benefits
Def. Tax Liability, Non-Curr. 3.06% 3.35% 3.19% 3.33% 3.65% 3.17%
Other Non-Current Liabilities 2.91% 2.93% 3.03% 2.57% 3.23% 2.67%
Total Liabilities 65.47% 67.45% 70.30% 69.25% 69.91% 76.14%
Common Stock 1.05% 1.06% 1.01% 0.93% 0.86% 0.80%
Additional Paid In Capital 0.30% 0.30% 0.30% 0.29% 0.24% 0.22%
Retained Earnings 45.39% 44.97% 42.81% 43.25% 41.08% 44.20%
Treasury Stock -8.66% -8.55% -8.59% -7.88% -7.38% -15.27%
Comprehensive Inc. and Other -4.75% -6.28% -7.11% -7.07% -5.81% -7.34%
Total Common Equity 33.32% 31.52% 28.42% 29.52% 28.98% 22.61%
Minority Interest 1.21% 1.03% 1.27% 1.23% 1.11% 1.26%
Total Equity 34.53% 32.55% 29.70% 30.75% 30.09% 23.86%
Total Liabilities And Equity 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%

14
 Equity Research 14.06.2018

Income Statement
Income Statement
2012 2013 2014 2015 2016 2017
Revenue 51,324.0 49,797.0 48,436.0 53,272.0 52,713.0 53,715.0
Total Revenue 51,324.0 49,797.0 48,436.0 53,272.0 52,713.0 53,715.0
Cost Of Goods Sold 30,530.0 29,065.0 28,387.0 30,808.0 30,229.0 30,547.0
Gross Profit 20,794.0 20,732.0 20,049.0 22,464.0 22,484.0 23,168.0
Selling General & Admin Exp. 12,959.0 12,308.0 11,208.0 14,065.0 13,799.0 13,507.0
R & D Exp. 1,003.0 1,040.0 955.0 1,005.0 978.0 900.0
Other Operating Exp., Total 13,962.0 13,348.0 12,163.0 15,070.0 14,777.0 14,407.0
Operating Income 6,832.0 7,384.0 7,886.0 7,394.0 7,707.0 8,761.0
Interest Expense (524.0) (497.0) (486.0) (552.0) (572.0) (608.0)
Interest and Invest. Income 136.0 117.0 162.0 235.0 219.0 175.0
Net Interest Exp. (388.0) (380.0) (324.0) (317.0) (353.0) (433.0)
Income/(Loss) from Affiliates 105.0 113.0 98.0 107.0 127.0 155.0
Currency Exchange Gains (Loss) (2.0) (3.0) (14.0) 36.0 (12.0) 13.0
Other Non-Operating Inc. (Exp.) - - - - - (26.0)
EBT Excl. Unusual Items 6,547.0 7,114.0 7,646.0 7,220.0 7,469.0 8,470.0
Gain (Loss) On Sale Of Invest. (14.0) - - - - -
Legal Settlements - - - - - 65.0
Other Unusual Items - - - - - (382.0)
EBT Incl. Unusual Items 6,533.0 7,114.0 7,646.0 7,220.0 7,469.0 8,153.0
Income Tax Expense 1,697.0 1,851.0 2,131.0 1,961.0 1,922.0 1,667.0
Net Income to Company 4,836.0 5,263.0 5,515.0 5,259.0 5,547.0 6,486.0
Minority Int. in Earnings (468.0) (421.0) (344.0) (350.0) (363.0) (433.0)
Net Income 4,368.0 4,842.0 5,171.0 4,909.0 5,184.0 6,053.0

Income Statement as % of Revenue

2012 2013 2014 2015 2016 2017
Revenue 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Total Revenue 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Cost Of Goods Sold 59.48% 58.37% 58.61% 57.83% 57.35% 56.87%
Gross Profit 40.52% 41.63% 41.39% 42.17% 42.65% 43.13%
Selling General & Admin Exp. 25.25% 24.72% 23.14% 26.40% 26.18% 25.15%
R & D Exp. 1.95% 2.09% 1.97% 1.89% 1.86% 1.68%
Other Operating Exp., Total 27.20% 26.80% 25.11% 28.29% 28.03% 26.82%
Operating Income 13.31% 14.83% 16.28% 13.88% 14.62% 16.31%
Interest Expense -1.02% -1.00% -1.00% -1.04% -1.09% -1.13%
Interest and Invest. Income 0.26% 0.23% 0.33% 0.44% 0.42% 0.33%
Net Interest Exp. -0.76% -0.76% -0.67% -0.60% -0.67% -0.81%
Income/(Loss) from Affiliates 0.20% 0.23% 0.20% 0.20% 0.24% 0.29%
Currency Exchange Gains (Loss) 0.00% -0.01% -0.03% 0.07% -0.02% 0.02%
Other Non-Operating Inc. (Exp.) n/a n/a n/a n/a n/a -0.05%
EBT Excl. Unusual Items 12.76% 14.29% 15.79% 13.55% 14.17% 15.77%
Gain (Loss) On Sale Of Invest. -0.03% n/a n/a n/a n/a n/a
Legal Settlements n/a n/a n/a n/a n/a 0.12%
Other Unusual Items n/a n/a n/a n/a n/a -0.71%
EBT Incl. Unusual Items 12.73% 14.29% 15.79% 13.55% 14.17% 15.18%
Income Tax Expense 3.31% 3.72% 4.40% 3.68% 3.65% 3.10%
Net Income to Company 9.42% 10.57% 11.39% 9.87% 10.52% 12.07%
Minority Int. in Earnings -0.91% -0.85% -0.71% -0.66% -0.69% -0.81%
Net Income 8.51% 9.72% 10.68% 9.21% 9.83% 11.27%

15
Equity Research 14.06.2018 <Consumer Goods>

Appendix: Legal Structure

SHAREHOLDERS

DIRECTORS

EQUALISATION AND OTHER

NV AGREEMENTS PLC

NV OWNED PLC OWNED

JOINTLY OWNED OPERATING
OPERATING OPERATING
COMPANIES COMPANIES COMPANIES

TICKER: UNA TICKER: ULVR

TRADED: 1 UNA = 1 ULVR TRADED:
AMSTERDAM LONDON

1 UN = 1 ULVR
1 UN = 1 UNA

TICKER: UN TICKER: UL
TRADED: NYSE 1 UN = 1 UL TRADED: NYSE

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 Equity Research 14.06.2018

Appendix: Management & Governance

Name Board Job Title Appointed

Graeme Pitkethly Executive Board Chief Financial Officer, Director 2015

Mr. Graeme Pitkethly has been the Chief Financial Officer of the company since October
2015. He was appointed as a Director of the company in April 2016. Previously, Mr.
Pitkethly held several leadership roles including Executive Vice President and Chairman
for Unilever UK and Ireland, Senior Vice President of Finance for Global Markets, Global
Head of Mergers and Acquisitions, Head of Treasury, Pensions and Tax, and Chief
Financial Officer of Unilever Indonesia. Prior to joining the company, he held several
senior corporate finance roles at PricewaterhouseCoopers and in the
telecommunications industry.

Paul Polman Executive Board Chief Executive Officer, Director 2009

Mr. Paul Polman has been the Chief Executive Officer and Director of the company
since January 2009. He was appointed as an Executive Director of the company in
October 2008. Prior to this, Mr. Polman served as the Chief Financial Officer of Nestle
S.A. from January 2006 and as the Executive Vice President for the Americas from
February 2008. He began his career at Procter & Gamble in 1979 and served as Group
President Europe and Officer until 2001. He also serves as a Director of The Consumer
Goods Forum.

David Blanchard Senior Management Chief Research and Development Officer 2014

Mr. David Blanchard has been the Chief Research and Development Officer of the
company since April 2014. Previously, he served as the Chief Category Research and
Development Officer of the company since January 2013. Mr. Blanchard joined the
company in 1986 as the Development Manager of Spreads and held several senior
managerial positions including Senior Vice President of Unilever Research and
Development, Senior Vice President of Marketing Operations Foods Americas, Vice
President of Research and Development for Global Dressing and the Chairman of
Unilever Canada Inc.

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 Equity Research 14.06.2018

Name Board Job Title Appointed

Marc Engel Senior Management Chief Supply Chain Officer 2016

Mr. Marc Engel has been the Chief Supply Chain Officer of the company since January
2016. Previously, he held several leadership roles at the company, including the
Executive Vice President of Unilever East Africa and Emerging Markets; Chief
Procurement Officer and Vice President for Supply Chain, Spreads, Dressings and Olive
Oil Europe at Unilever Supply Chain Company. Mr. Engel also served as the Operations
Manager for Birds Eye Wall’s at Unilever UK; and Unilever Meat Group NL.

Ritva Sotamaa Senior Management Chief Legal Officer 2013

Ms. Ritva Sotamaa has been the Chief Legal Officer of the company since February
2013. Previously, she served as the General Counsel for Siemens AG – Siemens
Healthcare. Ms. Sotamaa also held several managerial roles at General Electric
Company including General Counsel, GE Healthcare Systems and General Counsel at
Instrumentarium Corporation.

Marijn Dekkers Non Executive Board Chairman 2016

Mr. Marijn Dekkers has been the Non-Executive Chairman of the company since April
2016. Previously, he served as Chief Executive Officer at Bayer AG and Thermo Fisher
Scientific Inc. Currently, Mr. Dekkers serves as the Non Executive Director at General
Electric.

Chief Marketing and

Keith Weed Senior Management 2010
Communications Officer

Mr. Keith Weed has been the Chief Marketing and Communications Officer of the
company since April 2010. He joined the company in 1983 and held various managerial
positions such as Executive Vice President for Global Home Care and Hygiene and the
Chairman of Lever Faberg

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 Equity Research 14.06.2018

Appendix: Porter’s 5 Forces

Porter’s Five Forces Buyers Power: buyers are all around the world;
they have no power to bring the prices down. But it
is easier for the customer to switch to a competitor
Buyer
Power if they don’t are satisfied in every level weather it is
5 about the price of quality of the product.
4
Competitor Rivalry: There are not only small or
3 reginal shops but also big giants like P&G, Kraft
2 Barriers and Nestle. These big industries have the power to
Rivalry
1
to entry persuade the customer by introducing the equally
attractive and best performer products. Low
0 switching cost allow customer to switch to other
brands easily.

Threat of Substitutes: Today consumers like to try

Threat something new and better at least once reducing
of Supplier customer devotion and willing to go for the same
substitu s Power usable products which substitutes from Unilever.
tes

Supplier’s Power: Unilever has agreement with

suppliers to provide them the products for a certain
period of time at an agreed rate. This agreements
helps to prevent suppliers from switching to other
competitor and charge higher rates.

Barrier to Entry: Unilever is supplying its products

and services in diverse geographical markets, so it
mostly depends on the place and the society.

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 Equity Research 14.06.2018

Appendix: SWOT Analysis

Strengths Weaknesses
• Global presences – sales +190 countries • Dependence on Distribution and Retailers –
• Brand product mix – strong popular brands lack of forward integration
• Focused R&D activities and integrated • High number of substitutes
supply chain • Limited business diversification
• Economies of scale
• Evolving Portfolio and Developing Channels

SWOT
Opportunities Threats
• Potential in Emerging Markets
• Growing Demand for Premium and • Global and regional Competitors
Specialized High-End products in Skin Care • Private label brands from Retailers
Segment • Product imitation
• Social Media for advertising • An increase of social ethic and concern for
the environment among customers
• Stricter regulations

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 Equity Research 14.06.2018

Comparable Companies Analysis

Revenue (TEUR)
Company Name 31.12.2013 31.12.2014 31.12.2015 31.12.2016 31.12.2017 31.12.2018 31.12.2019 31.12.2020 31.12.2021
PepsiCo Inc 48,333,516 54,770,749 57,464,824 59,734,409 52,955,075 55,825,000 57,622,000 58,742,000 59,650,000
Colgate-Palmolive Co 12,673,747 14,282,032 14,764,268 14,453,484 12,882,609 13,818,000 14,242,000 14,658,000 15,306,000
General Mills Inc 13,136,871 16,046,570 14,902,980 13,968,631 13,968,631 13,379,000 14,276,000 14,591,000 14,833,000
Kraft Heinz Co 4,541,160 8,970,894 16,888,931 25,194,434 21,867,258 22,302,000 22,598,000 22,966,000 23,576,000
Coca-Cola Co 34,088,159 38,024,247 40,786,358 39,820,086 29,518,130 27,141,000 28,179,000 29,277,000 30,638,000
Nestle SA 75,099,273 76,180,525 81,607,223 83,614,573 76,825,080 79,573,000 83,206,000 85,304,000 89,588,000
Danone SA 21,298,000 21,144,000 22,412,000 21,944,000 24,677,000 25,039,000 26,086,000 27,190,000 28,932,000
Henkel AG & Co KgaA 16,355,000 16,428,000 18,089,000 18,714,000 20,029,000 20,257,000 20,989,000 21,754,000 22,610,000
L'Oreal SA 22,124,200 22,532,000 24,290,200 24,916,300 26,023,700 26,407,000 27,728,000 29,101,000 30,671,000
Reckitt Benckiser Group PLC 11,161,050 11,374,902 12,042,781 11,123,774 12,966,866 14,205,000 14,701,000 15,245,000 16,521,000
Beiersdorf AG 6,141,000 6,285,000 6,686,000 6,752,000 7,056,000 7,198,000 7,527,000 7,866,000 8,211,000
Procter & Gamble Co 54,343,234 63,537,554 58,806,973 56,953,725 56,953,725 56,915,000 58,456,000 60,353,000 62,256,000
Unilever NV 49,797,000 48,436,000 53,272,000 52,713,000 53,715,000 54,789,300 56,432,979 58,125,968 60,451,007

Revenue Growth
Company Name 31.12.2013 31.12.2014 31.12.2015 31.12.2016 31.12.2017 31.12.2018 31.12.2019 31.12.2020 31.12.2021
PepsiCo Inc -2.48% 13.32% 4.92% 3.95% -11.35% 5.42% 3.22% 1.94% 1.55%
Colgate-Palmolive Co -2.13% 12.69% 3.38% -2.10% -10.87% 7.26% 3.07% 2.92% 4.42%
General Mills Inc -4.44% 22.15% -7.13% -6.27% 0.00% -4.22% 6.70% 2.21% 1.66%
Kraft Heinz Co 0.00% 97.55% 88.26% 49.18% -13.21% 1.99% 1.33% 1.63% 2.66%
Coca-Cola Co -6.33% 11.55% 7.26% -2.37% -25.87% -8.05% 3.82% 3.90% 4.65%
Nestle SA 1.11% 1.44% 7.12% 2.46% -8.12% 3.58% 4.57% 2.52% 5.02%
Danone SA 2.06% -0.72% 6.00% -2.09% 12.45% 1.47% 4.18% 4.23% 6.41%
Henkel AG & Co KgaA -0.94% 0.45% 10.11% 3.46% 7.03% 1.14% 3.61% 3.64% 3.93%
L'Oreal SA -1.51% 1.84% 7.80% 2.58% 4.44% 1.47% 5.00% 4.95% 5.40%
Reckitt Benckiser Group PLC -5.28% 1.92% 5.87% -7.63% 16.57% 9.55% 3.49% 3.70% 8.37%
Beiersdorf AG 1.67% 2.34% 6.38% 0.99% 4.50% 2.01% 4.57% 4.50% 4.39%
Procter & Gamble Co -11.77% 16.92% -7.45% -3.15% 0.00% -0.07% 2.71% 3.25% 3.15%
Unilever NV -2.98% -2.73% 9.98% -1.05% 1.90% 2.00% 3.00% 3.00% 4.00%

Min -11.77% -0.72% -7.45% -7.63% -25.87% -8.05% 1.33% 1.63% 1.55%
0.25 -4.65% 1.74% 4.53% -2.56% -10.99% 0.84% 3.18% 2.44% 3.03%
Peer Group 4.93% 12.48% 2.87% 5.36% 16.12% 3.20% 1.39% 1.54% 2.09%
Median -1.82% 6.95% 6.19% -0.55% 0.00% 1.73% 3.72% 3.44% 4.40%
0.75 0.28% 14.22% 7.40% 2.80% 5.13% 4.04% 4.57% 3.98% 5.12%
Max 2.06% 97.55% 88.26% 49.18% 16.57% 9.55% 6.70% 4.95% 8.37%

Gross Profit Margin

Company Name 31.12.2013 31.12.2014 31.12.2015 31.12.2016 31.12.2017 31.12.2018 31.12.2019 31.12.2020 31.12.2021
PepsiCo Inc 53.08% 53.64%n/a 54.96% 54.68% 54.52% 54.82% 54.80% 54.90%
Colgate-Palmolive Co 58.80% 58.70% 58.70% 60.30% 60.53% 60.80% 61.18% 61.83% 64.00%
General Mills Inc 35.40% 34.70% 35.60% 36.08% 36.08% 34.08% 34.46% 34.70% 35.03%
Kraft Heinz Co n/a n/a 35.07% 39.09% 38.22% 36.79% 36.98% 37.22% 38.50%
Coca-Cola Co 60.90% 61.10% 60.60% 60.30% 62.00% 65.26% 66.19% 66.53% 67.50%
Nestle SA 47.80% 48.09% 49.62% 50.60% 49.97% 49.81% 50.21% 50.70% 51.25%
Danone SA 48.46% 47.71% 49.97% 51.03%n/a 50.06% 50.36% 51.73% 51.30%
Henkel AG & Co KgaA 47.75% 46.97% 48.20% 47.94% 46.68% 46.90% 47.31% 47.60% 47.83%
L'Oreal SA 71.30% 71.15% 71.19% 71.59% 71.72% 71.88% 72.05% 72.17% 72.43%
Reckitt Benckiser Group PLC 59.43% 57.67% 59.12% 60.92% 59.68% 59.95% 60.70% 61.25% 62.60%
Beiersdorf AG 63.28% 62.34% 58.35% 58.92% 58.76% 59.22% 59.51% 59.79% 60.80%
Procter & Gamble Co 49.25% 49.70% 49.60% 50.80% 50.80% 50.16% 50.29% 50.70% 51.00%
Unilever NV 41.63% 41.39% 42.17% 42.65% 43.13% 44.00% 44.50% 45.00% 45.50%

Min 35.40% 34.70% 35.07% 36.08% 36.08% 34.08% 34.46% 34.70% 35.03%
0.25 48.13% 47.90% 48.90% 49.94% 48.32% 49.08% 49.49% 49.93% 50.21%
Peer Group 12.04% 12.00% 10.01% 10.37% 11.78% 11.08% 11.33% 11.47% 12.74%
Median 53.08% 53.64% 49.97% 52.99% 54.68% 52.34% 52.59% 53.27% 53.10%
0.75 60.17% 59.90% 58.91% 60.30% 60.11% 60.16% 60.82% 61.40% 62.95%
Max 71.30% 71.15% 71.19% 71.59% 71.72% 71.88% 72.05% 72.17% 72.43%

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 Equity Research 14.06.2018
EBIT Margin
Company Name 31.12.2013 31.12.2014 31.12.2015 31.12.2016 31.12.2017 31.12.2018 31.12.2019 31.12.2020 31.12.2021
PepsiCo Inc 15.22% 14.99% 15.74% 15.95% 16.98% 16.62% 17.04% 17.33%n/a
Colgate-Palmolive Co 23.65% 24.33% 24.82% 26.16% 25.31% 25.61% 26.40% 26.95% 26.18%
General Mills Inc 16.25% 16.05% 16.52% 17.96% 17.96% 16.70% 17.25% 17.74% 20.03%
Kraft Heinz Co 2.40% 14.36% 14.39% 27.12% 27.75% 26.32% 26.74% 26.88% 27.86%
Coca-Cola Co 23.99% 22.82% 23.04% 23.08% 26.76% 32.42% 33.68% 34.69% 40.22%
Nestle SA 16.44% 15.41% 15.60% 15.94% 16.48% 16.14% 16.81% 17.35% 17.07%
Danone SA 9.95% 10.14% 13.06% 13.75% 13.81% 15.05% 15.63% 16.17% 16.64%
Henkel AG & Co KgaA 15.53% 16.11% 16.10% 17.28% 17.45% 17.46% 17.84% 18.19% 17.65%
L'Oreal SA 16.92% 17.18% 17.88% 18.12% 17.95% 18.33% 18.58% 18.73% 18.74%
Reckitt Benckiser Group PLC 23.13% 24.73% 26.86% 27.81% 26.77% 26.77% 27.58% 27.90% 27.24%
Beiersdorf AG 13.68% 13.83% 14.34% 15.54% 15.53% 15.75% 16.17% 16.56% 16.78%
Procter & Gamble Co 18.70% 19.83% 21.99% 22.57% 22.57% 21.72% 22.07% 22.61%n/a
Unilever NV 14.83% 16.28% 13.88% 14.62% 16.31% 17.00% 18.00% 18.50% 19.50%

Min 2.40% 10.14% 13.06% 13.75% 13.81% 15.05% 15.63% 16.17% 16.64%
0.25 14.83% 14.84% 15.30% 15.95% 16.86% 16.50% 16.99% 17.35% 17.22%
Peer Group 4.97% 5.74% 6.96% 7.90% 8.81% 9.29% 9.50% 9.55% 9.76%
Median 16.35% 16.08% 16.31% 18.04% 17.96% 17.89% 18.21% 18.46% 19.38%
0.75 19.80% 20.58% 22.25% 23.85% 25.67% 25.79% 26.48% 26.90% 26.97%
Max 23.99% 24.73% 26.86% 27.81% 27.75% 32.42% 33.68% 34.69% 40.22%
EBITDA Margin
Company Name 31.12.2013 31.12.2014 31.12.2015 31.12.2016 31.12.2017 31.12.2018 31.12.2019 31.12.2020 31.12.2021
PepsiCo Inc 19.23% 18.93% 19.58% 19.72% 20.71% 20.18% 20.73% 21.28% 22.39%
Colgate-Palmolive Co 26.17% 26.89% 27.62% 29.08% 28.38% 28.61% 29.08% 28.64% 29.58%
General Mills Inc 19.52% 19.39% 20.20% 21.83% 21.83% 20.66% 21.04% 21.42% 23.67%
Kraft Heinz Co 6.89% 19.21% 18.43% 32.17% 31.70% 29.76% 30.24% 30.14% 31.49%
Coca-Cola Co 28.20% 27.12% 27.49% 27.35% 30.31% 35.74% 36.79% 37.79% 38.87%
Nestle SA 19.88% 18.74% 19.18% 19.44% 20.08% 20.13% 20.77% 21.92% 21.95%
Danone SA 13.28% 14.66% 16.50% 17.19% 17.17% 18.73% 19.28% 19.67% 20.73%
Henkel AG & Co KgaA 17.93% 18.47% 18.59% 19.96% 20.80% 20.39% 20.67% 21.15% 21.38%
L'Oreal SA 20.71% 21.05% 21.85% 22.45% 22.45% 22.58% 22.78% 23.07% 22.86%
Reckitt Benckiser Group PLC 24.80% 26.55% 28.78% 30.20% 29.10% 28.88% 29.45% 30.06% 30.80%
Beiersdorf AG 15.40% 16.63% 16.27% 17.73% 17.66% 17.92% 18.39% 18.98% 19.22%
Procter & Gamble Co 22.92% 24.26% 26.71% 26.91% 26.91% 25.99% 26.31% 26.27% 28.12%
Unilever NV 17.14% 18.61% 16.45% 16.85% 18.57% 19.00% 20.00% 20.50% 21.50%

Min 6.89% 14.66% 16.27% 17.19% 17.17% 17.92% 18.39% 18.98% 19.22%
0.25 17.30% 18.68% 18.55% 19.65% 20.55% 20.17% 20.71% 21.24% 21.81%
Peer Group 6.09% 6.16% 8.36% 8.13% 8.01% 8.50% 8.46% 7.75% 8.07%
Median 19.70% 19.30% 19.89% 22.14% 22.14% 21.62% 21.91% 22.49% 23.26%
0.75 23.39% 24.83% 26.90% 27.78% 28.56% 28.67% 29.17% 29.00% 29.88%
Max 28.20% 27.12% 28.78% 32.17% 31.70% 35.74% 36.79% 37.79% 38.87%

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 Equity Research 14.06.2018

Enterprise Value / Price /

2018E 2019E 2018E 2019E 2018E 2019E 2018E 2019E
LTM LTM LTM LTM
Reven Revenu Revenu EBITD EBITD EBITD
EBIT EBIT
ue e e A A A EBIT EPS EPS EPS
Nestlé S.A. 3.1x 3.0x 2.9x 16.5x 13.5x 13.3x 20.6x 18.7x 17.1x 23.7x 21.8x 19.6x
Danone SA 2.5x 2.4x 2.3x 13.4x 11.8x 11.7x 17.7x 16.0x 16.0x 20.4x 18.4x 16.7x

Henkel AG & Co. KGaA 2.4x 2.3x 2.2x 13.5x 13.7x 14.2x 16.2x 16.4x 16.5x 19.0x 17.8x 16.8x
L'Oréal S.A. 4.0x 3.9x 3.7x 17.2x 17.0x 17.5x 22.2x 21.3x 20.0x 27.6x 26.2x 24.6x
Reckitt Benckiser Group
plc 5.5x 4.8x 4.7x 17.0x 15.7x 15.5x 20.2x 17.8x 16.7x 21.2x 19.4x 18.0x
Beiersdorf
Aktiengesellschaft 2.9x 2.8x 2.7x 16.3x 14.6x 14.6x 18.6x 17.6x 16.3x 29.3x 27.4x 25.3x
The Procter & Gamble
Company 3.1x 3.8x 3.7x 13.4x 12.5x 13.0x 14.5x 17.0x 16.1x 19.6x 22.0x 20.6x
The Kraft Heinz
Company 4.8x 4.7x 4.6x 15.5x 13.5x 13.3x 16.9x 16.0x 15.3x 21.6x 20.0x 19.0x
The Coca-Cola
Company 6.2x 6.6x 6.3x 20.0x 18.5x 17.8x 28.6x 20.5x 19.0x 21.7x 20.1x 18.7x
PepsiCo, Inc. 2.5x 2.5x 2.4x 13.3x 11.6x 11.4x 15.4x 15.0x 13.8x 18.7x 17.2x 16.0x
Colgate-Palmolive
Company 3.9x 3.7x 3.6x 13.5x 12.5x 12.4x 15.2x 15.1x 13.8x 21.7x 19.7x 18.2x
General Mills, Inc.
2.3x 2.2x 2.1x 13.0x 13.8x 14.5x 15.2x 15.6x 16.2x 14.0x 13.9x 13.4x

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 Equity Research 14.06.2018

DCF 2012 2013 2014 2015 2016 2017 CAGR 2018 2019 2020 2021 2022 TV

Revenue 51,324 49,797 48,436 53,272 52,713 53,715 0.9% 54,789 56,433 58,126 60,451 62,869

COGS (30,530) (29,065) (28,387) (30,808) (30,229) (30,547) (0.0%) (30,682) (31,320) (31,969) (32,946) (33,949)

Gross Profit 20,794 20,732 20,049 22,464 22,484 23,168 2.2% 24,107 25,113 26,157 27,505 28,920

SG&A (12,959) (12,308) (11,208) (14,065) (13,799) (13,507) (0.8%) (13,697) (13,826) (14,241) (14,508) (14,774)

R & D expenses (1,003) (1,040) (955) (1,005) (978) (900) 2.1% (1,096) (1,129) (1,163) (1,209) (1,257)
Other Operating
Costs (13,962) (13,348) (12,163) (15,070) (14,777) (14,407) (0.6%) (14,793) (14,955) (15,403) (15,717) (16,032)

EBIT 6,832 7,384 7,886 7,394 7,707 8,761 5.1% 9,314 10,158 10,753 11,788 12,888

Taxes (1,738) (1,879) (2,007) (1,881) (1,961) (2,229) (5.1%) (2,370) (2,585) (2,736) (3,000) (3,280)

NOPLAT 5,094 5,505 5,879 5,513 5,746 6,532 5.1% 6,944 7,573 8,017 8,788 9,609

Plus: D&A 1,199 1,151 1,127 1,370 1,173 1,214 0.2% 1,096 1,129 1,163 1,209 1,257
Plus/Less: Changing
Working Cap 146 861 267 434 (1,955) (266) 125 128 186 192

Less: CAPEX (1,975) (1,791) (1,893) (1,867) (1,804) (1,509) 5.2% (1,534) (1,580) (1,628) (1,693) (1,760)

CAPEX (1,975) (1,791) (1,893) (1,867) (1,804) (1,509) 5.2% (1,534) (1,580) (1,628) (1,693) (1,760)
Unlevered Free
Cash Flow 4,318 5,011 5,974 5,283 5,549 4,282 (0.2%) 6,240 7,247 7,680 8,490 9,297 184,443

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 Equity Research 14.06.2018

Enterprise Value Implied Equity Value and Share Price Implied Perpetuity Growth Rate
Enterprise Value
Cumulative Sum of PV 32,371 PGM Terminal Year FCF 9,297
Enterprise Value
EEM WACC 6.1%

Perpetuity Growth Method (PGM) Less: Net Debt Terminal Value 184,443

Terminal Value 184,443 Less: Preferred Securities

Discount Factor 0.74 Less. Non-Controlling Interest Implied Perp. Growth Rate 1.00%

PV of Terminal Value 137,236 Assumed Perp. Growth Rate 0.50%

% of Enterprise Value 80.9% Check: 0.50%

Implied Equity Value PGM

Implied Equity Value EEM

Implied EV /
Fully Dil. Shares Outstanding
Exit Multiple Method (EEM) EBITDA
Terminal Period
EBITDA 14,146 Enterprise Value 169,607

Terminal Value Exit Multiple Method 192,379 as of 31.12.2017 EBITDA 2018 10,410

PV of Terminal Value 143,141 Implied Share Price PGM

% of Enterprise Value 81.6% Implied Share Price EEM

Enterprise Value PGM 169,607 as of 31.05.2018 Implied EV / EBITDA (x) 16.3x

Enterprise Value EEM 175,512 Implied Share Price PGM Peer Group EV / EBITDA (x) 13.6x

Implied Share Price EEM

Current Share
Date Price
01/01/201
Starting 8 Return Potential % (PGM)
31/05/201
End of Valuation 8 Return Potential % (EEM)

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 Equity Research 14.06.2018

WACC & g

52.07 0.3% 0.5% 1.0% 1.5% 2.0%

5.0% 58.89 61.46 69.01 78.72 91.66

5.5% 52.25 54.30 60.22 67.63 77.16

6.1% 45.88 47.49 52.07 57.65 64.59

6.5% 42.18 43.57 47.46 52.13 57.83

7.0% 38.29 39.44 42.67 46.49 51.08

WACC & Exit Multiple

54.17 11.6x 12.6x 13.6x 14.6x 15.6x

5.0% 49.34 53.27 57.21 61.15 65.09

5.5% 48.10 51.95 55.79 59.64 63.49

6.1% 46.69 50.43 54.17 57.91 61.65

6.5% 45.73 49.40 53.07 56.74 60.41

7.0% 44.60 48.18 51.76 55.35 58.93

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 Equity Research 14.06.2018

Terminal Value
Cost of equity 6.81%
Scenario 1 20%
Mil. Shares Outst. 2,814
Scenario 2 25%
Scenario 3 29% Dividend 2017 1.43

g (Terminal
Scenario Dividend 2017 Growth (2-10) Growth (11-20) Value) Share Price Weighting

1 = Worst case % 1.43 7% 6% 2.00% 37.03 25%

2 = Base case % 1.43 9% 10% 2.00% 50.06 50%

3 = Best case % 1.43 11% 13% 2.00% 66.20 25%

Scenario 1 Scenario 2

6.00 10.00
5.00 8.00
4.00
6.00
3.00
4.00
2.00
1.00 2.00

0.00 0.00
2018

2020

2022

2024

2026

2028

2030

2032

2034

2036

2018

2020

2022

2024

2026

2028

2030

2032

2034

2036
Scenario 3
15.00

10.00

5.00

0.00
2018

2020

2022

2024

2026

2028

2030

2032

2034

2036

50.98 1.23 1.33 1.43 1.53 1.63

5.8% 53.27 57.56 61.85 66.15 70.44
6.3% 48.13 52.01 55.88 59.76 63.63
6.8% 43.92 47.45 50.98 54.51 58.05
7.3% 40.38 43.62 46.87 50.11 53.36
7.8% 37.36 40.36 43.35 46.35 49.35

27
 Equity Research 14.06.2018 <Consumer Goods>

Appendix: Ethical Initiatives

Year Ethical Initiatives

Unilever and PT Perkebunana Nusantara (PTPN) reach agreement to accelerate
2018
production of sustainable palm oil in Indonesia
Announced that all of the plastic packaging will be design to be fully reusable, recyclable
2017
or compostable by 2025
IFF and Unilever launched partnership to improve lives of vetiver farming communities in
2016
Haiti
Unilever's stepped up its engagement in support of a climate change agreement at the
2015
UN Framework Convention on Climate Change COP21 in Paris
Three major sustainable sourcing partnerships signed: with Solidaridad and Internet.org
to boost opportunities for young people in agriculture< with Symrise and GIZ to source
2014
vanilla in Madagascar; and with International Fund for Agricultural Development (IFAD)
to improve food security
Launched Project Sunlight, a new initiative to motivate millions of people to adopt more
2013
sustainable lifestyles
Launched a sustainable paper and board policy - source 75% of the paper and board
2010
packaging from sustainably managed forests or from recycled material
2009 Launched global "Brush Day and Night" campaign with FDI World Dental Federation
Lipton sustainable tea partnership with Rainforest Alliance launched
2007 PROGRESS, a food sector industry partnership on supplier standards, launched with
Unilever as a founding member
2004 Roundtable on Sustainable Palm Oil established
2003 Nutrition Enhancement Programme started
Lifebuoy Swasthya handwashing campaign launched in India (hygiene education
2002
campaign)
Project Shakti launched in India to increase rural distribution and help create women
2000
entrepreneurs
1996 Fish sustainability initiative sets long-term goal of sustainable sourcing

28
 Equity Research 14.06.2018

Appendix: Share Price movement related to News

Publication
Headline Return
Date
Hindustan Unilever Ltd. shares rose 3.5 percent, more than any full-day
16-May-18 gain since May 10, 2017, while India's benchmark index declined. Trading -0.1792%
in the company's call options was more than triple the average
14-May-18 Hindustan Unilever reported net income for the fourth quarter that was 1.5% 0.0736%
above the average analyst estimate
04-May-18 Reckitt Benckiser Leads U.K. Exporters Higher as Pound Falls 0.7753%
03-May-18 Kraft Heinz Jumps Most Since Unilever Talks Sent Shares Surging -1.2615%
02-May-18 Unilever Ghana reported revenue for the first quarter of 165.3 million cedis. -2.2655%
25-Apr-18 Unilever Indonesia Cut to Sell at Trimegah Securities 0.5593%
24-Apr-18 Unilever Indonesia 1Q Net Income Falls 6.2% Y/y to 1.84T Rupiah 1.0416%
19-Apr-18 Unilever First Quarter Underlying Sales Match Estimates -1.8719%
29-Mar-18 Unilever Nigeria reported revenue for the full year of 90.8 billion naira 1.1689%
28-Mar-18 Unilever GDRs Upgraded to Buy at UBS 4.3378%
Colgate gains as much as 2%, Estee Lauder as much as 1% after The
Times of the U.K. reported the Unilever is preparing for "a series of
19-Mar-18 0.3586%
blockbuster mergers that could include deals with rivals such as Colgate-
Palmolive and Estée Lauder"
01-Feb-18 Unilever Fourth Quarter Underlying Sales Beat Estimates 0.7288%
30-Jan-18 Unilever Ghana Full Year Revenue 575.3 Mln Cedis 0.7058%
27-Oct-18 Unilever Ghana Nine Months Revenue 428.2 Mln Cedis 0.7062%
26-Oct-18 Hindustan Unilever Second Quarter Net Income Beats Estimates 3.4300%
25-Oct-18 Hindustan Unilever Second Quarter Net Income Beats Estimates -0.3166%
20-Oct-18 Unilever shares drop as much as 1.9%, extending Thursday’s losses after -2.8659%
3Q adj. sales growth missed estimates
Unilever’s poor performance in 3Q came in below expectations in all
19-Oct-18 geographies -5.8373%
26-Sep-18 Korean Cosmetics Stocks Rise After Unilever-Carver $2.7b Deal 0.1619%
20-Jul-18 Unilever First Half Revenue Misses Estimates 0.3520%

29
 Equity Research 14.06.2018 <Consumer Goods>

Disclaimer:
Disclosures:

Ownership and material conflicts of interest:

The author(s), or a member of their household, of this report does not hold a financial interest in
the
securities of this company. The author(s), or a member of their household, of this report does not
know of the existence of any conflicts of interest that might bias the content or publication of this
report.

Receipt of compensation: Compensation of the author(s) of this report is not based on revenue.

Position as a officer or director: The author(s), or a member of their household, does not serve as
an officer, director or advisory board member of the subject company.

Market making: The author(s) does not act as a market maker in the subject company’s
securities.

Disclaimer: The information set forth herein has been obtained or derived from sources generally
available to the public and believed by the author(s) to be reliable, but the author(s) does not
make any representation or warranty, express or implied, as to its accuracy or completeness. The
information is not intended to be used as the basis of any investment decisions by any person or
entity. This information does not constitute investment advice, nor is it an offer or a solicitation of
an offer to buy or sell any security. This report should not be considered to be a recommendation
by any individual affiliated with WUTIS – Trading and Investment Society

30
 Unilever N.V.
Target Price: € 52.07
Current Price: 47.74 as of 31th May
Upside: 9.1 %

Recommendation: BUY
Investment Horizon: 6 Months
Vienna, 15th of June

Vienna, 15th of June 2018

Valid until 30/06/2018

© Equity Research - 0 - | Valid until 30/06/2018 WUTIS.

WUTIS.
 Team – Overview
Equity Research

Lizette Philipp Dima Max

Navarro Utz Solovei Fellhuber

Analyst Analyst Associate

Analyst

 Business Overview  Industry  DCF & DDM Analysis  Risk Analysis

 Competitive Positioning  Financial Analysis  Comparable Valuation  Conclusion

 MA. Quantitative Asset and

 BA. International Business
Risk Management  BSc. (WU) – 6th Sem.  BSc. (WU) – 4th Sem.
Administration – 4th Sem.
 BA. Business Administration
 BSc. Business Informatics
– 4th Sem.

© Equity Research - 1 - | Valid until 30/06/2018 WUTIS.

 1 Executive Summary 3

2 Business Description 5

3 Industry Overview & Outlook 9

4 Financial Analysis 13

5 Valuation Analysis 17

6 Risk Analysis 19

7 Appendix 22

© Equity Research - 2 - | Valid until 30/06/2018 WUTIS.

 Executive Summary
We issue a BUY recommendation with a 1-year target price of EUR 52.07 per share

Industry
Industry&&growth
growthpotential
potential Business
Business
model
model Unilever’s 1-year share price history
54 €
EUR 52.07
52 €

50 €
Limited
Limited Highly
Highly diversified
diversified
market risk
market risk business model
business model 48 €
EUR 47.74
6 6 1 1
46 €

55 2 2 44 €
One One of biggest
of the the biggest
Tata
TataSteel
Steelmerger
merger producer
producer of of
Below
Below industry
industry consumer goods 42 €
creates
createssteel
steelgiant
giant consumer goods
valuation
valuation
4 4 3 3
40 €
06/2017 08/2017 10/2017 12/2017 02/2018 04/2018 06/2018

Growth
Growthpotential
potential
MoreMore
than than
400 400 Upside
brands
brands
worldwide
worldwide Trading Price: Target Price:
Potential:
EUR 47.74 EUR 52.07
9.1%

© Equity Research - 3 - | Valid until 30/06/2018 WUTIS.

Company Overview
 Business Summary
Unilever is a global player in the consumer goods industry
Business Description Unilever‘s Business Actions

• UN operates in the Fast Moving Consumer Goods (FMCG) Industry • 2015 Acquisition of Kate Somerville
making and selling around 400 brands in more than 190 countries, • 2015 Acquisition of Dermalogica
giving Unilever a unique position in emerging markets where • 2016 Acquisition of Dollar Shave Club
58% of the turnover is generated.
• 2017 Carver Korea
• Unilever operates and manages 306 factories in 69 countries and • 2017 Block Chain collaboration with IBM
maintains a network of approximately 400 warehouses in various • 2017 Agreement signed with Alibaba-backed Lazada
markets. • 2018 Acquisition of Quala”s beauty & personal a
• Unilever is organized into four main divisions: the largest being • 2018 Beginning of a program to buy back shares with an
Personal Care (39% of Turnover), followed by Foods (23%), Home aggregate market value of up to €6 biillion.
Care (20%) and Refreshment (18%).

Ratios & Key Indicators 2012 2013 2014 2015 2016 2017
In % of revenue
Revenue 51,324 49,797 48,436 53,272 52,713 53,715
EBITDA % 16% 17% 19% 16% 17% 19%
EBIT % 13% 15% 16% 14% 15% 16%
Liquidity KPIs
Current Ratio (x) 0.8 0.7 0.6 0.6 0.7 0.7
Net Working Capital (WC) -5,824 -5,970 -6,831 -7,098 -7,532 -5,577
Profitability Ratios
Gross Profit margin % 41% 42% 41% 42% 43% 43%
Operating Profit margin % 13% 15% 16% 14% 15% 16%
ROE % 31% 36% 32% 31% 39%
Financial Ratios
Total Debt / Equity (x) 0.9 1.0 1.,2 1.2 1.3 2.0
Equity Ratio % 33% 32% 28% 30% 29% 23%

© Equity Research - 5 - | Valid until 30/06/2018 WUTIS.

 Unilever NV – Overview
Unilever’s four segments at a glance
Personal Care (mio. EUR) Home Care (mio. EUR)
22,000 12,000 25%
25%
20,000
20% 10,000 20%
18,000
16,000 15% 8,000 15%

14,000 6,000
10% 10%
12,000
5% 4,000 5%
10,000
8,000 0% 2,000 0%
2012 2013 2014 2015 2016 2017 2012 2013 2014 2015 2016 2017

Revenues EBIT Margin Revenues EBIT Margin

Foods (mio. EUR) Refreshment (mio. EUR)

16,000 25.0% 12,000 25%

20.0% 10,000 20%

14,000

15.0% 8,000 15%

12,000
10.0% 6,000 10%

10,000
5.0% 4,000 5%

8,000 0.0% 2,000 0%

2012 2013 2014 2015 2016 2017 2012 2013 2014 2015 2016 2017

Revenues EBIT Margin Revenues EBIT Margin

© Equity Research - 6 - | Valid until 30/06/2018 WUTIS.

 Unilever – Corporate Governance
Key factors about Unilever’s CEO and its Legal Structure

SHAREHOLDERS
CEO – Paul Polman

Appointed: 2009 DIRECTORS

Formerly: P&G (Group President, EU)

Nestlé SA (CFO) EQUALISATION AND OTHER
NV AGREEMENTS PLC

• Introduce the Unilever Sustainable Living Plan (USLP)

NV OWNED PLC OWNED
• Under his leadership Unilever has an ambitious vision to fully OPERATING
JOINTLY OWNED OPERATING
OPERATING
decouple its growth from overall environmental footprint and COMPANIES COMPANIES COMPANIES
increase its positive social impact through the USLP

• Change the strategy moving from the Foods segment to the TICKER: UNA TICKER: ULVR
TRADED: 1 UNA = 1 ULVR TRADED:
Personal Care segment AMSTERDAM LONDON

• In 2016, he received France’s Chevalier de la Legion 1 UN = 1 UNA

1 UN = 1 ULVR

d’Honneur
TICKER: UN TICKER: UL
TRADED: 1 UN = 1 UL TRADED:
NYSE NYSE

© Equity Research - 7 - | Valid until 30/06/2018 WUTIS.

Industry Drivers
 Hygiene segment
Decelerating growth – Companies have to be more selective
Global Personal Hygiene market Market share 2016
(bn. USD) 25%
50 5.0%
40 4.8%
4.6%
30
4.4%
20 57% 7%
4.2%
10 4.0%
6%
0 3.8%
4%
2013 2014 2015 2016
Unilever Colgate-Palmolive Company
Global personal hygiene market Growth Procter & Gamble Beiersdorf Ag
Other

Personal Hygiene market Market position

• Growth rates expected to decelerate • Unilever‘s position:

• Quest for growth: • Addressing emerging markets
• Premium segments • Carver Korea acquisition
• Millennials
• Increased disposable income • Addressing millennials
• Emerging markets • Dollar Shave Club

© Equity Research - 9 - | Valid until 30/06/2018 WUTIS.

 Foods and Refreshment Segment
Strong growth expectation in the overall Foods & Refreshment market segment
Foods market value outlook (bn. EUR) Ice-cream market share 2016
60 4.0%
8.6% 3.6%
50
3.5% 2.7% 1.1%
40
30 3.0%
20
2.5%
10
0 2.0% 84.0%
2014 2015 2016 2017 2018 2019
Unilever Nestle
EUR bn % Growth Artisanal Producers General Mills
other

Global Tea & Coffee market value

130 10.0%
120
8.0%
110
Industry
Key 100 6.0%
Drivers 90
4.0%
80
70 2.0%

$ billion % Growth
© Equity Research - 10 - | Valid until 30/06/2018 WUTIS.
 Home Care Segment
Driven by change in demographics and hygiene habits
12% Growth of demand for soap and cleansers, APAC Five largest Home Care product consumers. In
region million EUR
10% 7%

2017 2018 11%

7%

5% 39%

12%
2%

-1%

-3%
31%

China United States Brazil Japan United Kingdom

Palm Oil Price in USD Industry Drivers

$1,000
• Home cleaning products such as soap and laundry
$900 detergents become more common in emerging
$800 markets, as individual income increases.
$700 • Low commodity prices facilitate cuts in costs and
$600 push the margins.
$500
• A shift in demographics: more single-person
Jan Apr Jul Okt Jan Apr Jul Okt Jan Apr Jul Okt Jan Apr Jul Okt Jan households mean larger living space to take care of.
14 14 14 14 15 15 15 15 16 16 16 16 17 17 17 17 18

© Equity Research - 11 - | Valid until 30/06/2018 WUTIS.

Financial Analysis
 Financial Analysis
Increased leverage and the importance of exchange rates
Total Debt / Equity (bn. €) Effects of Turnover growth (%)
30 2.5x 12% 10%
25 2.0x 8%
2%
20
1.5x 4%
15
1.0x 0%
10
-1%
5 0.5x -4% -3%
-3%
0 0.0x -8%
2012 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017
Acquisitions Disposals Exchange Rates
BV Total Debt BV Equity Total Debt / Equity (x) USG Turnover growth

Increased leverage Turnover analysis

• Continuously rise in Total Debt with spike in 2017 • Substantial variation in revenues
• 8 bn. EUR increase mainly by issuing bonds • Gains in 2017 ensured new revenue record for
Unilever
• 5 bn. EUR repurchase of shares in 2017 • Revenues consistently above 50 bn. EUR hurdle
• Unique action • High exposure to currency fluctuation
• Revenues typically move with exchange rates
• Low avg. after tax cost of debt 1.57% effect

© Equity Research - 13 - | Valid until 30/06/2018 WUTIS.

 Financial Analysis
Strong market position and improvements in profitability
Activity Ratios (days) EBIT Margin Comparison
120 30%
102 100
100 94 94
88
25%
80
60 53 52 50 52 49 20%
40
21 21 20 22 23 15%
20
0 10%
2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 2018 2019 2020

DIH DSO DPO Peer Group Unilever NV Median

Managing Dates of Payment Ambivalent Profitability Comparison

• Strong market position is supported by: • Unilever drags behind its peers since 2014
• Low DSO
• High DPO • Unilever increases profitability faster ever since
• Difference rose from 35 days to 51 days
• Unilever is bigger than most peers
• Increased efficiency in supply chain represented in
reduction
of DIH

© Equity Research - 14 - | Valid until 30/06/2018 WUTIS.

 Peer Group
Our Peer Group consists of 12 well-known public companies
Obtaining our Peer Group Peer Group Screening
6,000
1. Classification: The classification on the basis of
5,000
the “U.S. Standard Industrial Classification (SIC)
system led to a selection of companies in the same 4,000
industry. Moreover, the companies must be public
3,000
companies to be a good fit for the peer group. 5 101 (4 832)
2,000
2. Size: All companies with a market capitalization 1,000
below 10bn. EUR were excluded from the long list, (64) (193) 12
thereby reducing the list by 4.832 companies. 0
Long List MCAP EBITDA Business Short List
Fit
3. Profitability: Excluding 64 companies with an Source: Capital IQ

EBITDA < 1bn. EUR which are therefore too small

for comparison.

4. Business Fit: Next, the business model of the

remaining companies was reviewed.

This selection process resulted in a group of 12

companies.

© Equity Research - 15 - | Valid until 30/06/2018 WUTIS.

Valuation
 Unilever NV – Valuation
Transaction Multiples, DCF and DDM

Price Range LTM

Assumptions:
• Revenues growing at average 3%
DCF
• EBIT margin will reach 18,5% by 2020
• Consistently returning cash to its shareholders for almost
DDM 20 years and showed an average of 8% YoY growth
• DDM price EUR 50.84 and Multiples price EUR 54.17
P/E LTM

EV/EBIT Y1
180,000 1000
169,607
EV/EBIT
LTM 160,000 800
+4,009
145,630
EV/EBITDA 140,000 -758 600
LTM -27,228 Dil. Shares
2,814 Mil
120,000 400
EV/Rev Y1

100,000 200
EV/Rev LTM
52,07
80,000 0
€ 30.00 € 40.00 € 50.00 € 60.00 € 70.00 € 80.00 € 90.00 EV Total Debt Cash and Minority Equity Value Share Price
Cash equiv. Interest

© Equity Research - 17 - | Valid until 30/06/2018 WUTIS.

Investment Risk
 Investment Risks
Emerging markets: the biggest risk factor

Investment risks:

Ethical Branding
The firm, along with some competitors
(Nestlé), is under public scrutiny for it´s
operations in underdeveloped areas.
Mitigation: Ethical Guidelines and Publicity

Economic and political instability

Impact

Unilever´s relatively high exposure to

emerging markets brings along higher
uncertainty
Mitigation: Diversified Portfolio

Exchange Rate Risk

Due to it´s international business dealings,
the firm is heavily exposed to relatively
unstable currencies.
Mitigation: Hedging and Liquidity
Mangement
Likelihood

© Equity Research - 19 - | Valid until 30/06/2018 WUTIS.

 Investment Summary
BUY recommendation with a target Price of € 52,07

Strategy for growth Customer needs E-Commerce Healthy Financials

• Strong expected • Appealing to luxury • Acquisiton of Dollar • Share-buyback instead

increase in income in market and price- Shave Club of mindless M&A
APAC (where 58% of concious consumers signals shareholder-
Unilever‘s revenue is alike through precisely • Expected sales of EUR friendly strategy
generated) targeted product lines 1bn in China alone
• Increase in leverage
• Strategic investments • Large costumer base • Very well positioned pushed ROE to 42%
and acquisitions will in up and coming and therefore therefore creating more
somewhat resilient value for shareholders
further strenghten countries by adjusting
against consolidation in
Unilever‘s position packaging size etc. to
E-Commerce • Leverage matches risk
consumer needs
profile

© Equity Research - 20 - | Valid until 30/06/2018 WUTIS.

Q&A and Appendix
 Balance Sheet
Assets
Balance Sheet
ASSETS 2012 2013 2014 2015 2016 2017
Cash And Equivalents 2,465.0 2,285.0 2,151.0 2,302.0 3,382.0 3,317.0

Short Term Investments 711.0 934.0 599.0 596.0 565.0 521.0

Trading Asset Securities 56.0 20.0 21.0 124.0 181.0 171.0

Total Cash & ST Investments 3,232.0 3,239.0 2,771.0 3,022.0 4,128.0 4,009.0

Accounts Receivable 2,793.0 2,852.0 2,827.0 2,917.0 3,329.0 3,439.0

Other Receivables 217.0 217.0 281.0 230.0 1,190.0 1,538.0

Notes Receivable 2.0 100.0 180.0 269.0 208.0 277.0

Total Receivables 3,012.0 3,169.0 3,288.0 3,416.0 4,727.0 5,254.0

Inventory 4,436.0 3,937.0 4,168.0 4,335.0 4,278.0 3,962.0

Prepaid Exp. 549.0 516.0 540.0 561.0 504.0 452.0

Other Current Assets 918.0 1,261.0 1,580.0 1,352.0 247.0 3,306.0

Total Current Assets 12,147.0 12,122.0 12,347.0 12,686.0 13,884.0 16,983.0

Gross Property, Plant & Equipment 17,509.0 17,229.0 18,914.0 19,917.0 21,207.0 19,398.0

Accumulated Depreciation (8,064.0) (7,885.0) (8,442.0) (8,859.0) (9,534.0) (8,987.0)

Net Property, Plant & Equipment 9,445.0 9,344.0 10,472.0 11,058.0 11,673.0 10,411.0

Long-term Investments 519.0 512.0 695.0 592.0 491.0 502.0

Goodwill 14,619.0 13,917.0 14,642.0 16,213.0 17,624.0 16,881.0

Other Intangibles 7,099.0 6,987.0 7,532.0 8,846.0 9,809.0 11,520.0

Accounts Receivable Long-Term 172.0 207.0 265.0 413.0 306.0 265.0

Loans Receivable Long-Term 1.0 4.0 28.0 34.0 190.0 186.0

Deferred Tax Assets, LT 1,050.0 1,084.0 1,286.0 1,185.0 1,354.0 1,085.0

Other Long-Term Assets 1,137.0 1,336.0 760.0 1,271.0 1,098.0 2,452.0

Total Assets 46,189.0 45,513.0 48,027.0 52,298.0 56,429.0 60,285.0

© Equity Research - 22 - | Valid until 30/06/2018 WUTIS.

 Balance Sheet
Liabilities
LIABILITIES 2012 2013 2014 2015 2016 2017
Accounts Payable 7,084.0 6,995.0 7,636.0 8,296.0 8,591.0 8,217.0

Accrued Exp. 3,878.0 3,900.0 3,727.0 4,175.0 4,123.0 4,205.0

Short-term Borrowings 1,076.0 2,529.0 3,235.0 3,257.0 3,268.0 6,420.0

Curr. Port. of LT Debt 1,565.0 1,467.0 2,288.0 1,495.0 2,173.0 1,537.0

Curr. Port. of Cap. Leases 15.0 14.0 13.0 37.0 9.0 11.0

Curr. Income Taxes Payable 1,129.0 1,254.0 1,081.0 1,127.0 844.0 1,088.0

Other Current Liabilities 1,068.0 1,223.0 1,662.0 1,632.0 1,548.0 1,699.0

Total Current Liabilities 15,815.0 17,382.0 19,642.0 20,019.0 20,556.0 23,177.0

Long-Term Debt 7,378.0 7,301.0 7,000.0 9,696.0 11,011.0 16,342.0

Capital Leases 187.0 190.0 186.0 158.0 134.0 120.0

Pension & Other Post-Retire. Benefits 4,100.0 2,968.0 3,947.0 3,254.0 3,867.0 2,734.0

Def. Tax Liability, Non-Curr. 1,414.0 1,524.0 1,534.0 1,744.0 2,061.0 1,913.0

Other Non-Current Liabilities 1,346.0 1,333.0 1,455.0 1,345.0 1,820.0 1,612.0

Total Liabilities 30,240.0 30,698.0 33,764.0 36,216.0 39,449.0 45,898.0

Common Stock 484.0 484.0 484.0 484.0 484.0 484.0

Additional Paid In Capital 140.0 138.0 145.0 152.0 134.0 130.0

Retained Earnings 20,964.0 20,468.0 20,560.0 22,619.0 23,179.0 26,648.0

Treasury Stock (4,002.0) (3,890.0) (4,125.0) (4,119.0) (4,164.0) (9,208.0)

Comprehensive Inc. and Other (2,194.0) (2,856.0) (3,413.0) (3,697.0) (3,279.0) (4,425.0)

Total Common Equity 15,392.0 14,344.0 13,651.0 15,439.0 16,354.0 13,629.0

Minority Interest 557.0 471.0 612.0 643.0 626.0 758.0

Total Equity 15,949.0 14,815.0 14,263.0 16,082.0 16,980.0 14,387.0

Total Liabilities And Equity 46,189.0 45,513.0 48,027.0 52,298.0 56,429.0 60,285.0

© Equity Research - 23 - | Valid until 30/06/2018 WUTIS.

 Balance Sheet as % of Balance Sheet Total
Assets

Balance Sheet as % of Balance Sheet Total

ASSETS 2012 2013 2014 2015 2016 2017
Cash And Equivalents 5.34% 5.02% 4.48% 4.40% 5.99% 5.50%
Short Term Investments 1.54% 2.05% 1.25% 1.14% 1.00% 0.86%
Trading Asset Securities 0.12% 0.04% 0.04% 0.24% 0.32% 0.28%
Total Cash & ST Investments 7.00% 7.12% 5.77% 5.78% 7.32% 6.65%
Accounts Receivable 6.05% 6.27% 5.89% 5.58% 5.90% 5.70%
Other Receivables 0.47% 0.48% 0.59% 0.44% 2.11% 2.55%
Notes Receivable 0.00% 0.22% 0.37% 0.51% 0.37% 0.46%
Total Receivables 6.52% 6.96% 6.85% 6.53% 8.38% 8.72%
Inventory 9.60% 8.65% 8.68% 8.29% 7.58% 6.57%
Prepaid Exp. 1.19% 1.13% 1.12% 1.07% 0.89% 0.75%
Other Current Assets 1.99% 2.77% 3.29% 2.59% 0.44% 5.48%
Total Current Assets 26.30% 26.63% 25.71% 24.26% 24.60% 28.17%
Gross Property, Plant & Equipment 37.91% 37.86% 39.38% 38.08% 37.58% 32.18%

Accumulated Depreciation -17.46% -17.32% -17.58% -16.94% -16.90% -14.91%

Net Property, Plant & Equipment 20.45% 20.53% 21.80% 21.14% 20.69% 17.27%

Long-term Investments 1.12% 1.12% 1.45% 1.13% 0.87% 0.83%

Goodwill 31.65% 30.58% 30.49% 31.00% 31.23% 28.00%
Other Intangibles 15.37% 15.35% 15.68% 16.91% 17.38% 19.11%
Accounts Receivable Long-Term 0.37% 0.45% 0.55% 0.79% 0.54% 0.44%
Loans Receivable Long-Term 0.00% 0.01% 0.06% 0.07% 0.34% 0.31%
Deferred Tax Assets, LT 2.27% 2.38% 2.68% 2.27% 2.40% 1.80%
Other Long-Term Assets 2.46% 2.94% 1.58% 2.43% 1.95% 4.07%
Total Assets 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%

© Equity Research - 24 - | Valid until 30/06/2018 WUTIS.

 Balance Sheet as % of Balance Sheet Total
Liabilities

LIABILITIES
Accounts Payable 15.34% 15.37% 15.90% 15.86% 15.22% 13.63%
Accrued Exp. 8.40% 8.57% 7.76% 7.98% 7.31% 6.98%
Short-term Borrowings 2.33% 5.56% 6.74% 6.23% 5.79% 10.65%
Curr. Port. of LT Debt 3.39% 3.22% 4.76% 2.86% 3.85% 2.55%
Curr. Port. of Cap. Leases 0.03% 0.03% 0.03% 0.07% 0.02% 0.02%
Curr. Income Taxes Payable 2.44% 2.76% 2.25% 2.15% 1.50% 1.80%
Other Current Liabilities 2.31% 2.69% 3.46% 3.12% 2.74% 2.82%
Total Current Liabilities 34.24% 38.19% 40.90% 38.28% 36.43% 38.45%
Long-Term Debt 15.97% 16.04% 14.58% 18.54% 19.51% 27.11%
Capital Leases 0.40% 0.42% 0.39% 0.30% 0.24% 0.20%
Pension & Other Post-Retire. Benefits 8.88% 6.52% 8.22% 6.22% 6.85% 4.54%

Def. Tax Liability, Non-Curr. 3.06% 3.35% 3.19% 3.33% 3.65% 3.17%
Other Non-Current Liabilities 2.91% 2.93% 3.03% 2.57% 3.23% 2.67%
Total Liabilities 65.47% 67.45% 70.30% 69.25% 69.91% 76.14%
Common Stock 1.05% 1.06% 1.01% 0.93% 0.86% 0.80%
Additional Paid In Capital 0.30% 0.30% 0.30% 0.29% 0.24% 0.22%
Retained Earnings 45.39% 44.97% 42.81% 43.25% 41.08% 44.20%
Treasury Stock -8.66% -8.55% -8.59% -7.88% -7.38% -15.27%
Comprehensive Inc. and Other -4.75% -6.28% -7.11% -7.07% -5.81% -7.34%
Total Common Equity 33.32% 31.52% 28.42% 29.52% 28.98% 22.61%
Minority Interest 1.21% 1.03% 1.27% 1.23% 1.11% 1.26%
Total Equity 34.53% 32.55% 29.70% 30.75% 30.09% 23.86%
Total Liabilities And Equity 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%

© Equity Research - 25 - | Valid until 30/06/2018 WUTIS.

 Income Statement

Income Statement
2012 2013 2014 2015 2016 2017
Revenue 51,324.0 49,797.0 48,436.0 53,272.0 52,713.0 53,715.0
Total Revenue 51,324.0 49,797.0 48,436.0 53,272.0 52,713.0 53,715.0
Cost Of Goods Sold 30,530.0 29,065.0 28,387.0 30,808.0 30,229.0 30,547.0
Gross Profit 20,794.0 20,732.0 20,049.0 22,464.0 22,484.0 23,168.0
Selling General & Admin Exp. 12,959.0 12,308.0 11,208.0 14,065.0 13,799.0 13,507.0
R & D Exp. 1,003.0 1,040.0 955.0 1,005.0 978.0 900.0
Other Operating Exp., Total 13,962.0 13,348.0 12,163.0 15,070.0 14,777.0 14,407.0
Operating Income 6,832.0 7,384.0 7,886.0 7,394.0 7,707.0 8,761.0
Interest Expense (524.0) (497.0) (486.0) (552.0) (572.0) (608.0)
Interest and Invest. Income 136.0 117.0 162.0 235.0 219.0 175.0
Net Interest Exp. (388.0) (380.0) (324.0) (317.0) (353.0) (433.0)
Income/(Loss) from Affiliates 105.0 113.0 98.0 107.0 127.0 155.0
Currency Exchange Gains (Loss) (2.0) (3.0) (14.0) 36.0 (12.0) 13.0
Other Non-Operating Inc. (Exp.) - - - - - (26.0)
EBT Excl. Unusual Items 6,547.0 7,114.0 7,646.0 7,220.0 7,469.0 8,470.0
Gain (Loss) On Sale Of Invest. (14.0) - - - - -
Legal Settlements - - - - - 65.0
Other Unusual Items - - - - - (382.0)
EBT Incl. Unusual Items 6,533.0 7,114.0 7,646.0 7,220.0 7,469.0 8,153.0
Income Tax Expense 1,697.0 1,851.0 2,131.0 1,961.0 1,922.0 1,667.0
Net Income to Company 4,836.0 5,263.0 5,515.0 5,259.0 5,547.0 6,486.0
Minority Int. in Earnings (468.0) (421.0) (344.0) (350.0) (363.0) (433.0)
Net Income 4,368.0 4,842.0 5,171.0 4,909.0 5,184.0 6,053.0

© Equity Research - 26 - | Valid until 30/06/2018 WUTIS.

 Income Statement as % of Revenue
as % of Revenue

Income Statement as % of Revenue

2012 2013 2014 2015 2016 2017
Revenue 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Total Revenue 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Cost Of Goods Sold 59.48% 58.37% 58.61% 57.83% 57.35% 56.87%
Gross Profit 40.52% 41.63% 41.39% 42.17% 42.65% 43.13%
Selling General & Admin Exp. 25.25% 24.72% 23.14% 26.40% 26.18% 25.15%
R & D Exp. 1.95% 2.09% 1.97% 1.89% 1.86% 1.68%
Other Operating Exp., Total 27.20% 26.80% 25.11% 28.29% 28.03% 26.82%
Operating Income 13.31% 14.83% 16.28% 13.88% 14.62% 16.31%
Interest Expense -1.02% -1.00% -1.00% -1.04% -1.09% -1.13%
Interest and Invest. Income 0.26% 0.23% 0.33% 0.44% 0.42% 0.33%
Net Interest Exp. -0.76% -0.76% -0.67% -0.60% -0.67% -0.81%
Income/(Loss) from Affiliates 0.20% 0.23% 0.20% 0.20% 0.24% 0.29%
Currency Exchange Gains (Loss) 0.00% -0.01% -0.03% 0.07% -0.02% 0.02%
Other Non-Operating Inc. (Exp.) n/a n/a n/a n/a n/a -0.05%
EBT Excl. Unusual Items 12.76% 14.29% 15.79% 13.55% 14.17% 15.77%
Gain (Loss) On Sale Of Invest. -0.03% n/a n/a n/a n/a n/a
Legal Settlements n/a n/a n/a n/a n/a 0.12%
Other Unusual Items n/a n/a n/a n/a n/a -0.71%
EBT Incl. Unusual Items 12.73% 14.29% 15.79% 13.55% 14.17% 15.18%
Income Tax Expense 3.31% 3.72% 4.40% 3.68% 3.65% 3.10%
Net Income to Company 9.42% 10.57% 11.39% 9.87% 10.52% 12.07%
Minority Int. in Earnings -0.91% -0.85% -0.71% -0.66% -0.69% -0.81%
Net Income 8.51% 9.72% 10.68% 9.21% 9.83% 11.27%

© Equity Research - 27 - | Valid until 30/06/2018 WUTIS.

 Discounted Cash Flows
Projections and Growth Assumptions

DCF 2012 2013 2014 2015 2016 2017 CAGR 2018 2019 2020 2021 2022 TV

Revenue 51,324 49,797 48,436 53,272 52,713 53,715 0.9% 54,789 56,433 58,126 60,451 62,869
COGS (30,530) (29,065) (28,387) (30,808) (30,229) (30,547) (0.0%) (30,682) (31,320) (31,969) (32,946) (33,949)
Gross Profit 20,794 20,732 20,049 22,464 22,484 23,168 2.2% 24,107 25,113 26,157 27,505 28,920

SG&A (12,959) (12,308) (11,208) (14,065) (13,799) (13,507) (0.8%) (13,697) (13,826) (14,241) (14,508) (14,774)
R & D expenses (1,003) (1,040) (955) (1,005) (978) (900) 2.1% (1,096) (1,129) (1,163) (1,209) (1,257)
Other Operating Costs (13,962) (13,348) (12,163) (15,070) (14,777) (14,407) (0.6%) (14,793) (14,955) (15,403) (15,717) (16,032)

EBIT 6,832 7,384 7,886 7,394 7,707 8,761 5.1% 9,314 10,158 10,753 11,788 12,888
Taxes (1,738) (1,879) (2,007) (1,881) (1,961) (2,229) (5.1%) (2,370) (2,585) (2,736) (3,000) (3,280)
NOPLAT 5,094 5,505 5,879 5,513 5,746 6,532 5.1% 6,944 7,573 8,017 8,788 9,609
Plus: D&A 1,199 1,151 1,127 1,370 1,173 1,214 0.2% 1,096 1,129 1,163 1,209 1,257
Plus/Less: Changing
Working Cap 146 861 267 434 (1,955) (266) 125 128 186 192
Less: CAPEX (1,975) (1,791) (1,893) (1,867) (1,804) (1,509) 5.2% (1,534) (1,580) (1,628) (1,693) (1,760)
CAPEX (1,975) (1,791) (1,893) (1,867) (1,804) (1,509) 5.2% (1,534) (1,580) (1,628) (1,693) (1,760)
Unlevered Free Cash
(0.2%)
Flow 4,318 5,011 5,974 5,283 5,549 4,282 6,240 7,247 7,680 8,490 9,297 184,443

© Equity Research - 28 - | Valid until 30/06/2018 WUTIS.

 Discounted Cash Flow Model
Cost of Debt, Cost of Equity and Weighted average cost of capital

Cost of Equity

Market return 9% DAX Index Cost of Capital

Risk free rate 2.2% 30-Y Gov. Bond Risk free rate 2.2%

2-Y relevered Beta 0.68 Bottom-Up Approach Market risk premium 6.8%
2-Y relevered Beta 0.68
Cost of Equity 6.81%
Cost of Equity 6.81%

Cost of Debt 2.10%

Assumptions: Equity ratio 86.25%

• Revenues growth starts at 2% and accelerates to 4% in Debt ratio 13.75%

years 4 and 5. Tax rate 25.45%
• Cost reductions will reduce COGS as % of Sales
• CAPEX will be kept constant at 2% WACC 6.1%
• Lower SG&A expenditure
• Increased EBIT margin (from 16,3% in 2017 to 20.5% in 2022)
• Cost of Debt = Weighted Yields of long-term Unilever bonds
• Target Capital Structure = Solving the circularity problem with an
iteration of the equity value (end equity value is equal to the equity
value within our capital structure)

© Equity Research - 29 - | Valid until 30/06/2018 WUTIS.

 Discounted Cash Flows
Results
Enterprise Value Implied Equity Value and Share Price Implied Perpetuity Growth Rate
Enterprise Value
Cumulative Sum of PV 32,371 PGM Terminal Year FCF 9,297
Enterprise Value
EEM WACC 6.1%
Perpetuity Growth Method (PGM) Less: Net Debt Terminal Value 184,443
Terminal Value 184,443 Less: Preferred Securities
Discount Factor 0.74 Less. Non-Controlling Interest Implied Perp. Growth Rate 1.00%
PV of Terminal Value 137,236 Assumed Perp. Growth Rate 0.50%
% of Enterprise Value 80.9% Check: 0.50%
Implied Equity Value PGM
Implied Equity Value EEM
Implied EV /
Fully Dil. Shares Outstanding
Exit Multiple Method (EEM) EBITDA
Terminal Period EBITDA 14,146 Enterprise Value 169,607
Terminal Value Exit Multiple Method 192,379 as of 31.12.2017 EBITDA 2018 10,410
PV of Terminal Value 143,141 Implied Share Price PGM
% of Enterprise Value 81.6% Implied Share Price EEM

Enterprise Value PGM 169,607 as of 31.05.2018 Implied EV / EBITDA (x) 16.3x

Enterprise Value EEM 175,512 Implied Share Price PGM Peer Group EV / EBITDA (x) 13.6x
Implied Share Price EEM

Date Current Share Price

01/01/201
Starting 8 Return Potential % (PGM)
31/05/201
End of Valuation 8 Return Potential % (EEM)

© Equity Research - 30 - | Valid until 30/06/2018 WUTIS.

 Discounted Cash Flows
Sensitivity Analysis
WACC & Exit Multiple
54.17 11.6x 12.6x 13.6x 14.6x 15.6x

5.0% 49.34 53.27 57.21 61.15 65.09

5.5% 48.10 51.95 55.79 59.64 63.49

6.1% 46.69 50.43 54.17 57.91 61.65

6.5% 45.73 49.40 53.07 56.74 60.41

7.0% 44.60 48.18 51.76 55.35 58.93

WACC & Growth Rate

52.07 0.3% 0.5% 1.0% 1.5% 2.0%

5.0% 58.89 61.46 69.01 78.72 91.66

5.5% 52.25 54.30 60.22 67.63 77.16

6.1% 45.88 47.49 52.07 57.65 64.59

6.5% 42.18 43.57 47.46 52.13 57.83

7.0% 38.29 39.44 42.67 46.49 51.08

© Equity Research - 31 - | Valid until 30/06/2018 WUTIS.

 Peer Group
Multiples for LTM, 2018E and 2019E

Enterprise Value / Price /

2018E 2019E 2018E 2019E 2018E 2019E 2018E 2019E
LTM LTM LTM LTM
Revenu Revenue Revenue EBITDA EBITDA EBIT EBIT
e EBITDA EBIT EPS EPS EPS
Nestlé S.A. 3.1x 3.0x 2.9x 16.5x 13.5x 13.3x 20.6x 18.7x 17.1x 23.7x 21.8x 19.6x
Danone SA 2.5x 2.4x 2.3x 13.4x 11.8x 11.7x 17.7x 16.0x 16.0x 20.4x 18.4x 16.7x

Henkel AG & Co. KGaA 2.4x 2.3x 2.2x 13.5x 13.7x 14.2x 16.2x 16.4x 16.5x 19.0x 17.8x 16.8x
L'Oréal S.A. 4.0x 3.9x 3.7x 17.2x 17.0x 17.5x 22.2x 21.3x 20.0x 27.6x 26.2x 24.6x

Reckitt Benckiser Group plc 5.5x 4.8x 4.7x 17.0x 15.7x 15.5x 20.2x 17.8x 16.7x 21.2x 19.4x 18.0x
Beiersdorf
Aktiengesellschaft 2.9x 2.8x 2.7x 16.3x 14.6x 14.6x 18.6x 17.6x 16.3x 29.3x 27.4x 25.3x
The Procter & Gamble
Company 3.1x 3.8x 3.7x 13.4x 12.5x 13.0x 14.5x 17.0x 16.1x 19.6x 22.0x 20.6x

The Kraft Heinz Company 4.8x 4.7x 4.6x 15.5x 13.5x 13.3x 16.9x 16.0x 15.3x 21.6x 20.0x 19.0x

The Coca-Cola Company 6.2x 6.6x 6.3x 20.0x 18.5x 17.8x 28.6x 20.5x 19.0x 21.7x 20.1x 18.7x
PepsiCo, Inc. 2.5x 2.5x 2.4x 13.3x 11.6x 11.4x 15.4x 15.0x 13.8x 18.7x 17.2x 16.0x

Colgate-Palmolive Company 3.9x 3.7x 3.6x 13.5x 12.5x 12.4x 15.2x 15.1x 13.8x 21.7x 19.7x 18.2x
General Mills, Inc.
2.3x 2.2x 2.1x 13.0x 13.8x 14.5x 15.2x 15.6x 16.2x 14.0x 13.9x 13.4x

© Equity Research - 32 - | Valid until 30/06/2018 WUTIS.

 Discounted Dividends Model
Three scenarios, assumtions, sensitivity table
Dividend Growth (2- Growth (11- g (Terminal
Terminal Value Scenario 2017 10) 20) Value) Share Price Weighting
Cost of equity 6.81%
1 = Worst case
Scenario 1 20% % 1.43 7% 6% 2.00% 37.03 25%
Mil. Shares Outst. 2,814
Scenario 2 25% 2 = Base case
% 1.43 9% 10% 2.00% 50.06 50%
Scenario 3 29% Dividend 2017 1.43
3 = Best case % 1.43 11% 13% 2.00% 66.20 25%

Scenario 1 Scenario 2 Scenario 3

6.00 10.00 16.00
5.00 8.00 14.00
12.00
4.00
6.00 10.00
3.00 8.00
4.00
2.00 6.00
2.00 4.00
1.00
2.00
0.00 0.00 2018 0.00

2020

2022

2024

2026

2028

2030

2032

2034

2036
2018

2020

2022

2024

2026

2028

2030

2032

2034

2036

2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
50.98 1.23 1.33 1.43 1.53 1.63
5.8% 53.27 57.56 61.85 66.15 70.44
6.3% 48.13 52.01 55.88 59.76 63.63
6.8% 43.92 47.45 50.98 54.51 58.05
7.3% 40.38 43.62 46.87 50.11 53.36
7.8% 37.36 40.36 43.35 46.35 49.35

© Equity Research - 33 - | Valid until 30/06/2018 WUTIS.

 Activity Ratios

Activity Ratios- Large Companies Activity Ratios in Consumer Goods

Outperform Small Industry
100 80
94

90
83 70 68 69
66 66 66 65
80 62 63
59
70 71 60 58
70
64

60 56 50
53
51 41 41 41 41
50 40
40
39
40
30
30

20
20

10 10

0
Large: Revenues > 1 Medium: 500 mio EUR < Small: Revenues < 500 0
bn. EUR Revenues < 1 bn. EUR mio. EUR 2012 2013 2014 2015 2016

DSO DIH DPO DSO DIH DPO

© Equity Research - 34 - | Valid until 30/06/2018 WUTIS.

 Management & Governance
Key Employees

Name Board Job Title Appointed

Graeme Pitkethly Executive Board Chief Financial Officer, Director 2015

Mr. Graeme Pitkethly has been the Chief Financial Officer of the company since October 2015. He was appointed as a
Director of the company in April 2016. Previously, Mr. Pitkethly held several leadership roles including Executive Vice
President and Chairman for Unilever UK and Ireland, Senior Vice President of Finance for Global Markets, Global Head of
Mergers and Acquisitions, Head of Treasury, Pensions and Tax, and Chief Financial Officer of Unilever Indonesia. Prior to
joining the company, he held several senior corporate finance roles at PricewaterhouseCoopers and in the
telecommunications industry.

Paul Polman Executive Board Chief Executive Officer, Director 2009

Mr. Paul Polman has been the Chief Executive Officer and Director of the company since January 2009. He was appointed as
an Executive Director of the company in October 2008. Prior to this, Mr. Polman served as the Chief Financial Officer of Nestle
S.A. from January 2006 and as the Executive Vice President for the Americas from February 2008. He began his career at
Procter & Gamble in 1979 and served as Group President Europe and Officer until 2001. He also serves as a Director of The
Consumer Goods Forum.

David Blanchard Senior Management Chief Research and Development Officer 2014

Mr. David Blanchard has been the Chief Research and Development Officer of the company since April 2014. Previously, he
served as the Chief Category Research and Development Officer of the company since January 2013. Mr. Blanchard joined
the company in 1986 as the Development Manager of Spreads and held several senior managerial positions including Senior
Vice President of Unilever Research and Development, Senior Vice President of Marketing Operations Foods Americas, Vice
President of Research and Development for Global Dressing and the Chairman of Unilever Canada Inc.

© Equity Research - 35 - | Valid until 30/06/2018 WUTIS.

 Management & Governance
Key Employees
Name Board Job Title Appointed
Keith Weed Senior Management Chief Marketing and Communications Officer 2010

Mr. Keith Weed has been the Chief Marketing and Communications Officer of the company since April 2010. He joined the
company in 1983 and held various managerial positions such as Executive Vice President for Global Home Care and Hygiene
and the Chairman of Lever Faberg

Marc Engel Senior Management Chief Supply Chain Officer 2016

Mr. Marc Engel has been the Chief Supply Chain Officer of the company since January 2016. Previously, he held several
leadership roles at the company, including the Executive Vice President of Unilever East Africa and Emerging Markets; Chief
Procurement Officer and Vice President for Supply Chain, Spreads, Dressings and Olive Oil Europe at Unilever Supply Chain
Company. Mr. Engel also served as the Operations Manager for Birds Eye Wall’s at Unilever UK; and Unilever Meat Group
NL.

Ritva Sotamaa Senior Management Chief Legal Officer 2013

Ms. Ritva Sotamaa has been the Chief Legal Officer of the company since February 2013. Previously, she served as the
General Counsel for Siemens AG – Siemens Healthcare. Ms. Sotamaa also held several managerial roles at General Electric
Company including General Counsel, GE Healthcare Systems and General Counsel at Instrumentarium Corporation.

Marijn Dekkers Non Executive Board Chairman 2016

Mr. Marijn Dekkers has been the Non-Executive Chairman of the company since April 2016. Previously, he served as Chief
Executive Officer at Bayer AG and Thermo Fisher Scientific Inc. Currently, Mr. Dekkers serves as the Non Executive Director
at General Electric.

© Equity Research - 36 - | Valid until 30/06/2018 WUTIS.

 AD-HOC
Share Price movement in regards to market news
Publication
Headline Returns
Date
Hindustan Unilever Ltd. shares rose 3.5 percent, more than any full-day gain since May 10, 2017, while India's benchmark
16-May-18 -0.1792%
index declined. Trading in the company's call options was more than triple the average
14-May-18 0.0736%
Hindustan Unilever reported net income for the fourth quarter that was 1.5% above the average analyst estimate
04-May-18 Reckitt Benckiser Leads U.K. Exporters Higher as Pound Falls 0.7753%
03-May-18 Kraft Heinz Jumps Most Since Unilever Talks Sent Shares Surging -1.2615%
02-May-18 Unilever Ghana reported revenue for the first quarter of 165.3 million cedis. -2.2655%
25-Apr-18 Unilever Indonesia Cut to Sell at Trimegah Securities 0.5593%
24-Apr-18 Unilever Indonesia 1Q Net Income Falls 6.2% Y/y to 1.84T Rupiah 1.0416%
19-Apr-18 Unilever First Quarter Underlying Sales Match Estimates -1.8719%
29-Mar-18 Unilever Nigeria reported revenue for the full year of 90.8 billion naira 1.1689%
28-Mar-18 Unilever GDRs Upgraded to Buy at UBS 4.3378%

19-Mar-18 Colgate gains as much as 2%, Estee Lauder as much as 1% after The Times of the U.K. reported the Unilever is preparing for 0.3586%
"a series of blockbuster mergers that could include deals with rivals such as Colgate-Palmolive and Estée Lauder"
01-Feb-18 Unilever Fourth Quarter Underlying Sales Beat Estimates 0.7288%
30-Jan-18 Unilever Ghana Full Year Revenue 575.3 Mln Cedis 0.7058%
27-Oct-17 Unilever Ghana Nine Months Revenue 428.2 Mln Cedis 0.7062%
26-Oct-17 Hindustan Unilever Second Quarter Net Income Beats Estimates 3.4300%
25-Oct-17 Hindustan Unilever Second Quarter Net Income Beats Estimates -0.3166%
20-Oct-17 -2.8659%
Unilever shares drop as much as 1.9%, extending Thursday’s losses after 3Q adj. sales growth missed estimates
19-Oct-17 Unilever’s poor performance in 3Q came in below expectations in all geographies -5.8373%
26-Sep-17 Korean Cosmetics Stocks Rise After Unilever-Carver $2.7b Deal 0.1619%
20-Jul-17 Unilever First Half Revenue Misses Estimates 0.3520%

© Equity Research - 37 - | Valid until 30/06/2018 WUTIS.

 PESTEL Analysis
The Macro Perspective

o Subject to guidelines from o Stable growth in EM o Growing preference towards

FDA and EC as well as o Increasing wages in DC eco- and bio-products
other global and local o Optimistic outlook for o Strong reputation as a
regulations economic future company, that cares about
o Global GDP growth 4% it’s customers

o Innovation pipeline o Palm oil scandal (2017) o From Plc and N.V. to New
o WCM sites o Transparency campaign N.V.
o Digital transformation in (2018) o Complexity associated with
Supply chain (saving 4bn) o Reducing environmental taxation under different
impact across the entire jurisdictions
production

© Equity Research - 38 - | Valid until 30/06/2018 WUTIS.

 Social and Environmental
PESTEL Analysis

Unilever is running a campaign

aimed at establishing a sustainable
sourcing and reducing the
environmental impact.
After being accused of non-ethical
conduct in 2017, the company
decided to provide the public with all
the information about mills and
factories that produce palm oil for
Unilever.

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 Technological
PESTEL Analysis

Unilever also has a higher level of automation,

especially compared to its competitors; allowing
to supply products to store locations quickly.

Reported high levels of sustainable ingredients,

variously defined, along with below-median
energy and water usage, likely a function of
product mix.

E-commerce as a new method of distribution is

gaining momentum. In China, sales via the
Internet are expected to amount to 1bn.

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 Unilever NV
Supply Chain
 The team plays a vital role in getting our goods to customers and Channels (400k delivery points):
consumers; from sourcing raw materials to manufacturing and • Small retailers
delivering the end product. • Large retailers
• Online Shops
 The Supply Chain includes approximately 100,000 employees,
working with over 70,000 suppliers and more than 1.5 million
farmers to manage a logistics network that transports over a
distance of more than 1.5 billion km each year.

Unilever's share of worlds supply

14%

12%

10%

8%

6%

4%

• Speed 2%
Digital
Transformation • Agility 0%
Black Tea Tomatoes Palm Oil
• Cost reduction

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 SWOT Analysis

Strengths Weaknesses
• Global presences – sales +190 countries • Dependence on Distribution and Retailers
• Brand product mix – strong popular brands – lack of forward integration
• Focused R&D activities and integrated • High number of substitutes
supply chain • Limited business diversification
• Economies of scale
• Evolving Portfolio and Developing
Channels

SWOT
Opportunities Threats
• Potential in Emerging Markets
• Growing Demand for Premium and • Global and regional Competitors
Specialized High-End products in Skin • Private label brands from Retailers
Care Segment • Product imitation
• Social Media for advertising • An increase of social ethic and concern
for the environment among customers
• Stricter regulations

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 Unilever NV – Industry Overview
Porter’s 5 Forces
Buyers Power: buyers are all around the world; they have no
power to bring the prices down. But it is easier for the customer to
Porter’s Five Forces switch to a competitor if they don’t are satisfied in every level
weather it is about the price of quality of the product.

Buyer
Competitor Rivalry: There are not only small or reginal shops but
Power also big giants like P&G, Kraft and Nestle. These big industries
5 have the power to persuade the customer by introducing the
4 equally attractive and best performer products. Low switching cost
allow customer to switch to other brands easily.
3
2 Barriers Threat of Substitutes: Today consumers like to try something
Rivalry
to entry
1 new and better at least once reducing customer devotion and
0 willing to go for the same usable products which substitutes from
Unilever.

Supplier’s Power: Unilever has agreement with suppliers to

Threat provide them the products for a certain period of time at an agreed
of Supplier rate. This agreements helps to prevent suppliers from switching to
substitut s Power other competitor and charge higher rates.
es
Barrier to Entry: Unilever is supplying its products and services in
diverse geographical markets, so it mostly depends on the place
and the society.
© Equity Research - 43 - | Valid until 30/06/2018 WUTIS.
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