聯合利華 (UL) 2008 Q4 法說會逐字稿

Welcome to Unilever's fourth quarter and full year results 2008 conference call. This conference -- there will be a presentation by Mr. Paul Polman, Chief Executive Officer, followed by Mr. Jim Lawrence, Chief Financial Officer, concluding with a question and answer session hosted by Mr. James Allison, Head of Investor Relations. (Operator Instructions).

This conference is being recorded and will be available for a period of two weeks. Details of the replay numbers and access codes can be found on Unilever's webcast. A video webcast and a podcast of the teleconference will also be available on Unilever's website, www.unilever.com. We will now hand the call over to Mr. Polman.

Morning, good morning. Life is not that bad. Okay, good to see some familiar faces. We will start right away. I'm lucky we didn't get snowed in this morning. At the moment it's very unpredictable. If there is less than 1 inch of snow it panics. I'm glad we don't have our headquarters in Moscow. We'd never meet anybody.

Good morning everyone and obviously welcome to the 2008 full year results and then the fourth quarter results presentation as well. I'm joined this morning by Jim, Jim Lawrence, our Chief Financial Officer, James Allison, our Senior Vice President for Investor Relations and in the audience we have some of our fellow colleagues with us. Perhaps you want to quickly stand up.

If I start with Harish, who runs all of our developing market basically. We have Doug sitting next to him. Doug runs Western Europe. Vindi, good morning. Vindi runs all of our categories. Genevieve, our R&D. Next to them we have Steve Williams, our legal counsel. Always take him with you. We have Richard, Richard Rivers, and then we have Mike Polk who runs the Americas. Good morning guys.

Well this is my first address to the investors as CEO of Unilever and I am both pleased and excited to be doing this, despite the difficult economic environment. I am convinced that the actions that we've already taken to make this business simpler and more efficient will help us to weather the impact of what has become a global downturn. More importantly, there is scope to build on the strong foundations which have been laid by Patrick and to make Unilever more competitive still.

Later in the presentations I will share with you some of my thinking moving forward, but first I would like Jim to run us through some of the assessments of our business performance in 2008 as well as quarter four. So let me hand it over to Jim first.

Thank you Paul and let me add my welcome to all of you and, in particular, welcome to this room which is being used for the first time for an investors' meeting. And I'm delighted to have all of you with us. As per normal practice, I draw your attention please to the disclaimer relating to forward-looking statements and non-GAAP measures, and I note that this disclaimer is included here and will also be posted with the text of this presentation on Unilever's website.

In 2008 we have been confronted with unprecedented levels of commodity price inflation and an unpredictable and, through the course of the year, a generally deteriorating economic environment. Against this challenging background we've delivered underlying sales growth well in excess of our 3% to 5% guidance, and a better underlying operating margin for the year.

We characterize this as solid performance and a continuation of the good performance which Unilever has been showing in recent years. The actions that we have taken have made us sharper, faster, more efficient and more able to win. Certainly there is further to travel, but the progress thus far is clear and encouraging. So let me now turn to the specifics of our performance in 2008.

2008 was our fourth consecutive year of accelerating organic sales growth, to 7.4% for the year, and in this year driven strongly by price increases. Volumes were flat. At the same time we have improved underlying operating margin by 10 basis points and this is despite rapidly escalating input costs which added EUR2.7b to our cost base. And that is the equivalent of 640 basis points of margin compression, truly unprecedented, truly exceptional.

Nonetheless, in 2008, cash flow from operating activities was EUR5.3b, which is EUR100m up on last year. And particularly satisfying, I should say, was the improvement in cash flow generation in the second half of 2008 after a weaker first half. EUR3.6b of cash was returned to shareholders during the course of the year through share buybacks and dividend payments. And today we're announcing a total dividend increase of some 3% for NV and 19% for plc, both in respect of the fiscal year 2008.

The completion of the sale of our Bertolli Olive Oil business in December brought total disposals in the year to approaching EUR1.6b of turnover. And in so doing we have raised the long-term growth profile of Unilever and we have generated returns which are well in excess of the retention value of the businesses that we've sold. After-tax profit on the disposals for the year was EUR1.6b. The after-tax cash proceeds from these disposals were EUR1.9b.

And we believe this brings to a conclusion that part of the transformation program specifically associated with disposals. Some of the brands which we originally identified are performing well, and there is no longer a compelling economic case for exit. That said, a number of minor disposals will certainly be progressed and we will keep, we'll continue to keep our whole portfolio under active review.

Now, at the same time, we have acquired businesses which are more in line with our strategy. Inmarko, the leading ice cream business in Russia, was acquired in April and I'm pleased to report that that business is progressing ahead of our plan. And last week, we announced the acquisition of the premium salon hair brands of TIGI and this will strengthen our personal care portfolio.

Let me now look at the numbers in a little more detail. Turnover for the full year was EUR40.5b, which is 0.8% ahead of 2007. Currency, of course, adversely impacted the full year turnover by 4.8%, while disposals, net of acquisitions, further reduced the turnover by 1.4%. The former reflects the strength of our reporting currency, that is the currency translation. Our reporting currency is euro and it was strong during the year against a wide range of currencies including, of course, the US dollar and sterling.

Sales in quarter four were EUR10.2b, which is 2.6% ahead of last year, this again after a 2.7% reduction from disposals net of acquisitions and after an adverse currency effect of 1.6%. Underlying sales growth was 7.3% in the quarter and 7.4% for the year as a whole.

Growth was increasingly driven by price as the year progressed and this reflects the strong and concerted pricing action that we took to protect the business in the face of the commodity cost increase which I mentioned earlier. These actions have negatively impacted volume growth. As a number of markets have gone into recession and consumers have adjusted their spending, the effect on volume has been more pronounced. Trade de-stocking in quarter four has also been a drag on volume.

Price growth for the year as a whole was 7.2% and volume growth was slightly positive. Volume declined by 1.6% in quarter four as our pricing peaked at over 9% in the quarter. We are taking action to address volume growth and we'll come back to this later in the presentation.

Now let's have a look at regional performance and we start with Western Europe, and we're going to go through this under the new line of reporting. This is the Western Europe which reports to Doug Baillie and there we saw underlying sales growth in Western Europe of 1.3% in both the quarter and the full year. Volume was down 1.7% in the quarter, but for the full year volume was down 2.4%.

Market growth in Western Europe continued to slow and was roughly 2% in the quarter. The growth of private label continues to put pressure on branded players and this is particularly the case in Southern Europe. In Northern Europe private label shares are flat. Our performance in the UK and the Netherlands continues to be strong, up close to 4% and 6% respectively for the full year, and both are up by more than 7% in the fourth quarter. Germany and France remain challenging markets as does Spain, where the economic situation has deteriorated faster and further than elsewhere in Europe.

The transformation program in Western Europe has been more intense than any other part of Unilever and excellent progress is being made despite the challenges faced in what are very competitive markets in the year we've just seen.

First, the completion of the move to a single harmonized IT system. This has been described by Accenture as one of the most rapid, sizeable and successful ERP rollouts in which they have been involved. And it is a key enabler for supply chain optimization and simplification, and is a significant contributor to substantial cost -- substantial savings in IT costs in the region.

Second, the disposal of Boursin and the Bertolli Olive Oil business, and the move of Lipton Ready to Drink Tea into the Pepsi Lipton joint venture took place in the year.

And third, we made further progress in the Unilever organizations which operate across country boundaries. Belgium is now performing well within the Benelux cluster. And UK/Ireland is now setting new benchmarks for cost efficiency.

We have announced the closure or streamlining of some 24 factories in Western Europe and 12 have already been closed or disposed.

Once again, progress is clear and the impact on performance is becoming more obvious. The underlying operating margin of Western Europe increased during the year by 70 basis points.

Now we'll turn to Mike Polk's Americas. The Americas grew by 6.5% in the year and by 6.6% in the fourth quarter. Volume growth was about 80 basis points for the full year, was negative 3.1% in the fourth quarter. In the US we grew by 3.8% for the full year, 3.1% in the quarter, both in line with the market, and both price-driven.

While market volumes in food have remained flat, personal care markets are down, reflecting consumer de-stocking and reduced consumption. However, our shares have held up well. We also experienced some trade de-stocking in the fourth quarter which further held back volume. Private label have gained share, particularly in foods, but I'm pleased to say, for the most part, not at our expense.

Turning to Latin America, Latin America grew by around 12% in both the quarter and the year. Volume was positive for the year, but negative in the fourth quarter, with weaker economies and weaker currencies impacting consumer confidence. And again, we also saw some significant trade de-stocking in Brazil.

The transformation program continued to progress well. And I would cite the disposals of our North American laundry brands during the year, as well as the close of the Lawry's Seasonings sale. They were both completed in quarter three. The Bertolli Olive Oil disposal was completed in quarter four.

Our Ice Cream business was integrated in to a single head office for the US, based in Englewood Cliffs. And more recently we announced that the US, Canada and the Caribbean would be managed together as a North American multi-country organization. So, again, we see clear and pleasing progress on our transformation agenda.

Underlying operating margin was flat for the year, with pricing and cost savings offsetting sharply higher input costs. Unrecovered overheads from disposals and the lower volumes were also absorbed.

I turn now to the expanded Asia/Africa/Central and Eastern Europe, under Harish. And growth there in this region was 14.2% for the year, and 13.5% in the fourth quarter. Encouragingly, growth was broad-based, with continued strong growth in India and Indonesia, which were both powerhouse businesses where Unilever has great scale. Indeed our top five countries grew by upwards of 18% for the full year.

Across the region volumes were up 3.5% in the year, but flat in the quarter, with some of the countries seeing signs of slowdown in consumption, and others, such as Russia and China, being impacted by trade de-stocking. Despite this, China continued to post strong volume growth.

The One Unilever organization is in place throughout the region. Supply chain management for Asia/Africa is being centralized in Singapore. And the move to a single SAP system is progressing to plan. And Indonesia, we started up with that at the beginning of January.

Underlying operating margin declined by 20 basis points in the year, reflecting increased investment in building our capabilities to drive growth and reflecting the sharp increases in input costs, which were partially offset by the benefits of our savings programs.

Now let's spend a few moments on category performance. Savory, Dressings and Spreads grew by over 7% in the year and over 6% in the quarter, driven by vitality focused innovation. I'd cite examples such as the launch of Knorr Stock Pots, Bertolli frozen meals, Rama margarine, which offers better taste and less fat and is supported by the Goodness of Margarine campaign.

The Ice Cream & Beverages category grew by close to 6% in both the fourth quarter and for the year, with our premium range of Magnum Temptations and Ben & Jerry's performing well as consumers' desire for indulgent treats continued despite the recession. And Lipton delivered another strong year, particularly in Asia/Africa/CEE, as consumers up-traded from loose tea to regular tea bags and then again to pyramid tea bags.

Home Care performed well again with close to 10% underlying sales growth for the year and 12% growth in the quarter. We continued to rollout margin enhancing innovation using superior technology, which included the launch of Dirt is Good with long-lasting freshness, and a new premium range of fabric conditioners and household care products, such as CIF Actifizz and Domestos Grotbuster.

Personal Care grew by over 6.5% in both the quarter and the year, with a good balance between volume and price. Superior technologies deployed to new personal care products are benefiting consumers and driving growth. These include Vaseline new clinical therapy lotion, Signal White Now toothpaste, and Dove and Rexona hair minimizing deodorants which were launched last month. And finally, it's been yet another excellent year for Clear Anti-dandruff shampoo and Axe, with its chocolate variant now being the most successful deodorant brand we've ever launched.

Now that covers what I wanted to say about the drivers of our top-line performance. And I'll now turn to other aspects of our financial performance, and I'll start with operating profit. We'll start with the full year. And I'll do it in absolute money and in constant exchange rates, making the underlying performance easier to read.

So for the full year, this chart format we've used before. The combined effect from volume, mix and disposals was around EUR200m. Price increases added EUR2.9b. As I mentioned earlier, commodity increases reduced operating profit by around EUR2.7b. And other costs increased by just under EUR1b. So while pricing covered commodity cost increases, it was not sufficient to cover the totality of cost increases, still less to maintain gross margins.

However, savings programs are on track for the year, delivering EUR1.1b and, in terms of advertising and promotional expenditure, there we increased by EUR50m for the year. That's left an underlying increase in operating profit of EUR370m, which is 6% up on 2007.

Now we'll take a look at the quarter. Again we'll do it in absolute money, measured in constant exchange rates. The combined effect here of volume, mix and disposals was to reduce operating profit by around EUR100m. Pricing peaked in the quarter, contributed in the quarter EUR900m. Not enough to cover commodity cost increases of nearly EUR800m, and the other cost increases of around EUR400m.

This level of other cost inflation is higher than the average for the year, which reflects three things. First, fixed cost under-recovery from the reduced volume and from the disposals, the negative impact of currency movements on non- commodity costs, and the phasing of overhead and other costs through the year. So in Q4 you can see that despite the significant level of price increases, cost did increase by more.

Balancing this, our savings programs continued to accelerate through the course of the year and delivered in the quarter EUR300m. Finally, A&P expenditure reduced by about EUR50m, leaving an underlying reduction in operating profit of about EUR40m, 3% lower than the same quarter in 2007. Now, before the loss of profit from disposed businesses, the underlying profit would have increased, or would have been EUR30m more in the fourth quarter.

Now let's look at the development of operating margin. Our full year operating margin was 17.7%, but of course this included just over EUR900m of restructuring and impairment charges and disposal profits of EUR2.2b. Put the two together and they added 310 basis points to the operating margin.

Excluding RDIs, restructuring, disposals, and impairments, there was an underlying improvement in the operating margin of 10 basis points for the full year and of course that included that decline of 70 basis points in the fourth quarter. So for the full year, 10 basis points up.

The lower margin in the fourth quarter reflects the impact of lower volumes, the phasing of overhead costs, negative currency impacts, as mentioned, and of course the sharply higher commodity costs. Short-term under-recoveries arising from disposals reduced the underlying operating margin by some 30 basis points in the quarter.

Now let's look at commodity costs and A&P expenditure in a bit more detail. Commodity cost impact on the P&L peaked in quarter three, but remained high in quarter four, impacting the year by 640 basis points. Underlying reductions in commodity costs were heavily offset by negative currency impacts, particularly the strengthening of the US dollar and the weakening of sterling.

We expect to see substantial commodity cost headwinds continuing in our P&L throughout quarter one, before beginning to ease in quarter two. At the same time, we will begin to lap price increases which were taken in quarter one of '08 and so the price component of sales growth will reduce as the year unfolds. In combination, this will mean that margins in the first half of 2009 are likely to be lower than the corresponding period in 2008 before recovering in the second half of the year.

Advertising and promotional expenditure was up EUR50m in the year, as I mentioned, but down 70 basis points when measured as a percentage of sales. Our share of advertising spend relative to competitors in our markets increased in 2008 in both foods and home and personal care, indicating that we have continued to invest to strengthen our brands. This is something not all competitors have done to the same extent. Further, savings from media efficiency programs have been reinvested and media rates in a number of markets are down, most particularly in the fourth quarter. And this has enabled our A&P spend to go further, getting more bang for our buck.

Now we turn to earnings per share. Earnings per share grew by 32% in the year, but with 26% of that coming from the net impact of RDIs. Operational drivers together contributed 6% to EPS growth and the EUR1.5b share buyback in the first half of 2008 added a further 2% to the EPS. There was a negative impact of 4% from currency, and a further negative 3% from tax, which reflects the substantial favorable settlement of tax audits in the first half of 2007, the comparator. This left underlying EPS growth of 1% for the year as a whole.

Our financial strategy targets a competitive balance sheet with a strong single A credit rating and I reiterate that commitment today. We believe it's continued to serve us well. Our strong balance sheet and prudent financial management have enabled us to access low cost debt throughout the financial crisis. This ready access to low cost liquidity is a competitive strength and in 2008 we issued Swiss bonds to the value of CHF1b, and a EUR750m Eurobond, each at very attractive prices. In addition, we have accessed commercial paper throughout the year at very competitive prices, substantially below LIBOR.

Net debt reduced through the course of the year to EUR8b as at the end of December and finance costs, net of borrowing, were 1% lower in 2008 reflecting lower borrowing cost on what was a higher average level of net debt through the year. Despite the strong commodity cost-driven inflation, our working capital increased by less than EUR200m in the year.

Cash flow from operating activities was EUR5.3b and, as I mentioned before, with a strong improvement in the second half. During the year we invested around EUR1.1b in capital expenditure. Mentioned before, pre-tax disposal proceeds were EUR2.5b in 2008, and that was up EUR2.1b versus 2007. After-tax proceeds from these disposals were EUR1.9b.

Our net pension liability at the end of December was EUR3.4b. That is up from the EUR1.1b that was on the books as at the end of 2007. As I'm sure you're all aware, this reflects a reduction in the asset values on the world markets, partially offset by a reduction in liabilities caused by the increased corporate AA bond rates which we use for discounting those liabilities and putting it on to the balance sheet. In 2009 we expect cash contributions to pension funds to be higher than in 2008, but below the levels of the preceding two years.

Return on invested capital in 2008 was 15.7%, boosted of course by the profits from disposals. If we exclude those, the return on invested capital was 11.2%, broadly in line with 2007 on a comparable basis.

Now let's turn to the cash which we've been returning to shareholders. We're recommending a final dividend of EUR0.51 per NV ordinary shares, and 40.19p per plc share. That will raise our full year dividend by 3% for NV and 19% for plc respectively. This will bring the total dividend payment for the year to EUR2.1b, and the total cash returned to shareholders in the year to EUR3.6b, which of course includes the EUR1.5b of share buybacks. From the chart which you see displayed, you can see that cash returned to shareholders for the last two years has been in excess EUR7b.

Now let me just say a few words about quarterly dividends before I conclude. Our current dividend practice we believe to be unnecessarily complex. For example, we have different calendars for final dividends of NV and plc, which leads to different ex-dividend dates and temporary share price distortions. And different exchange rates are used to determine the dividends for the different listings, leading to different dividend amounts when translated to US dollars for NV and plc in New York.

We wish to simplify our dividend practice and we believe that is best achieved by moving to quarterly dividend, with one dividend calendar and one set of exchange rates for all share listings. This will align dividend payments with the cash flow generation of the business and provide more frequent payment to shareholders.

It's important to note that the total euro amount of dividend available for shareholders will not be impacted by these changes. It is simply the payment mechanics and the exchange rate conventions will be different. These proposed changes will be brought forward to the annual general meetings in May, and, if approved, the new quarterly dividend calendar will become effective from January 1, 2010. More details on the dividend proposals can be found on the Unilever.com website.

And now, with that, I am happy to pass the baton back to Paul.

Thank you Jim. Let me start my part of the presentation with some initial observations, if I may.

I believe that Unilever has made good progress in recent years and is now in a much better and stronger position to compete. 2008 results are certainly a testimony to that. We have been able to hold the volumes despite restructuring the organization and the disruptions associated with the significant disposals that Jim talked about.

That we have done so in this environment gives me the confidence that we have a solid foundation from which to grow volume again. And we have delivered, at the same time, an improvement in underlying margin to 10 basis points, despite the EUR2.7b additional commodity costs. I've been in this industry for 30 years, and I've certainly never seen increases to that extent.

I believe that we would not have been able to do this performance a few years ago in this Company. However, it is also clear that we are facing a tougher economic environment. In many places around the world we have slipped into recession and the general consensus is that we might not see a significant improvement in the next 18 to 24 months, if we like it or not. And we will certainly plan our business on that basis. Better to be proven wrong by being on the conservative side than the other way around.

Markets have come under pressure, first in developed economies but now also in developing markets, and we've seen a rapid change in recent months. In developed markets we see consumers trading down, drawing down from their pantry stocks or simply consuming less. At the same time we see retailers increasingly pushing their own brand and driving efficiencies in the supply chain by reducing their inventories. All of this puts pressure on the system.

In developing markets, we fortunately still see growth, but demand is slowing down as a result of the rapidly changing economic environment there as well and the impact of cost inflation. With currencies weakening in a number of these developing countries, we actually don't see prices coming down significantly in that part of the world in the near future.

Whilst we are certainly not fully where we want to be as a Company, I believe that the changes that Unilever has been making under Patrick's leadership and the team that is represented here have made us certainly a more resilient and more able-to-compete Company in this environment.

We now have a more focused portfolio of brands as a result of selected disposals. In fact, in the last three years alone, we have disposed of over 3b of our turnover. We also have a more competitive cost structure as a result of the restructuring efforts, firmly on track to deliver the target originally set out of EUR1.5b of savings in 2010 against our 2006 cost base.

We've been able to adjust the organizational size, in fact from over 200,000 people to about 170,000 currently. And the senior management levels have been halved over that same period of time. We have as a result a leaner, faster organization, significantly reduced the layers, increased the clarity of the roles and accountability at the same time, what I call better leveraging the scale and the power of One Unilever.

The change program in Unilever has been enormous, in fact, much bigger than what I thought before I came in and what has impressed me that this has been achieved at the same time as the business results have improved as well. You've recognized this, and I appreciate that, by putting the firm -- putting the Company firmly in the middle of the pack in TSR. It's a good achievement, and a bit, in my opinion, like driving a car faster whilst changing the engine at the same time. I have not seen many companies, in fact I have not seen any, that has had that scale of change and at the same time able to deliver these results. Now we have many elements in our business model that place us well in the current economic environment. First, we have strong brands and category positions. In fact, 13 of our brands have more than EUR1b in turnover and 70% of our portfolio actually comes from categories or market combinations in which we are leaders. We have the number one position in seven out of the 11 categories in which we operate.

With consumers trading down, it also serves us well to be positioned across the spectrum of the market, rather than be overly exposed in the premium sector, as some of our other companies. The fact that we have both foods and HPC businesses is also an advantage, especially with food seeming to hold up better in today's market environment, as Jim was talking about.

We are also able to increasingly leverage our technologies across both segments. And we shared some examples of that in Port Sunlight with you. Good examples are in the way in which we are, for example, deploying emulsion or extrusion technology across both food and HPC.

We have a balanced D and D&E portfolio, and D&E, as you know, accounts now more or less for half of our business. It is worth pointing out, as I mentioned before, that although growth in D&E has slowed down, there is ample opportunity still for growth in those regions. On top, we have very strong positions in some of these countries that are less affected by the current crisis.

Our significant restructuring efforts over the last few years are also beginning to pay off. This will provide us with the fuel that we need to reinvest in our business and ensure again that we start growing. We have a strong balance sheet, which has served us well throughout this financial crisis and for the months or years to come. Cash flow generation is particularly strong. And Jim has already alluded to that. Cash flow from operational activities was actually EUR5.3b in 2008, although I'd be the first one to say that it still can be stronger.

Despite the progress we've made in implementing the One Unilever, it is also clear to me that we are not yet where we want to be. We still do have gaps to close. On top of this, the environment is changing and, believe me, competitors are not standing still either. In fast-moving consumer goods you simply do not succeed by just closing gaps. You only win by creating gaps versus your competitors and to do that we simply need to raise our game.

There are several areas where we will need to set the bar higher. First of all, we have to get our volumes growing again. As I said before, you cannot save your way to prosperity. We are definitely in better shape as a result of the restructuring of the organization, but long-term value will only be created, will only be built if we consistently grow our volumes.

Whilst we have done reasonably well holding value shares, we have seen pressure on our volume shares. Once more, even allowing for the very strong headwinds that we are facing, I believe that the surest way to build the long-term shareholder value is to get volume growth back firmly on the agenda.

So now, with the majority of the restructuring program behind us, we need to increasingly focus our energy externally as an organization, versus internally. It requires us to put the consumer and the customer firmly back at the heart of all we do. That's why we're here. We will certainly use the current economic pressure, which could not have come at a better time, to galvanize faster action so that we can emerge from this recession stronger and more competitive than we've ever been before. I am confident that we can do that, just as we've done in previous cycles.

Actually, don't forget, when I was reading up on the history of this Company, this Company was actually created in the recession of the '30s, and has faced several crises since, either in Latin America, the Far East or Europe, and guess what, each time coming out stronger. Whilst we can talk lofty long-term goals, I believe firmly that in the current economic climate, we simply stick to 2009 and its priorities, managing the business real time, maintaining a high degree of flexibility and reacting fast to the external environment. This will be key.

Our priorities are simple. First and foremost, we will reignite volume growth and second, we will protect our cash flow and margins whilst we do this. No trade off. It can be done. Let's look at these priorities in more detail.

First, I certainly make no apologies to start with volume growth. As I have mentioned, we need to reignite volume and put everything in place to get to sustainable growth again. To do this we need to drive down cost faster and reinvest part of that in the business. We need to strengthen our brands. Let me briefly share some of the actions we are taking now.

The focus will be on improving our brands and portfolio, strengthening our go-to-market capabilities, and to continuing to evolve our organization and culture.

On our brands and portfolios, first priority is staying competitive in this tough environment. It is about basic competitiveness. We are looking more aggressively at where we have gaps in our business versus our competitive set and correcting them fast.

In fast-moving consumer goods there are no such things as holding share. We need to get more of our strategic brands and categories in the mode of growing share and developing plans and support behind that. We have identified those areas in our top 10 countries and categories where we have the outages and we have put 30-day plans in place to fix that.

The second area is that we need to drive our innovation harder and faster. This includes pulling innovations forward where we can, and faster expanding them across multiple countries when we have successful innovation. We certainly know how to do that and we have many examples of that. Dove 'Go Fresh', for example, was launched in January in the UK and the Netherlands. With its success, it was launched in 8 countries by June and in 55 countries in December. It can be done.

Third, we have to get into the mindset of growing everywhere, not only in developing and emerging markets. Around 50% of our business is still in Europe and the US. And there is no good reason why we cannot hold on or grow our volumes in these regions either. After all, some of our biggest inventions, Axe, Magnum, etc., were born in Europe.

Fourthly, we need to strengthen our portfolios again by ensuring that we always have stronger offerings in the value segment. We need to better communicate this inherent value of our product, play what we call the full price piano, to do that, offer choice, including different formats and variants where needed. And, very simply, we need to be where the shoppers are.

And fifth, some of the developing countries that will, according to the OECD, be more affected by the current crisis, actually happen to be countries where we have a relatively weaker market position. That's good news because I see this as an opportunity that will allow us to invest and strengthen into those countries and drive our portfolio and brands there as well, countries like China and Russia.

We're also putting in place the elements which will support our longer-term growth aspirations. We have to take care of today, but also invest in sustainable growth in the future. One example of that is the new single R&D organization which we spoke about in Port Sunlight. Under Genevieve's leadership this new organization will take effect as of now and we will see the benefit of that in the years to come, I am convinced of that. Not surprisingly, with this agenda, there also will be no compromise, by the way, of A&P and R&D.

Next to strengthening our brands and portfolios, we also have to sharpen our go-to-market capabilities. Firstly, with the appointment of David Blanchard as of January, we have appointed a Global Supply Chain leader and integrated all the different supply chain functions, from buying, manufacturing and distribution, into one organization. That's a huge change. This not only results in a more cost-efficient supply chain, but also will allow us to significantly improve the service levels and consumer and customer satisfaction along the way.

We will also strengthen our customer development operations, putting even sharper focus against our more successful and faster growing customers to be sure that we get our fair share of the growth. And we're putting in place increased capabilities to drive further our shopper knowledge into everything we do. In the US we have just opened our new Customer Innovation Centre. And the first customers are already coming through.

Finally, the organization and culture, shortly we will announce some of the leadership changes which will strengthen key categories and country operations. We will also increase the focus on the consumer and customer as we move to the next phase in our development. We are simplifying and sharpening our reward structures to further drive our performance culture. We're putting in place clearer responsibilities and accountabilities for all of us to deliver and, finally, we will continue to drive the external focus and speed that we need in this environment.

Now let me briefly talk two of the other things that I touched upon, cash flow and margins, recognizing that the achievement of both are not mutually exclusive. Let me start with the cost savings since it actually underpins both.

Simply put, I think that it is essential to remove all costs from our system which consumers are not willing to pay for and no better moment than doing it now. Lots of progress has been made here, but there is still lots more to be done. Indeed, there are a number of areas where we still are not cost-competitive. That's great news, provided we do something about it.

As someone said recently in one of the interviews I was reading, 'there is nothing better than leveraging a good crisis'. And we shall use this economic downturn to create a new sense of urgency in our approach to cost and organizational efficiency. Now here are a few examples of what we are doing now.

On indirect, we have frozen our salaries, reduced external hiring and cut many parts of our discretionary spending. In our cost structures we will use our scale to accelerate our better buying and the new organization I talked about will help us do that increasingly at a global scale. We also have appointed, for this reason, Marc Engel as Global Procurement Officer. And we will improve the efficiency of our spending in marketing and sales.

This all will come on top of the savings we will generate from the existing restructuring program which we will try to pull forward. And that, ladies and gentlemen, will provide the fuel that we need for the growth I was talking about. In short, we will use this economic crisis as a catalyst to act faster, more decisively and come out stronger. And let me be clear, these are changes that are borne out of aspiration and not desperation.

Our cash flow remains strong, with cash flow from operations, as Jim talked, over EUR5.2b -- EUR5.3b for the full year, a good performance given the input cost headwinds we've had. We do have a reputation for strong cash flow and I'm determined that this will remain so.

We've made good progress in working capital over the last years, and certainly consider ourselves to be towards the top of our peer group. In 2008, as you will have seen, our working capital increased by about EUR200m, which actually is not that bad in this tremendous inflationary environment we've seen. But we actually think we can do better. The actions on cost and capital management will provide the opportunity to better support our brands whilst protecting overall cash generation.

Let me also clarify how we intend to use the cash. Our priorities there as well are clear. First, we will use the cash to reinvest in the business to grow. Then we will provide dividends to our shareholders and meet our obligations to fund the pension plans, slightly higher, incidentally, in 2009 than in 2008, but lower than the levels in 2006 and 2007. The final priority will be to look at bolt-on acquisitions, Inmarko Ice Cream, TIGI hair care. We have no further plans for share buybacks in the foreseeable future.

I am certainly excited and energized by the potential we have in Unilever, and frankly otherwise I wouldn't be here. Since I have arrived, I have not seen anything that really concerns me. In fact, just the opposite, lots of opportunities from a very solid base. We can be grateful what the team has put in place and what we are inheriting here.

We have the technology. We have the brands. We have the people and the values to succeed, both short term as well as long term. The economic outlook is volatile and there certainly will be impacts that are unclear on the consumers, customers, stakeholders, but we are ready for that.

In these exceptional times, I believe that it certainly is not helpful to provide top and bottom-line guidance for 2009, let alone 2010. And it is unhelpful for two reasons. First, no-one can be clear about the exact extent of the current recession or the speed of recovery. And second, the 2010 targets were set at a time that was actually very different from the current circumstances.

We simply need to ensure that we focus on creating the long-term value in today's environment. I firmly believe that the short-term priorities I have set out for the business in terms of growing volume whilst protecting cash flow and margins, are very much in the interest, in the long-term interest of our shareholders.

Now finally, looking further out, I am confident that Unilever will be able to lift the growth profile of the business while steadily improving margins every year. That is why I joined this business. And I hope that you are as excited about it as I am.

With that, I will stop my part of the presentation and we certainly will be more than happy to take questions.

Thank you, Paul. I'm going to suggest that we take 20 minutes now for questions because we've run over a bit. We will take questions from the floor, also on the telephones and a number of questions have come in online.

Let me just explain how it's going to work on the floor and on the telephones. First of all, with telephones, if you want to poll for a question, please press *1 on your telephone and you will be able to ask your question. If you change your mind, maybe because the questions have already been asked, then press *2 and if you wish to talk to an operator at any time, press *0.

Here on the floor you will find that in your chairs there is a console with a large button on it. If you press that button, that will activate the microphone which is on your chair. If you're asking a question from the floor, if you could please explain who you are and who you represent, and please don't forget to switch off the microphone after you have finished speaking.

So, with that, I suggest that first of all we take questions from the floor. Who'd like to ask a question? Alan?

Alan Erskine from UBS. Just a couple of quick questions. Firstly, if possible, could you tell us what the volume growth was in Q4 in Eastern Europe, trying to get that because it looks like Europe was quite weak.

And also the volume growth in Home Care in Q4 if that's possible.

And then a question for Paul. You said that you more or less maintained value share but not volume share. Is the implication of that that you felt maybe Unilever pushed prices up a little bit too far or maybe didn't move quickly enough into the value end of the price piano?

And then thirdly, I take your point about not wanting to give top-line guidance in a very difficult and challenging year. But if you are determined to grow volume and the annualized effect of prices that you've already taken through the second half of '08 would give you a couple of points of pricing, might it not have been possible to say we'll be at the bottom of our 3% to 5% range or do you think even that is too much of a hostage to fortune?

No, I understand, Alan, that the more data you have on that one is the better, but in this current environment (inaudible) the last one. As I said before, I'm very clear what the priorities are, but it doesn't serve anything with this fast-changing environment to give exact numbers now. And I look at our competitive set and I look at what they are doing and changing it every five minutes. I don't think that's a way to communicate with each other. We'll manage the business, we'll deliver the result and that is what we get paid for.

The -- let me talk about the pricing, I think the Company has taken the courageous steps, and again we see that now versus our competitors, that to reflect these cost increases early in our products. You see those in the last quarter, our pricing actually 9%. You see that in some of the regions, the one that Harish is leading, there actually last quarter pricing was 14%. So not surprising to me that we see a little bit of pressure on the volumes and the market and consumption as a result of that.

But it's in a much better position that we're in than if you have to catch up or haven't fully reflected that, which I've seen in some of the results announcements from some of the people we compete with. So I feel comfortable where we are, but it is very clear that we have seen better performance on our value shares than volume shares and thus we need to be sure in this environment, as you rightly say, that we provide the right value equation to the consumer.

It's not only about price, it's also performance, but we have to get the right value equation. And on some of these cases, as my friend Charlie pointed out in his recent report, we might have the equation not totally where we want it to be. And but broadly I'm happy about that.

On Eastern Europe, I don't want to go into any individual region. Our life doesn't depend on Eastern Europe alone. If you look at the last quarter, I'm actually fairly positive about that. We see the volume decline in Europe, which is a tough region, slowing down, less decline. I don't like that, I want to see growth, but actually we had a good quarter in a very tough environment and Doug is doing an outstanding job there to get this business to grow again.

In Harish's region, it's true that the volume came down, but this is 14% pricing and these countries are going through the same economic shocks that we see anywhere else. So I think if you look at the result, even in the fourth quarter, with the perspective of the pricing and the volumes, I feel confident that we have a good base for going into next year, and certainly feel more confident about that now that I've seen some of the others coming out with results.

Thank you. The lady there.

Good morning. It's (inaudible) from JP Morgan. Two questions. One coming back on volume, would it be possible to have an idea on what has been the volume lost to de-stocking and what has been the volume lost to maybe market share loss? It's a bit concern, particularly I think that the category volumes should still hold, no, hopefully (inaudible).

And the follow-up on that is on prices. You said you wanted to be value competitive. What does that mean? In an event where you adjust your prices do you think that volume will be down? So that's the first question.

The second question is I would like if you could take us through the margin components because I can see that you have headwinds that will probably still be there but maybe two tailwinds, input costs lowering I would presume A&P spending will fall in the industry and therefore (inaudible) will follow. Even if you want to invest you're going to do these extra measures. And I wonder what is the negative there and is it really the volume leverage that's affecting your model for 2009?

I think we're in a good position with the savings effects of the restructuring program going in. Some of the easing of the input costs that we've seen and the leverage of the current economic crisis to accelerate some of the cost savings I talked about will create some breathing room in our cost structures to invest in our business to grow. That's why I don't think we need to compromise on saying we want to grow our top line and at the same time improve or maintain as a minimum our cash flow and margin. I don't see that as a trade-off for the same reason as you mentioned, provided we work the cost structure, we accelerate the restructuring and we're on top of that.

Now to strengthen our value equations in many of the regions, in many of the parts of the world we are by the way holding share or in some cases we're actually growing share, but in others we are not, so I'm very well aware of that. And -- but it's not only price, I want to be very clear about that. To get consumers to buy our products it is the right value equation and I deliberately use the word value each time instead of price. It might be a price point. It might be a product that has not all the features, the bells and whistles on performance or it might be simply a better-performing product at the same price, and we look at all of this.

A wonderful example of that is our Bertoli frozen business in the US. It's a wonderful frozen meal if you try Bertoli and it retails for about $8 or $9 for a home meal. The reference set of that is the restaurant meal outside of the house. In the current economic climate you cannot afford to eat out often as you want. Instead of spending $20 on a meal outside you can get a better quality, often a better quality Bertoli meal at home for $8.

That's a great value proposition for the consumer. Not surprisingly we see our Bertoli business in the US growing and building both volume and value. So those are the things we need to do in all of our key strategic steps.

Julian Hardwick at RBS. I just wondered if you could tell us a little about the overall Unilever portfolio. Are you entirely happy with all the categories that you're in? Should we expect that there are going to be any significant changes to the shape of the portfolio going forward?

I'm happy with any part of the portfolio that builds shareholder value. We have a good portfolio now of brands to be honest. I alluded to that in my talk. I don't want to repeat that.

But 13 brands of EUR1b, yes. Do I like to have 16, 17? Yes, I'll be working on that, but I like what I have, strong category positions now. Over the last three or four years the company has divested about EUR4b -- or EUR3b of turnover, apologies. So we have done a good job in getting a sharper portfolio. The divestitures that we still have, there might be EUR1b or EUR2b, but nothing for me to worry about.

There will be opportunities to continuously change the portfolio. I think part of building shareholder value over time is to successfully weed and feed your garden and get into the higher margin businesses that are faster-growing and probably deconsolidating some of the other businesses over time. But any business that performs is fine.

I absolutely don't see any problem either with having both the food and HBC. It's a very good balance that we have and I think a competitive advantage if we decide to exploit it that way. And I see increasingly opportunities to do that. Having now one R&D organization versus separate ones is a unique opportunity to really get to more discontinuous products and innovations in the years ahead. So we're going to leverage that to our advantage.

Broadly happy with the portfolio but there are categories obviously you'd like to see better performance and that's what we get paid for.

Chris Wickham from MainFirst. Just moving on from there, you talk about weed and feed the garden, you talk about leveraging a good crisis. We know that you're now saying that there aren't going to be any buybacks in 2009. Should we start to infer from that that you're thinking about quite a significant acquisition in the near term?

The answer is no, you cannot infer from that. You can think what you want but it is clear that we have ample scope and opportunity to deliver the results by growing our own business and nothing better than shareholder value than creating equity on your own brands. That's very clear to me. I've seen that many times over. So the stronger we make our brands and our portfolio the better service we provide through value creation for all of us, and more important for in the future to be successful on an ongoing basis.

It is also clear that increasingly in this environment there might be opportunities for M&A and I am happy that we are in a strong position financially to be able to do that and look at that. So we're not going to panic our way into it, but I would suspect that in the coming six to 12 months there will be more bolt-on M&A opportunities. And the TIGI acquisition that we just did, which obviously is a smaller one in the whole acquisition arena, slightly over 400m for a EUR250m business. We will see probably some more bolt-on acquisitions to strengthen our portfolio where we need them.

We're just going to take an online question if I may here, Paul. This comes from Michael Steib of Morgan Stanley who asks can you elaborate please on driving our savings programs even harder.

I think he's also asking what does this mean in terms of restructuring, any more restructuring?

Yes, we have a restructuring program which we announced which was going to be a cost of some EUR3b. We're about half the way through that and we're trying to pull forward as much of that as possible. That's the meaning of the acceleration. We're not identifying further savings from that program to date. We're staying on track with the savings that we identified at the time, but if we can pull them forward we will and that's what our intent is.

I just want to add to that. In the -- with the appointment of Marc Engel as Global Procurement Officer we can now better leverage scale in procurement and we want to see some benefits from that otherwise why do we do it. So Marc has to deliver. I hope he's listening.

The second thing is on indirect we can do a lot of things. We've taken some tough decisions here and we've taken those I think a little bit earlier and rightfully so than some of our competitors have. So we would want to expect some results from that as well.

And then the last thing we talked was -- because you always talk on the A&P sides etc. -- this is the time that a lot of people are pulling the plug on media and we are a reliable company building our brands long term and investing behind our brands long term. So this is an opportunity also there to drive more efficiencies, as you rightfully said, into those spending items. But we will be able to get more efficiencies in this current economic climate and the faster we have that the more opportunity we have to invest it back in our business.

One more online question and then we'll take a couple on the telephone. This comes from [Ramesh Nair] of [KG Financial Services] and he asks how has the slowdown affected our future -- your future CapEx plans? Are you planning any cut-down in CapEx?

That's a good question. We need to grow our businesses and we have a capital spending program in this Company that is fairly efficient by any standard, but we need to ensure that we're not only closing plants, restructuring. It will also require us to invest in growth and we will prioritize capital investments that help us grow and accelerate the business. There's no doubt about that. We will, as I mentioned, have an objective of having our cash flow at least in line, ideally better than we had last year, but it will not go at the expense of investing in growth for the business.

I think we'd like to take a couple of questions now on the telephone. That's going to be announced by the operator.

Thank you. Our first question on the telephone line is from the line of Warren Ackerman from Dresdner. Please go ahead.

Good morning. It's Warren Ackerman here at Dresdner. I've actually got two questions.

The first one is, can I go back to cash flow? You said in your speech that you have a reputation for strong cash flow and one of the cornerstones for Unilever was the ungeared free cash flow of EUR25b to EUR30b between 2005 and 2010. I calculate that at the end of '08 you are at EUR15b so you do need to do 10b of additional cash flow in the next two years just to reach the bottom end of that target. So my question is are you withdrawing that EUR25b to EUR30b guidance and if you're not, what will increase the ungeared free cash flow by 50% in each of the next two years, especially given you've got a higher pension contribution coming through in '09? That's the first one.

And the second one is regarding emerging market volumes. You've always said that emerging market volumes haven't moved negative in any period over a long period, over I think 10, 20 years. I do know that Asia/Africa volumes were negative in Q4 and I was just wondering whether you could talk about which emerging markets have slowed in the quarter?

And I also know that in India Hindustan Lever put up a chart showing share loss in pretty much all categories and I'm wondering whether you can talk about how that squares with comments earlier in the year that you were seeing broad-based share gains?

So the first one on free cash flow and the second one on emerging market volumes. Thanks.

On the emerging market volumes we have Harish here and Harish just came back from India for the Board meeting. So if you don't mind Harish it might be good that you address that. Although your assumption that volumes went down there in that region is actually not true. Despite the 14% pricing, volume in that region was flat so I don't know where you get the data from. But why don't I hand that over to Harish and I'll come back to your first question in a second, Warren. Here's a microphone.

If you look at volume for the region, actually Asia increased volume even in quarter four. So that if you like is the volume status. Of course volume growth slowed down but that as you can see because there were very high price growths that came in. And incidentally volume growth in the region also was well in line with the way the market volumes were going. So that's number one.

We had slowdown, we had considerable slowdown and negative volumes in Central and Eastern Europe. If you now look at Hindustan Unilever, again we had volume as you know in December quarter, we announced that, albeit again at lower rates. But if you look at the totality of our performance in India where we have grown the business by 20% this year, and if you look at category-wise, there are categories in which we have grown our market share.

To give you an example, take laundry for example. And on the other hand there was categories like skin cleansing where we had an enormous amount of headwind in terms of pricing and as a consequence a large number of low cost operators actually increased their market share. And of course our plan as we move forward is to see how we can get back in the competitive zone in terms of pricing and, as Paul said, value in these markets.

Then the second point Warren was the ungeared free cash flow.

Yes, let me take that question. Warren, first I'd just point out that for the year just closed we did in fact have substantial cash generation from operations, some EUR5.3b, and after tax makes it EUR3.9b. So the cash generation from the operating activities of the business were very good.

We did see a rise in working capital of some EUR200m but in the face of the sort of inflation that we went through we're actually quite proud of that. And working capital as a percent of sales as we look at ourselves compared to our competitors, and there may be one or two who are better than that but we're near the top of the pack in terms of working capital efficiency. So Paul's comments about being pleased to join a company with this kind of cash-generating capability is certainly true and we certainly intend to continue that in the year ahead.

Now while we have walked away from our guidance for this year, we obviously are still locked into the compensation programs which do include ungeared free cash flow targets for management through 2010. By our calculations we've got to generate about EUR7.3b to get in the zone over the next two years and we may or may not be able to do it. I can assure you we'll be doing our best to achieve that.

The starting point which you calculated I think is a little bit light and you can discuss the finer details of that with James if you want to call later. But we're very proud of the cash generated this past year. We're going to continue to do that in the upcoming year and our management's going to be working against our own comp targets which include the ungeared free cash flow measure.

Right. So if I had EUR12b of ungeared free cash flow between 2005 and 2007. You've said today another EUR3.2b for '08 so that leaves you at EUR15.2b so you've still got nearly EUR10b to hit the bottom end of that target, unless I've got the calculation wrong.

Actually Warren, the band I think we revised to EUR22.5b to EUR27.5b to take account of the restructuring and the disposals that we've been doing, but you and I can talk about that in a bit more detail after the call.

Okay. Thanks.

Let's take one more call on the telephone and then we'll come back to the room.

Okay. The next question on the audio is from the line of Marco Gulpers from ING. Please go ahead.

Yes, good morning to you all. I've got two questions if I may. The first is actually on your last acquisition, to get a bit more feeling of what your strategic direction is. To me it looks like a little bit of a strategic u-turn as you divested the professional haircare business a couple of years ago.

And also where do you see this business going? Do you still foresee a number two spot in this or a leading position within the professional haircare business? That's question number one.

Question number two is, I appreciate your lack of guidance, but the question I have is can you maintain cash flow and margins still if volumes are declining? And especially if you're comparing that with the current private label trends moving up and also the prices of private label moving down mid-single digits. How do you foresee to continue maintaining the cash flow and margins in the situation where potentially volumes are dropping? Thank you.

Yes, Marco, thanks. We have Vindi here with us who will talk the first part with the acquisition of TIGI which I'm very pleased to see most of you commented positively on. But I'll have Vindi explain a little bit why we're so happy with this acquisition.

Sure, thank you. Well first and foremost this acquisition gives us a good position in the fast-growing salon professional haircare business in one of the biggest markets in the world in the United States. About 40% of TIGI's business is in the US and we get a good share and more importantly we get an excellent set of brands. They have three brands, very well-positioned, and brands that enjoy very strong equity and top-of-mind recall amongst the best professional brands in North America.

We believe that we can grow this business significantly. We can grow it through increasing salon penetration in North America. We believe our geographic reach around the world should enable us to enter this channel as the channel evolves in other parts of the world. And last but definitely not least, we think there are other creative opportunities to drive top line of this business.

Last but definitely not least, I think what we're getting through TIGI is some very interesting complementary capabilities which will have a spin-off benefit across our haircare business in general, even in our retail haircare business and brands. So we believe strongly in this acquisition. We think it's a good step forward. It is complementary to our current business and adds capability.

How does it differ to --

I'd like to add to that and I'd like to thank also the Mascolo Brothers because what they have built is a quite impressive business in a short period of time and growing very nicely and continuing to grow. And they've been generous enough in this to continue to offer their services and use then the Unilever network to accelerate the business. So it cannot be a better combination than that and I'm very excited about that.

The second part Marco, let me just hand it over to Jim again for that.

We achieved in 2008 a substantial cash flow and we held our operating margins, actually we grew our operating margin, despite the fact that in total volume growth was essentially flat. During the year we achieved EUR1.1b in savings.

Going into 2009 we continue to have a focus on savings. First of all we have the restructuring program which we began some two years ago and it's to our good fortune that we did that because we now have in place a master plan to reduce costs and to get ourselves structurally more cost competitive. And we'll continue that in 2009 and as I said we'll try to bring it forward if that's possible. As Paul said, in addition to that, we have the opportunity for increased leverage from global buying under Marc Engels, we have our focus on indirect costs and managing them, and all of that is notwithstanding what the volume will do.

We are focused on volume growth in 2009 and we expect that will help us relative to cash generation and we think we're going to be able to achieve both. But one of the reasons that we have dropped the 15% operating margin target for 2010 is we want to be taking the decisions in this year which are both right for this year and right for the long term. And we believe that we can do that, balancing both the investment for volume growth, holding -- aiming to hold operating margin and to generate good cash flow.

Let's just finish with two quick questions from the floor. Let's go to the back.

Well we only have had males so I think we should have a female.

Okay.

Thank you. It's Sara Welford from Merrill Lynch. Just a couple of questions. First of all can you quantify the impact of the de-stocking on the business?

And secondly you've said that you're going to look at volume growth and just how are you going to measure your value share, how are you going to look at that?

And you've obviously shied away from the 15% margin target for 2010, but on a longer term perspective where do you see the right level of margin for Unilever broadly speaking? Are you still happy with around about 15%?

The de-stocking, we -- for example you take one of the biggest retailers in the world who is located in the US, made the decision to book their stocks in line with the payment terms of the other suppliers. They pay you in 10 days, stock will be 10 days or less, and that has been rolled out. That has resulted in adjustments of between sometimes a week, one or two days, depending on what your payment terms were in the inventory. And that comes through in the last quarter of the year since they closed the books end of January.

It probably will also come through in the first quarter of this year. So you see in the big efficient retailers, you see the same here in the UK, an efficiency that is being driven into the supply chain with the current pressure on the financing of operations that many of these companies are under.

If you have in the quarter 60 shipment days and there is a two-day reduction of inventory, you run the percentages yourself. So it's easy to see your shipments going down by 2% or 3% if the supply chain is one or two days of inventory. Now can you match that exactly with all the science that you require? No you cannot, you cannot.

But at the same time as we see that we also see the consumers. We definitely measure very closely the consumer behavior and consumers are drawing down their pantry stocks at home. Most consumers have one and a half, two weeks of stock at home. Again if they postpone by two or three days, we see that. Some of the retailers have gone too far and we see some of that happening in the store when the products are not available so that will be a correction.

But there is no doubt that we've seen part of that. I personally think that we'll see some of that also in the first quarter as we all try to be more efficient in this environment and then you'll get a better reflection again of consumption and shipment. We'll sit through that and that's why it's so important that we work closely with the retailers to ensure that our products are there at the point of sale.

On terms of the margin progress and a 15% margin is reasonable or not, I always -- I was at Davos last week and I see Bill Gates sitting there. He believed in 60%, 70% margins and he delivered that on his business. If we believe in 5% margins we'll get 5% margins, if we believe in 10% we'll get 10%. I see there is no reason why this business that we have which is wonderful and we have it on some of these, I see no reason why we cannot get 15% margin.

But, the but is you need to get to that by consistently growing your volumes. I can give you 15% margin tomorrow if you want it, but you destroy shareholder value if you don't grow your business. So we will manage our way consistently and steadily towards higher margins, absolutely.

And I don't think we see 15% as a limit.

No. Certainly I don't, absolutely not. Jim is right.

Last question. And lest I be accused of favouritism, Paul, why don't you select?

Okay, any women here? No, go ahead. It's an awful profession. Go ahead.

[Jeremy Kelso] at Redburn Partners. Just a question on commodities and that sort of thing. Obviously we've seen the palm oil prices roughly halved, the crude oil price is massively down and that should impact your packaging costs quite positively. Yet you're sounding a little bit more cautious on the outlook than perhaps I would have expected. So could you perhaps give us a bit more detail on how you see the whole commodity picture panning out?

Yes, I think that whole thing on commodity costs is not very thoroughly investigated by the outside world when it's being written about. Let's just look at this for a second. The business is, half of it is in developed market, half of it is in developing market.

In the developing markets again a lot of the materials that you use are being imported. We see currency swings from these markets that are quite substantial. You can do your own calculations, but if a country needs to important materials and the currency devalues by 20% it has to be reflected somewhere. So there are places in the world, without going into the details of the countries, that you will actually see price increase.

The second thing is, it is true that prices are decreasing on some materials but nowhere near the levels where they were two years ago. So we'll talk about decreases with big headlines in the paper, but peel the onion for a second and see where it is and I can give you some examples of that.

The third thing is that we see in some of these materials, agriculturally based materials, fruits and vegetables, things that we also need in our business, we actually don't see prices coming down. A good example of that is, if you want one example, is tea. The tea prices are holding up quite nicely and you don't get that benefit.

So it is a mixed picture. Broadly on the portfolio there is a little bit of easing of input costs, no doubt about that, but not as big as some people are trying to suggest. And that is also why you don't see prices coming down as much.

Is there some sort of aggregate number is there here, if you take where prices are today what your raw material costs would be in '09 versus '09?

No, I don't have that here. I don't have that here. We can get that but I don't have that here. I would be saying something, but I'd rather get the facts on that. We have it but I don't have it here.

Last one and then we'll stop.

Simon Marshall-Lockyer from Jefferies. I just wondered how you squared your focus on volume growth going forward as a value creating trend with the decline in A&P spend, 70 basis points run rate decline in 2008, 130 basis points decline in the fourth quarter. Maybe you could give an indication of whether the promotional side of that is also declining or whether it's only the advertising side and maybe how you square those two factors?

No, Simon, it's actually -- the part of the A&P if you break that down -- because I looked it that as well -- if you break it down actually the P is going down and the A is going up. Over the whole year it's EUR50m up but the A is up much more than that and the P is going down, which you would expect in this inflationary environment that we have to deal with. So we made the right choices there to invest in A and compromise over the P.

But there's one thing that needs to be understood here on A&P, and we can run many ratios for many years to come, but if you have input cost inflation that we've seen over the year or over the quarter, 9% on the quarter in pricing, 7% more or less over the year, I'm rounding it, don't expect media to follow that as well. The media inflation has not been that high. Media inflation is a function of many other things and these prices are actually coming down.

It's very important. That's why you also have to look more at volume than value. It's all this pricing stuff has distorted a lot of ratios in our mind and it's paid a lot of bonuses to people as well for achieving objectives that aren't real.

Okay, so, in media they're still a little bit more realistic. You need to look at -- prices in media are coming down. We will drive efficiencies in also next year and I expect media costs to go down more. And we will see our competitors undoubtedly easing off on some of their media spending, especially the ones that were late in pricing.

And we will be sure that we stay competitive and invest a little bit more if needed to grow our volumes and we have obviously increasingly the tools to decide where to do that. Not always calling it right in every cell that measure or monitor but broadly we can do that. But don't link in an inflationary environment the top line growth with ratios on media and I see everybody writing that. It's not the right way of looking at that in terms of running the business.

We'll leave it here. I thank you for your time that you've made available. Most importantly also I thank you for the interest in the Company and obviously the support. I hope to see you soon in the near future. Thanks.