聯合利華 (UL) 2002 Q4 法說會逐字稿

Welcome to Unilever's 2002 fourth-quarter and full-year results conference call. This conference will begin with a presentation by Mr. Niall FitzGerald, Chairman, and Rudy Markham, Financial director, followed by a question and answer session. At any time during the presentation you may indicate your desire to ask a question by pressing star one on your telephone touchpad. If you wish to cancel your question, simply press star two. This conference is being recorded and will be available up to and including February 27, 2003. Details of the replay numbers and access codes can be found on Unilever's web site. An audio archive copy of the teleconference will also be available on Unilever's Website, www.unilever.com. We will shortly hand you over to Mr. FitzGerald. Mr. FitzGerald, please go ahead, sir.

Ladies and gentlemen, good morning, and welcome to Unilever's 2002 results presentation.

A transcript contains the usual formal disclaimer as to forward-looking statements within the meaning of relevant US legislation, can be accessed via our web site at www.unilever.com. This presentation and the discussions are conducted subject to that disclaimer. I'll not read out the disclaimer, but propose to take it as read into the record for the purpose of this presentation and the conference call.

Rudy Markham will present the review of the 2002 results. Before he does, I'd like to put our performance in the context of the Path to Growth strategy, and how you can expect to see this develop as we move through 2003.

At the start of 2000 we set out a comprehensive plan. We were clear about what we wanted to achieve. I think the scorecard on chart one shows that we are well on the way to delivering what we said we would, with 12 of our 20-quarter program now completed.

Leading brands now approach 90% of our total business and in 2002 have grown by 5.4%. We've moved operating margin ahead by 380 basis points to 14.9% since 1999, with an improvement of 100 basis points in 2002. We've already spent or committed 90% of the EUR6.2b restructuring funds, and banked some 80% of the EUR3.9b of savings.

We've reshaped and enhanced our portfolio through acquisitions, and the sale of 87 businesses that did not have acceptable growth or margin potential, generating over EUR6b of sales proceeds on the way.

We've already achieved our planned improvement and fixed asset efficiency, getting to just over 17% of sales by the end of 2002, two years ahead of plan. Furthermore, we have reduced trading working capital by 200 basis points.

Cash flow from operations has risen almost 40% since 1999, and is running at EUR7.9b in 2002. We've delivered on our EPS growth target. Indeed in 2002 we exceeded our own ambition.

Finally, we've implemented a divisional organizational structure with a reinvigorated top team, where some 80% of the top 100 managers different from five years ago, with an average age down by 10 years. It's a structure that enables us to most effectively combine local consumer focus and global scale.

It's also a top team that has delivered a radical change program, and integrated successfully and quickly the second largest ever acquisition in our industry, that of Bestfoods.

I'm just going to say a few words about Bestfoods.

At the time of the acquisition we set clear milestones to measure progress and value creation. Firstly we said that the transaction would be cash earnings accretive in the first full year of operation. Last year-end we confirmed that this was the case. Secondly, we set an ambitious integration savings target of EUR800m by 2003. In reality we have achieved the full amount by the end of 2002, ahead of plan. Thirdly, we expected the Bestfoods brands to enhance growth post integration. The best way to see this is to look at the performance of our Savory and Dressings business.

In the second half of 2002, as we moved from the focus on integration, we have achieved underlying sales growth of some 7%, partly flattered by a softer prior year comparison. However, even allowing for this, we see sales growth now in the 5% to 6% range, consistent of course with the Path to Growth targets.

It is the strength of the acquired brands, the excellence of the Foodsolutions business, our increased presence in fast growing Savory and Dressings category, and the strong appeal of the Bestfoods brands in the developing and emerging markets, that underpins our confidence that this has indeed been an excellent acquisition.

So, at the end of year three of the five year Path to Growth strategy, we are on track or ahead, on all key elements and momentum is strong. However it's important to remember that the Path to Growth is about profitable growth, it isn't a path to anywhere else. With that in mind, let me now look at the growth side of the equation. Firstly by looking at the overall growth drivers, and secondly, by looking at how we're using these to address the growth agenda within our business.

Chart two shows the building blocks of growth, and how we are reshaping Unilever to the 5% to 6% growth target by 2004, and sustain it thereafter. In our markets the consumer trends that drive growth include the increasing role of nutrition, personal care and household hygiene in supporting a vital and healthy lifestyle. The desire not only for vitality, but also, from time to time, for pleasure and indulgence, a search for convenience, but without sacrificing quality and value, and the demand for instant availability. And of course there is increasing competition for share of consumers' wallets, retailers' own brands, and new technologies which challenge and change the value chain of companies and industries.

Path to Growth is designed to address all of these issues in a comprehensive and integrated way. We've reshaped our portfolio in order to focus on those businesses where we have scale, leading share positions and potential for sustained growth. We now operate in 12 clearly defined categories, rather than the diffused 50+ of the early 90s.

We have focused on the brands that on trend with the consumer. This gives us the potential for our market average growth, through more affective innovation, with fewer projects, faster rollout and increased speed to market. Today all of our innovation is behind the leading brands, as is our advertising spend.

Having the leading brands in each market, or relevant market segment, within a consolidating retail environment, enables us to lead the category. We have the brands that retailers must have to drive consumer traffic drivers through their stores. These leading brands also allow us to grow in their consumer heartlands, to reinforce strength as well as capturing unfilled geographic space.

Then there is new "space for growth". Many of our brands have the ability to stretch across categories. Lipton in Beverages, Knorr from boullion to soups, to quality convenience meals. Bertolli in Mediterranean eating, Dove, which has become now a truly iconic global Personal Care brand. Suave, which offers a range of products in the "smart shopper" position. Hellmann's which transforms food. Beyond these there is the ability of Slim Fast to expand its consumer franchise, Axe to broaden its stretch in male grooming, and Sunsilk to become the authority in hair.

We've also dramatically improved our capability to take our brands to consumers through other channels. An obvious example is in the Foodsolutions area. Equally, we have been building partnerships to extend our ready-to-drink tea business, developing new approaches to exploit fast growing segments in the Ice Cream market, and launching snacking products to satisfy you on the go wherever you are.

If we then add to this, two long-standing features of our business, which are our strength in developing in emerging markets - where more than 80% of the world's consumers live, and our fast growing Personal Care business - and the growing proportion that they both represent of our sales. We believe we have a compelling story to support our growth ambition.

We are now a simpler business that can focus resources, reinforce and build up positions of strength, and move with speed and agility. In the end it's all about gaining share through a more powerful and focused portfolio of brands, in what are still very fragmented markets. Focusing our innovation on the fastest growing segments, being on trend with consumers wherever they are, and growing our brand outside their existing geographic and category boundaries into what we call, "space for growth". And doing this in our own unique way. Enjoying the benefits of global scale, but with a local touch, power expressed in the local shopping basket, neither mindlessly global nor hopelessly local.

But let's get to some facts. Chart three shows the breakdown, on a moving annual total basis, of our overall growth in Home and Personal Care, Foods, excluding Ice Cream, and finally Ice Cream.

As you can see in Home and Personal Care we continue to deliver growth close to our target, whilst in Foods, excluding Ice Cream, we have made good progress, having increased the growth rate from less than 2% in 2000 to 4.5% in 2002. For Foods, 2002 has been in softer terms, been a year of two halves. The first half was the final stages of the integration of Bestfoods. The second was the move to focus on growth, particularly in our Savory and Dressings business.

The leading brands represent the core of our business. 400 brand names, which we operate at some 200 brand positions, and which are made up of global brands and local [jewels]. The global brands now represent 64% of our total sales, with 14 of these brands now having a turnover in excess of EUR1.0b. Slim Fast and Sunsilk have joined this exclusive club during the course of 2002. 10 years ago, we had one brand with a turnover over EUR1.0b.

Let me now show you the progress on the Path to Growth strategy in the different parts of the business, starting with Personal Care, which is on chart four.

Our Personal Care business has underlying sales growth of 9% in the year, with average growth over the last four years of 7% per annum. Leading brands account now for 95% of sales, and are growing at 10%. Within the total, our EUR10b plus Skin, Hair and Deodorant business grew by nearly 11% in the year and by nearly 9% per annum over the last four years. Importantly, this performance is underpinned by continued growth in the core of our brand proposition, the platform upon which we can exploit "space for growth". Let me give you a few examples.

Rexona, our global deodorant brand, grew by over 13% in 2002, with virtually all the growth coming from existing markets. Lux grew by almost 9% in 2002, again with virtually all of the growth coming from the core Personal Wash sector. Dove had another excellent year in 2002, with sales now reaching well in excess of EUR2.0b, and with a running rate based on the fourth quarter of nearly EUR2.4b. While innovations such as Dove Hair contributed strongly, we've continued to see good growth in the core of the Dove brands, Personal Wash. For example in Europe, Dove Bar sales increased by over 14% and in North America by nearly 6%. We started brand focus in Personal Care, and the benefits are there now for all to see.

Turning to Laundry, which is on chart five. Our Laundry business grew by 1.8% over the year, with 3.7% in the fourth quarter. Our priority within this business has been on improving profitability, with a regionally differentiated strategy. It is margins that provide the fuel for growth, and they increased by over 200 basis points in 2002. Leading brands represent 95% of sales.

In developing and emerging markets, which represent some 55% of our Laundry sales, and where we are clear overall leaders, we have seen underlying sales growth of over 4.5%. This was accompanied by an improvement in profitability, as we recovered devaluation driven cost increases.

In Western Europe, which represents nearly 25% of our Laundry sales, we have seen a solid performance in what were very competitive markets. By building on our strengths, we achieved volume growth of over 4%, which is partially offset by pricing. We have maintained overall Laundry shares.

In North America, which represents around 20% of our Laundry sales, our strategy is to be a profitable No. 2. Having achieved a marked improvement in profitability in 2002, our emphasis in 2003 will move towards innovation and growth.

As we unlock further fuel for growth from harmonization, rationalization and greater leverage of our Laundry scale, we would expect to further step up investment and for our overall Laundry business to start to move back towards its historical growth rate of about 4%.

Turning now to our Foods business and Savory and Dressings, which is on chart six. Savory and Dressings, including olive oil, is our largest business segment within foods, making up some 35% of our Foods portfolio. This compares to 9% prior to the acquisition of Bestfoods. We are the clear global leader. Leading brands represent some 90% of sales, with Knorr, Hellmann's and Bertolli on their own representing nearly 50%.

In 2002, as we move through the year, our focus changed progressively from integration to innovation. As a result we saw the expected step up in growth. Underlying sales growth for the second half of the year was 7%, with the leading brands growing at well over 8%.

Looking forward, we are confident of sustaining category growth in the 5% to 6% range, from the momentum we have established in our Foodsolutions business, the revitalization of Hellmann's in a number of regions, and the strength and breadth of momentum we have built behind Knorr. Of course, the acquired brands give us scope for accelerated growth in developing in emerging markets.

If we look at some of these in more detail, Foodsolutions accounts for over 15% of our Savory and Dressings sales. As we moved through 2002 our growth rate stepped up in each quarter, as we got integration behind us. Underlying sales growth for the second half of the year, for the whole of Foodsolutions, was some 7.5%. Savory and Dressings was the major contributor within this. There is no doubt about the competitiveness of our Food Solutions business model, and the professionals who drive it. They will continue to build on the existing momentum, expanding the brand offering, tackling the fastest growing market segments, gaining share in a very fragmented market. Our belief that this business can sustain growth of 8% to 10% is reaffirmed.

Let me turn to Hellmann's. In Europe Hellmann's grew by 7%, despite actions we have taken in the UK to reduce the high level of promotions, and build a strong platform for brand-driven growth. In Latin America, even with tough economic conditions, Hellmann's has continued to grow well with 2002 growth of over 15%. In the US, Hellmann's top-line performance has been mixed, primarily due to our exit from pourables and price action from our major competitor. However, we have continued to gain market share, and we have a strong innovation plan going forward.

Finally, look at Knorr on chart seven. We have built strong momentum in Knorr. In 2001 the Knorr brand grew by almost 4%, a remarkable performance in a year focused on integration. In 2002 we saw an acceleration through sales each quarter, as our focus moved to growth. Full year underlying sales for the Knorr family were ahead by over 7%.

Let me give you some insight into the Knorr growth model. As the chart shows it's about reaching out to new consumers, occasions and channels. To give some examples, in 2002 we moved the brand into Frozen in France, Spain and Portugal, and launched the brand into new countries in the Middle East and Eastern Europe. In Mexico we launched Knorr Noodle Cups, reaching down to drive growth, to affordability and availability, thereby driving growth in our important developing and emerging markets.

Again an example in 2002, we reacted quickly to the economic circumstances in Argentina, by launching innovations such as Knorr Stew Cubes and Knorr Affordable Family Pasta Soup. Reaching up to offer nutrition, fresh ethnic and high quality convenience foods such as Knorr Vie soups in the UK, and Knorr Cook-it-Easy in the Philippines.

In D&E markets we are able to leverage this model while drawing upon the strength of our Home and Personal Care distribution network, in regions such as Southeast Asia, where the former Bestfoods business was not as strong.

Now to chart eight, and our second largest Foods business, Spreads and Cooking Products, which accounts for nearly 25% of Food sales. Here again we are the global number one. Leading brands now account for nearly 70% of the total, and grew by over 4% in 2002. We've had nine successive quarters of 4% leading brands growth, which is in stark contrast to the decline in prior years. This has been achieved by focusing on six key brand positions, backed by a strong innovation program, including cholesterol lowering margarine, Pro-Activ, splatter-free cooking product Culinesse, and the great tasting cheese spread, Crème Bonjour.

We have a good innovation pipeline, which further capitalizes on our strong brands, and world class technology, which we intend to use to broaden our business, to deliver a range of hard held benefits across categories. We continue to make progress with exiting the tail and in the last year we have disposed of businesses with an annualized turnover of EUR900m.

Next to chart nine and our tea-based beverages. We are clear number one in tea-based beverages with the Lipton Brand, which is incidentally the third largest beverage brand by volume in the world. With growth averaging around 5% over the past three years, Lipton will remain a key driver into the future as we continue to exploit "space for growth" in the EUR350b soft drinks market.

Lipton continued to make good progress in 2002 with ready-to-drink sales growing by over 9%. In leaf tea we saw growth over 15% in Central and Eastern Europe, as we continued to extend availability of the brands. Overall growth in leaf tea was influenced by the impact of price reductions, as we continued to respond to lower raw material costs, and the planned exit from tail brands in India. Together these reduced overall tea-based beverages growth by around 160 basis points, to give reported growth of just under 2%.

Looking forward, we expect growth to improve as the impact of the exit from Indian tail brands lessen, as we expand in Eastern Europe - particularly in Russia - as we continue our Paint the World Yellow campaign. And finally, as we accelerate the expansion of the Lipton brand in the soft drinks market.

And now for Ice Cream on chart ten. In Ice Cream we are the clear global leader, despite recent acquisitions by our most significant competitor. And we have a very profitable business, with margins now around the group average. Over the last three years we have improved the cost structure, with a higher proportion of variable costs in our European Ice Cream business, and by exiting a number of small developing and emerging markets, which were EVA negative.

Turning to the top line we have achieved underlying sales growth of 3% in 2001, and 4% in 2002. We are achieving sustained good growth in North America, and the D&E markets are seeing a return to historical growth levels as we exit from the smaller value destroying countries.

In Europe, whilst we have years when we achieve excellent growth, the business is still too dependent upon the [rapt impulse single] statement of the market. We are making good progress with reducing this dependence, through initiatives in expanding Soft Ice, take home Ice Cream, including multipacks, and stimulating in-home usage.

Which brings me to Frozen Foods on chart 11. This is purely a European business, where we are by far number one. Over the last three years we have substantially reshaped and restructured our portfolio, having exited from all our activities outside of Europe, and at the same time low value frozen foods in Europe. This has improved margins from mid single digits to double-digits, hence return on capital employed to 30%. Having earned the right to grow, we stepped up our focus on innovation in 2001, with the rollout of quality convenience meals, giving leading brands growth of 3%.

In 2002, whilst we have continued to see double-digit growth in quality convenience meals, we did not sustain our overall progress. We know we have more work to do to realize our ambition in this area. Our plans going forward include moving Knorr into frozen meals, innovating in the areas of kid's nutrition, convenience meals and snacks, and products based on fresh and natural ingredients.

Turning to chart 12, let me summarize. To step up our underlying sales growth from the 4%+ we have achieved in 2002, to our target of sustained growth of between 5% to 6%. The key drivers are firstly, the impact of removing the remaining tail brands and businesses, which will give us the combined benefit of an increased proportion of faster growing leading brands, and a reduced drag effect from the current decline of the tail. We expect this to add a further 100 basis points to the overall growth rate. On its own, this gets us to the lower end of the 5% to 6% target growth range.

Secondly, an increase in the rate of growth of our leading brands, which adds 90 basis points to overall growth, through moving from establishing a profitable base to pursuing profitable growth, in both our Tea and Laundry businesses. Thereby returning them to their historical growth rates. Bringing more innovations to our whole Frozen Foods portfolio, and broadening the relevance of our consumer offering in our European Ice Cream business.

Finally, by sustaining the growth we have achieved in Personal Care, Health and Wellness, Spreads, Savory and Dressings, and in our Ice Cream business in both North America and the developing and emerging markets. This is progressively shifting the weight of our portfolio to faster growing categories and regions.

Taken in combination, we estimate that these will add close to 200 basis points to the underlying growth rate of 4.2% achieved in 2002, taking us comfortably to the top end of our targeted growth range, and leaving us with some room to deal with the normal cut and thrust of daily business.

So, as we end the 12th lap of our 20 lap program, we have done what we said we would do, and we have a clear road map for what we need to do to achieve all our targets. I am confident that we will execute this effectively, as we have the first part of the program.

Before I hand over to Rudy, let me respond to one of the most frequently asked questions that we've had during 2002. What can we expect after Path to Growth? In the past, ambitious strategies within Unilever have not always been delivered in full, because of inadequate focus and discipline in execution. Path to Growth is different. We are benefiting from sharp strategic clarity and disciplined alignment in execution. That will continue so that we deliver in full.

At the same time, we are of course working on the next phase of strategic development. It is likely to be evolutionary but exciting. Building on consumer foresight, brand focus, a streamlined supply chain, and the released enterprise of our people. As with Path to Growth, we will complete the process of internal alignment, before any external announcements. This will be done by the end of 2003, and we will take it to the market as the end of Path to Growth comes into sight.

What I can say now is that Unilever will continue to be based upon brands, our knowledge of consumers, and our deep roots in local markets, the attributes that contribute to our historical success. Our priority will be to sustain revenue growth in the 5% to 6% range, whilst pushing ahead on the other two operational levers of value creation, margin improvement and capital efficiency. What we will also bring is that same sense of purpose that has led to a successful first three years of Path to Growth, and there will be the same degree of total alignment to drive the strategy into action.

Let me now hand over to Rudy for the rest of the 2002 performance, and also to deal with the outlook for 2003.

Niall, thank you. Apart from the performance review, and the 2003 outlook, there are also two changes to our accounting policies for share options with the adoption of FRS17 for pensions accounting, that I wish to explain, and show how they will impact on our reported figures. But first, the 2002 results, which unless otherwise stated, are in Euros at constant exchange rates. That's average 2001 rates.

Niall has covered off the main features of sales performance, but let me just give you a little further analysis. Chart 13 shows the build up of our sales growth for the year. Underlying sales grew by 4.2%, with 2.9% from price and the balance from volume. Leading brands growth was 5.4%, with Foods growing 4.4% and HPC growing 6.7%. Volume growth in the leading brands is around 2.6%, with momentum building through the year.

In the balance of the business we continue to manage the tail for value. This has two aspects to it. Firstly, the trade-off between price and volume, as we extract value via our harvesting strategy. In the year, we saw an underlying sales decline of around 300 basis points, which has impacted total sales growth by some 40 basis points.

Secondly, realizing value through the sale of businesses. In the year, this effort is to reduce sales by the equivalent of 480 basis points, or some EUR2.4b. Acquisitions add just under EUR200m, or 30 basis points. Altogether, this gives total sales of EUR52b, a decline of 30 basis points on the prior year.

Let me now turn to how we've continued to drive forward our operating margin, and this is shown on chart 14. The basis point quotes are all expressed as an effect on total Unilever operating margin, which has moved ahead by 100 basis points in the year. Gross margins have moved ahead by 110 basis points in the year. The key drivers of the improvement in gross margin have been the benefits from our procurement and supply chain restructuring programs, which have contributed some 120 basis points of gross margin.

You will remember that with our third-quarter results we announced that our procurement savings target of EUR1.6b had been achieved. Savings from this new capability in our business continued to be generated, but as from the time of the achievement of the original target, they are being reported in the cost changes line shown on the chart.

The second driver behind gross margin improvement comes from improved mix, which contributed 60 basis points through disposals and a larger proportion of higher margin categories. There remains a shortfall between cost increases and prices of some 70 basis points. The major cause being devaluation related cost increases in Argentina and Brazil.

We saw a step up in advertising and promotional spend, 120 basis points ahead of the prior year, with the spend biased towards the second half, behind our backend loaded innovation and marketplace programs. Taking into account portfolio changes, we have increased our rate of spend behind A&P by a little over 100 basis points since the start of Path to Growth. This is consistent with the original planned step up of 200 basis points for the full period of the plan.

Lower associated costs add 30 basis points to the operating margin progression, with an additional benefit of 80 basis points from lower overheads.

Let me turn to chart 15 where I show trends in margin and capital efficiency.

The chart shows operating margin progression, before exceptional items and goodwill amortization, which is the left-hand scale. It also shows capital efficiency measures with the scale on the right-hand side. We've also taken the graph back to 1996, so that you can get the complete picture. We've made excellent progress on both measures, with a well-established culture of continuous improvement in efficiency, which is further enhanced by Path to Growth.

Our cost savings and restructuring program are delivering on time and in full. We see the benefit both in bottom line, and in a more efficient use of capital, with a 700 basis points improvement since the start of Path to Growth. Of course it's the combination of operating margin improvement and increased capital efficiency that create the fuel for growth.

In terms of capital efficiency, we spend 2.7% of sales in 2002 on purchases of fixed assets. This compares with simple average of 3.1% of sales over the last five years. We expect to sustain this improvement going forward, as we further simplify the business, with fewer brands, factories, greater harmonization of manufacturing processes and technologies, and an increasing proportion of manufacturing being outsourced.

With respect to outsourcing, this currently represents 15% of our manufacturing. We expect this to rise to around 25% over the next few years. So we've more to go at, and the programs are in place to deliver.

In terms of margin, if we look forward to 2004, then we see a number of key drivers that support our ambition. These are embedded in strategic plans recently agreed with the divisions, and are shown on chart 16. Firstly, reaching our target savings from restructuring will deliver a further EUR700m, or 130 basis points of operating margin. On top of this you will already have noted our progress with the Bestfoods integration savings. It would be wrong to assume that we will stop just because we have hit the target.

Secondly, improved mix. As we remove the balance of the tail from high value innovations, and also the greater proportion that higher margin categories represent of our business, is expected to add some 60 to 70 basis points of operating margin.

Thirdly we see upside in operating margin of some 70 to 90 basis points, from the full effect of pricing action in key developing and emerging markets, as we recover the impact of devaluation-driven cost increases. Against these, we plan to spend the balance of the additional 200 basis points of advertising and promotions, as set out in Path to Growth. Thus we see around 200 basis points in additional operating margin from these elements.

In addition, we continue to see benefits from our global procurement programs. As I said at the Q2 results announcement, this is not a capability that we have disbanded once we achieved the original EUR1.6b of savings as set out in Path to Growth. Indeed, I can assure you that we have only just touched the first level of using Unilever's scale to enable more efficient procurement.

We are already implementing our plans to take us to the next level of performance. Extending the range of materials purchased globally, further enhancing those scale benefits via harmonization of formulations and specification. Using new market sources to improve overall efficiency. Stepping up our efforts in the procurement of non-production items, where our current annual spend is EUR9.5b. Underpinning our capability, with an information infrastructure to promote sharing and identification of further opportunity.

So, whilst we do not intend to articulate yet another target to the market, in relation to the benefits we expect to get in the procurement area, what I can tell is that we have seen no loss of momentum in the fourth quarter. Our 2003 programs assume some EUR450m of savings, which is well below the current running rate.

So in total, we believe we have the plans in place to deliver the fuel for growth. To invest further behind our brands and deliver our 16%+ operating margin, including the costs of normal business restructuring. I hope you can also see that we have created sufficient margin headroom to allow us to respond to changes in the economic and competitive environment.

Let us now look at the key features of the fourth quarter results, shown on chart 17. Underlying sales growth was 7.2%, with half coming from price. Growth of the leading brands was 8.5%, with some 3.9 percentage points coming from price. Leading brand growth in Home and Personal Care was 9.8%, whilst that in Foods was 7.3%. I think it's worth giving you the background to why we came in above pre-close.

The first two months of the quarter showed leading brand growth of 7.6%, and an underlying sales growth for the whole business of 6.4%. At pre-close we used a forecast of underlying sales growth for December month of 3%, reflecting a prudent view of the likely impact of various public and religious holidays around the world. In the event, we saw excellent consumer pull for our brands, and in December month we saw leading brand growth of nearly 10%, with underlying sales growth of 9%.

At the same time, we also expected a step up in investment in A&P in December, but with more than 80% of the increase spend going into advertising. This was spent as planned, not only behind brand building, but also to underpin initiatives at the start of 2003. Operating margin before exceptional items and goodwill amortization was thus 13.5%, which reflects a 300 basis points increase in advertising and promotions.

Tax in the quarter benefited from prior-year adjustments, which added two percentage points to the full year EPS (BEIA) growth. EPS growth for the quarter, before exceptional items and goodwill amortization was 4.6%.

Let me now turn to chart 18 to highlight the other key financial indicators for the year. Operating profit before exceptional items and goodwill amortization rises to EUR7.7b, an increase of 6% over the previous year. Net exceptional charges for the year were EUR0.9b, which includes EUR1.3b of restructuring, with the balance being the net of profits and losses and disposals, and the settlement of legal cases and claims in our favor. Interest payable is EUR1.3b, 22% lower than last year, through the combination of cash flow from operations, the proceeds from disposals, and lower rates. Interest payable in the quarter was EUR317m.

Net debt at the year-end, at current rates of exchange was EUR17b, compared to EUR23.2b a year ago. Net gearing is 67%. EBITDA before exceptional items, which is in current money, is EUR8.3b for the year, and EBITDA interest cover is 7.3 times for both the year and the fourth quarter.

The underlying tax rates for normal trading operations, and excluding goodwill amortization, was 30%, including two percentage points from prior-year adjustments. The effective tax rate for the year was 39%, which reflects the non-tax deductibility of Bestfoods goodwill amortization, partly offset by the release of provisions on the resolution of a number of outstanding tax matters.

Now let me turn to chart 19, which shows how reporting currencies have developed in both the year and the quarter. Chart 19 shows the current exchange rate, EPS and EPS (beia), and percentage change for the euro, pound sterling and the US dollar. When expressed in current rates of exchange, EPS before exceptional items and goodwill amortization grew by 14% for the year, and declined by 4% in the quarter. Across the year, average rates for pound sterling and the US dollar weakened against the euro by 1% and 5% respectively while the Argentinean Peso and Brazilian Real devalued by 68% and 20%. In the quarter, the pound sterling and the US dollar weakened against the euro by 2.5% and 11% respectively.

When expressed in current exchange rates we see sales growth, in euros, for the year lowered by 630 basis points. Of this, the weaker US dollar accounts for just over one percentage point, and the weaker currencies in Argentina and Brazil account for a further 2.5 percentage points. EPS (beia) growth is lowered by 7 percentage points.

At this stage we would normally take you on a tour of the regional performance. However, given our agenda, we've decided to include the regional review sections in your information pack. These same reviews are also available on our web site.

So in the rest of the agenda I want to cover accounting changes we intend to implement in 2003, and our outlook for 2003. First, the accounting changes. Again you will find briefing papers in your information packs, and again they are also on the web site.

The first of the changes accounting for pensions, with the impact shown on chart 20. We will implement the new UK accounting standard, FRS17 from the start of 2003, as we believe this creates greater transparency for users of our accounts. The 2002 results are presented under the existing UK accounting standard SSAP24. From 2003, under FRS17, the pension fund assets and liabilities are essentially brought directly onto the balance sheet, while operating profits reflect the service costs, and financing elements are taken through the interest line.

The change in accounting standard requires us to restate the 2002 results, to give a like-for-like basis of comparison as we report 2003. As you will see from the chart, had we been reporting 2002 results under FRS17, there would have been a small positive impact on net profit. Operating profit (beia) would have been lower by EUR107m, equivalent to 20 basis points of operating margin. But this would have been offset by an improvement on the interest line.

In 2003, under FRS17 we estimate operating costs to be EUR400m, interest costs to be EUR190m, with a net impact of some EUR395m on net profit. Compared to 2002, this represents 5 percentage points of EPS growth. This is fully absorbed within our low double-digit EPS growth outlook for 2003.

In respect of the 2002 balance sheet, under FRS17, net assets would reduce by EUR1.2b, compared with SSAP24. A net deficit of EUR3.9b net of tax in respect of post retirement benefits, substitutes for, and is not in addition to, the provision of EUR2.7b net of tax already included under SSAP24. Within the EUR3.9b FRS17 net deficit, the pensions element is EUR3.3b, made up of two elements.

The first part is the provision which we have always carried in respect of unfunded plans, and which totaled EUR1.9b at December 31, 2002. The second part amounting to EUR1.4b, is the amount by which the actuarial value of our long-term pension obligations exceeds the year end market value of the investments, to provide for those future obligations.

Whilst we believe FRS17 improves transparency, it also brings with a number of important principles that need to be understood, in using the information it provides.

Firstly the selection of rates used within FRS17 tend towards reporting a deficit. For example, using the same rate to discount obligations, as we expect for asset returns, would reduce the FRS17 deficit for funded pension schemes to EUR0.5b. Indeed, if we don't believe in the longevity and economic rationale of the equity risk premium, I guess the vast majority of us shouldn't be here.

Secondly, the process of marking to market is a point in time measure, a snapshot. By making appropriate assumptions and keeping these in line with market developments, long-term P&L charges should equal the amount of cash that the pension fund needs to meet future obligations. A reported deficit does not necessarily represent per se a present or future cash liability.

Thirdly, it's important to recognize that the headline reported deficit includes the full obligation for unfunded schemes, which have always been shown as a balance sheet liability.

Finally, let me also say that pension cost is just one of the many costs we need to manage in our business. We're doing this and we remain comfortable with the overall level of funding of our pension obligation. That is, we have an appropriate long-term match of assets and provisions, with pension obligations. We are satisfied that the adoption of FRS17 can be accommodated within our Path to Growth target and financial strategy.

So let me now turn to the second change, accounting for share options, on chart 21.

We have had, for many years, a policy of covering the obligations of options programs, by hedging through the purchase of shares at the time of grant. The costs of this are included in our profit and loss account on the interest line. Hedging is undertaken to avoid the alternatives of a dilution of shareholder interest, or the need for future cash outflows. We currently hold around EUR2.0b worth of shares to meet options granted. As options are exercised, there will be cash inflows equivalent to the holding for any specific grant.

Among the world's major accounting bodies, a clear consensus has emerged in favor of recognizing the value of share options to the employee as an operating expense. Whilst the proposed accounting standards do not address differences in hedging policies, we do believe that companies should adopt the proposals so that operating margins at least, are comparable.

The impact on the balance sheet of the interest costs, which we already bear to finance our hedging program, reflects the cash flows of protecting shareholders' interest by avoiding future dilution. The new charge against operating profit is a separate, non-cash charge, like depreciation, which has no effect on the cash flows of Unilever, and thus on its inherent value.

From the start of 2003, Unilever will include a charge based on the Black-Scholes model, with each grant charged over the best in period. Again, we would restate 2002 results to provide a basis for comparison through 2003. The 2003 charge to operating profit is estimated at EUR160m, an increase of EUR60m over 2002. The increase in 2003 reflects the impact of the earlier extension of share option schemes, to a broader range of managers, and will dilute EPS (beia) growth by around one percentage point.

We continue to be comfortable with the achievement of our 16%+ operating margin target, including FRS17, accounting for share options and the previously inclusion of operating margins at the normal cost of business restructuring.

Having given you the expected impact of these changes on earnings in 2003, and without commenting on current trading, let me move to chart 22 for the 2003 outlook. We expect growth of the leading brands to be between 5% and 6%. We expect them to increase their proportion of our total business towards the end 2004 target of 95%. As already mentioned, we expect our savings plans to deliver a further improvement in operating margin, and for cash flow to further reduce debt and interest.

As a result, we continue to target low double-digit earnings per share growth, before exceptional items and goodwill amortization. EPS growth is after the accounting changes just mentioned, and furthermore, includes a short-term dilution of around 150 basis points from the sale of businesses.

With respect to our tax rate, you have already seen in our 2002 numbers the benefit we are delivering through different ways of working and structuring our business. We are taking a cautious few going forward, but nonetheless expect to sustain an underlying or (beia) tax rate in 2003 and beyond of around 32%. The planned expenditure on exceptional items is around EUR500m.

With that I complete my part of the presentation, and Niall and I will be very happy to take your questions.

Thank you, Mr. FitzGerald and Mr. Markham. We will now poll for question from analysts. If you have a question, please press star one on your telephone. If you are listening to this conference call on a speakerphone, please use the handset when asking your question. Should you wish to cancel your question, please key star two. Once again ladies and gentlemen, if you would like to ask a question, please key star then one on your touchtone telephones. Our first question is from John McMillan of Prudential securities.

Hello everybody. Congratulations Niall and Rudy for these results.

Thank you.

Over the long term, Niall, I think CEOs tend to view - particularly in this country, right or wrong - the stock price as the ultimate long-term evaluator. From my perspective there's been a real disconnect in the last six or seven months between your strong performance and outlook, and the stock's decline. I just want to highlight one or two or three things that I hear from investors with concerns, and just hear your statements regarding them. After some of your statement, I think people are concerned that you might utilize your strong cash flow to make a major dilutive acquisition. I know you were quoted as talking about further food industry consolidation. Can you just briefly touch on the issues of a potential major acquisition? Another Bestfoods let's say.

Sure. When we acquired in [fixed position] Amora Maille, Ben and Jerry's, SlimFast and then finally Bestfoods, we said at the time that we would be highly unlikely to be involved in any major acquisitions for further two, three maybe four years. The reason being two-fold. One that we wanted to -- or three-fold in fact -- one that the they complimented the Foods portfolio in particular, and where we wanted to shift to get into much higher growth areas. That's what we needed to do, and we didn't need to do more at that stage.

Secondly, we wanted to get on with the integration, and deliver the synergies, both in cost and revenue terms, and show that business could be integrated quickly and effectively. Then move on to the growth agenda. Thirdly, of course, we want to get our balance sheet back into a position where we had more strategic flexibility for the future. To give you a guidance on that, I would not be comfortable that we had that until our debt was down into the 15 to 12 range. It's currently about 17 to 18.

That continues to be the position. And it continues to be the position also looked at from a strategic perspective, that I don't believe, at this moment in time, that we need further acquisitions. We certainly don't need them to deliver on our targets on Path to Growth that will be achieved without any acquisition. As we develop the strategy, which would come beyond 2004 - which we will certainly articulate towards the end of this year or early next year - then if acquisition plays any role in that, or if we saw gaps which we felt would be most effectively filled by acquisition, we would say so. We obviously wouldn't be specific, but we would say if that was going to be part.

But for the moment, John that is a fear that I think is unwarranted. We're not about to rush out and splurge on something else. We have enough to do for the moment, and we're very focused on the delivery of Path to Growth.

Just to touch on - I don't want to monopolize the call - but just to touch on some other concerns. I think these results in Latin America today, even the modest [indiscernible] decline, you're really differentiating your performance from Kraft and some others. But just the broader issues of, we're in a period where costs are going up and there's been some deflation of selling prices - or we're entering that kind of period for consumer products. I know your stock has been weak, but Nestle and some others -- are you seeing any evidence of that, and if you can take about your cost base?

Well we continue to attack the cost base. As Rudy described in what he was saying, we have still significant benefits to come through from our own restructuring program. The figure of EUR700m was mentioned. We believe we have a considerably further way to go on global buying, given everything we've learnt and what's been achieved so far. We haven't quantified a number, because we think that now must lie within the general operation of the business, and not be just taken out as a separate target. But you can assume that we are going for another brave number there. And that's one of the reasons -- those two -- Another action we're taking is the reason why we feel that we can be comfortable about our still aggressive margin projections for the end of 2004, given in particular that this includes the allowance for ongoing restructuring and the other accounting changes that Rudy mentioned today.

There will be obviously the normal cut and thrust. We are also gaining a lot further confidence from the simplification which we see coming forth in the business from the focus on a relatively small number of brand. In particular the growth of the global brands, and there are now being 14 of EUR1.0b +, and more candidates to enter that club. And that gives us a radically simpler, leaner business.

So all of the pressures you mentioned are out there, we're very conscious of them and we're responding to them. And had we not embarked on Path to Growth we'd be scrambling very fast to do it now. But we have it in place, we have the momentum, and that gives us a good feeling of security with regard to protection and further building of our margins as we go forward.

Thanks a lot.

I think Rudy might want to add something.

Let me just add one bit of color to one particular aspect of the worries some people may have, which is, what sort of impact do commodity price changes have on us? I'd just like to make two observations. Firstly if you look at the mix of our portfolio across Foods, Personal Care, and Home Care, then what we would call raw material ingredients and in packing materials, represent something between 25 - depending on the product - 25% and 40% of the sales value of the product. That's the first indicator.

If you then look at specific ingredients, then things like oils - which is probably one of the largest commodities we use - represent something like 4% to 5% of our sales, so pretty modest. If I look overall at the impact of price increases last year, the impact of Home and Personal Care has been pretty modest. Something like around 1%. We've seen some increase in edible oils, as we've commented on, around the world, and we've picked that up with pricing in most markets, as you've seen by looking at the price volume numbers that we've given for each of our regions.

So we remain relatively relaxed about the impact at this level of these commodity price changes on our business. They're part of the normal management of our portfolio, and of course the stronger the brands as we build and grow them, the strong their ability to reflect in the pricing, the ingredients they have in them.

Thank you.

Thank you, John.

Thank you. Your next question is from Florence Taj of MSS.

Hi, Rudy, hi, Niall. This is Florence Taj from MSS. I have a question from the chart 16, what you call "the drivers of margin growth to 2004". The first thing I'd like to know is, if I look at the transcript of what you just said, in terms of procurement you're saying 2003 plans assume some EUR450m of savings. Which is well below the current running rate. So are you saying that there will be a further EUR450m of procurement savings in '03 and '04? That's my first question.

What I'm saying is or indicating, that we are planning, through the actions that we're taking, for EUR450m of procurement savings as we go through 2003.

Additional to what's already been achieved.

And the plausibility of that I think is underpinned by the statements about the running rate that we've had to date.

Then the second question is, the mix improvement of 60 to 70 basis points, that is per year, right, in '03 and '04? In other words, you will achieve 60 in '03 and another 60 in '04, or should I divide that number by two?

No that figure relates to what we're expecting for 2003 and 2004 together, yes. Because the [indiscernible] growth drivers to 2004, and you should not divide the numbers by two, because as you will remember, through the whole of Path to Growth, we have never made any comment about how exactly operating margin - because that's what we're focusing on - would reflect the various pluses and minuses that we're making to our portfolio. Through portfolio restructuring, tail management, achievement of savings. We've said that that will progress, not necessarily evenly towards the 16+ target which will hit in 2004, but that at the same time we will deliver low double-digit EPS (beia), every year.

Okay. You're just can excuse me -- So the 60 or 70 bps of mix improvement, that's from 2002 to 2004 in total, is that correct?

It's for two years, correct, yes.

For two years, so 30 bps from where?

From where we are today looking forward.

So 30 bps per year until '04.

The chart build up, Florence. The chart builds up -- the constituent part of what will support the movement from 14.9 to 16% plus in the year 2004. Now it won't add up arithmetically, you will have already got the point that it's actually more than that increase. And that is what Rudy referred to as the allowance for the cut and thrust of normal business. This is not a precise science. But what we are seeking to convey is that we have a high degree of confidence about our ability to deliver that further margin improvement, and here are constituent parts which you can examine as whether that looks like a credible story.

Okay. And then the EUR500m of restructuring in '03, is that a combination of associated costs and restructuring?

No that is only the exceptional items, which is why we called it exceptional items EUR500m.

Okay, and what would be associated costs then in '03?

We've not given any guidance on that, Florence. You will have seen how the associated costs have run this year and the years before, and you can see we're coming to the end of that part of the program as well.

Okay. I think that covers my questions, thanks.

Thank you. Your next question comes from Karl Kowaja of Capital Research.

Congratulations on the great result.

Hi Karl.

I apologize, I have a slightly detailed question. I was wondering, FRS17, can you say what your return on asset and discount rate assumptions are?

I'll take this Niall, shall I? Let me give you the overall number -- because you remember we have a number of pension funds across the world, and of course they have different mixes of equities, of bonds and of property in their portfolio. The weighted average of the numbers that we're looking at, so covering the US, the UK, Netherlands, Germany - which are our bigger funds - is 6.9%. that calibrates with a number last year - if I remember correctly - weighted average again of over 7%. I think it was something 7.5%, 7.6%.

Okay that's the return assumption?

That's the return assumption, in aggregate for the mix of funds that we have around the world.

And then what about the discount rate assumptions?

The discount rate assumption, as you know, that's according to the standard that we follow, is driven off the AA -- the corporate bond yield, and that rate for us, or the assumption that we have made in assessing the value of our liabilities, is 5.7%.

Okay, I characterize both of those as very conservative.

We believe so, Karl.

The other thing, Niall, I was wondering if I could ask is, in response to the question John had earlier about acquisitions. I'm presuming that wouldn't bar you from doing something smaller though? His question was kind of addressing the $10b to $20b type acquisition. But in the view of the [five range], I presume that that is manageable?

Yes, I took that as talking about major acquisitions. Obviously if there are in-fill opportunities as we go along. There's also some areas where we need to do a little bit of tidying up, where business we've acquired, as in with Bestfoods, had outside shareholders such as the Robertson's business in South Africa, and we were precluded from properly integrating with ours until we made a rearrangement there. So we've done part of that. There are other areas where we will also do some tidying up. But I think the general point, are you likely to see major acquisition spending from us? The answer is no. Are we likely to take advantage of any small/medium-size opportunities as come along? Providing they are entirely consistent with the focus of Path to Growth, yes of course the normal cash flow could absorb that easily.

Another question that I had was on A&P spending in the fourth quarter, which was obviously particularly high. Did you set a target for that and then just spend in the fourth quarter, because your sales came in so much stronger than I anticipated? I'm wondering if you saw how strong the sales growth was and decided to continue to spend against it?

Well I think it was two things here, Karl. One as you know - I think we've discussed it before - we don't operationally run the business by quarters. We have an eight-quarter rolling approach to how we plan our marketing activities. And we don't either suddenly amend something and pull it from one quarter to another, simply because that would be helpful to smooth the financial results. We do what operationally is right. And if that give fight occasionally to the quarterly financial results, we believe that we can explain that appropriately, and people will understand that we're running the business in the right way.

What we had in the second half of 2002 was a building momentum of marketplace activity and innovation coming on stream. Which was both in HBC, but increasing in Foods as we got through the integration process. And we wanted to move through the year now and begin to build that top line growth number, and go out of the year with good momentum, and into 2003 with strong momentum. Now a lot of the spending, in fact 80% of the spending was in advertising, it wasn't in promotion. So this isn't a promotional drive at the end of the quarter to try to get sales. It was in brand building, which will have a significant return through 2003, as well as in 2002.

We also had a number of launches. Obviously one of the big launches in the US was Axe. We have continuing activity in Dove. Even the Dove Hair launch, which is in the first quarter of 2003, was the buildup to that meant that we were supporting the Dove brand generally very strongly in the US in the final quarter.

So you had a number of issues which related directly to marketplace activity, but particularly in the brand building rather than in the sales promoting area. Does that make sense?

Yes it does. I apologize, but another detailed question. I'm confused how -- what was the actual tax rate for 2002? Then also, I'm trying to remember what guidance you have given on when you think exceptionals will decline even further? EUR500m is obviously a pretty low level. But it's probably arguably still somewhat material. I'm wondering when you think it might become even less material?

Him Karl, it's Howard. The tax rate was 30% (beia), so what we would call underlying.

And you're saying now it's 32 for '03?

Yes. And the 30% includes 2 percentage points from prior year adjustments.

So you could probably even beat the 32 in '03?

I think as we said in the statement, Karl, we've taken a cautious view. But 32% remains our best estimate of what will be the outcome in 2003 and beyond. In terms of the exceptionals, then the cumulative spend to the end of 2002 was EUR5.2b, which of course includes associated costs. That gives us a EUR1.0b of spend to go to the end of the Path to Growth program, to get to the EUR6.2b. EUR500m on the exceptional items obviously gets us part of the way through that. But as Florence Taj earlier noted, there will be some incidence of associated costs, but those are just costs that we're managing as a normal part of the business and the margin.

I think what's also important is, as you look at the total spend under the Path to Growth program, that we still see ourselves coming out with the original estimate of two-thirds of it being cash based, and one-third of it being non-cash. So we still remain comfortable with all of those parameters that we'd earlier given.

I think also, Karl, I know you know this, but it's perhaps for others listening worth underlining again what we've said. That post 2004 the margin target -- in fact we exit 2004 with 16%+. By the time we get into 2005 that will be -- that will absorb all restructuring costs. We've given guidance that that could be in the region of 0.5% to 1% of turnover. And there will be no exceptional restructuring costs beyond 2004. The only thing that might be treated as exceptional beyond that date, is any major portfolio change, where we had a sale or a purchase of a business.

I heard John's comments of the share price [indiscernible] earlier, but I certainly wouldn't judge myself too much by the short-term [indiscernible]. These are absolutely fabulous results, and I hope you are all feeling really happy about the year that you achieved in 2002.

Thank you very much, Karl, we're pleased to death, and pass it on.

Thank you. Once again ladies and gentlemen, to ask a question, please key star followed by one on your touchtone telephones. Your next question is from Thomas Rissou of Gardener, Rissou, and Gardener

I would echo the last comments, congratulations. I have a couple of questions. The first would relate to any impact that you might see from the consolidation of the English supermarket trade - Safeways acquisition. And just speak in general to your view of the operating efficiencies that you've gained from dealing with ever-larger customers? That's one question.

I wouldn't like to comment too specifically on what's happening in the UK, because we don't know which way it's going to come out. And whether it will indeed lead to a further consolidation or whether we will just have a fourth major player from two smaller players getting together. I think in general our experience with our major retail customers is that we have a different than we have a more effective form of relationship with them. We bring big brands and big innovations, and they bring big distribution capability. And the dialogue we have is not solely about the last half cent on the price of the cost, although they're very sharp on that anyway. But it is about the next 25 or 50 cents you can get from more effective joint use of your supply chain, or more effective promotion of your brands on launch or relaunch, and more effective operation within store.

So from our perspective, and from those who bring the brands which are the key traffic drivers in their store, the economics of the relationship with the major retailers is a more favorable one, for both parties.

And you share the gains within that?

Indeed we do. So the only discussion we have is how will be share these even greater gains.

Wonderful. I'm curious about what we read in the US market, which is [indiscernible] potential liability for products that are in your Food portfolio and the [ill-healthfullness] of those products? And how you've recognized the possibility of liability and what you might have done to change your business practices?

It's something obviously which we all had to be very alert to. I think this grows out of the -- obesity seems to be coming [indiscernible]. Now I mean there's two things about that. First of all I think it's a fundamentally different issues, that food per se is not bad for you. The excess of consumption of food is bad for you, and that can range from anything which is in a package to eating -- if you ate 20 tomatoes a day, that wouldn't be very good for you either. So people have to make sensible choice.

What I think it does mean is that everybody - and we have always been in this arena anyway - everybody has to be very clear with regard to seeking to continue to increase the nutritional value of what they have. I mean our whole origins as a food business is in nutrition. It's something that runs right through the veins of the business.

And also be very clear with regard to the labeling of what's in your food, and very clear and appropriate and accurate about the claims you make about what your food product will do. And I think providing you're careful about that, and you're meticulous about what you do, the increased concern of consumers about food and the food they eat, is actually an opportunity for a company like ours, not a threat.

Yes, but the idea of nutritional value, clearly labeling and manage your claims, is what you reply on [indiscernible]?

Indeed.

And a question about your stakes. The existing public stake that remain within the Unilever traditional legacy businesses, how do you look at the need to retain those public market stakes in places like India?

Well each one we have to judge on its own merits. If I take it that India as you mentioned. At that time that that happened that was something we were required to do, we didn't necessarily volunteer to do. Although I'd have to say, it's having then developed, one of the great advantages we have in our Indian business is that it has a very strong Indian profile. It's not seen as the subsidiary of an international business, but it's seen as an Indian business with international connections. And that has many advantages for us in how we deal in India. It has advantages in how we attract talent, local Indian talent. And there are a lot of very talented people in India. And it has advantages in terms of how you deal with government s, etc.

So in certain environments it can be a positive advantage and not a negative. We have a public share holding in Indonesia, in Ghana and a number of other places.

Great. I guess my last question would be just for Mr. FitzGerald to explore a bit the balance of your pension funds. You did mention that you were underfunded. Does that depend on certain geographies? How do you look across your pool? Are there any markets where we're unusually underfunded or exposed?

There are some countries where there is not either a tradition nor is it efficient to have funded pension scheme. There are tax reasons. Germany is a very good example. There are tax reasons why it is better, rather than fund a separate scheme to build up the provisions for the pension in your own balance sheet. And get the return within your own business. And that's what we call traditionally, unfunded retirement benefit. We provide for it in our own balance sheet and then pay it out as and when the liability emerges.

And those aren't necessarily supported by any assets other than the corporate burning capabilities?

Indeed. But it's fully allowed for in our budgeting of our costs through the year, and our long-term projections of where our costs will be. It's allowed for, the provision is built up in the balance sheet over time.

Do you include in the pension discussion also liabilities for healthcare benefits for workers and retirees?

Yes we do.

Okay, thank you for your guidance. Good quarter.

Thank you, Thomas.

Thank you, there are no further questions at this time. I'd like to hand the program back to Mr. FitzGerald.

Thank you very much and thank you all for listening. See you or hear you next time.

Thank you. This conference has been recorded and will be available immediately. Details of the replay number and access codes can be found on Unilever's web site. An audio archive copy of the teleconference will also be available in two hours on Unilever's web site at www.unilever.com. Thank you.