聯合利華 (UL) 2009 Q4 法說會逐字稿

Good morning everybody and obviously welcome here. Good to see so many familiar faces. I hope the year has started well for you. Obviously we are here to share with you the full year results, and the fourth quarter results. And I really do appreciate you taking the time out and obviously showing your interest in Unilever and for being here in your busy schedules that you have.

Let me, I was just talking to him, so let me pay a particular welcome to Charlie Mills. Where's Charlie actually? I saw Charlie but I don't know -- here is Charlie, my friend, who actually today marks his 25th year of covering Unilever, and he's still smiling. That's 100 -- it also gives away his age, I guess. That's 100 quarterly results calls. So that's quite an achievement, Charlie. And obviously congratulations to you and many others who have covered us for so long.

I'm joined today by James Allison, the Head of Investor Relations. And in the audience I'm delighted to introduce to you Jean-Marc Huet, if you can stand up, Jean-Marc, for a second, our new Chief Financial Officer. And I certainly look forward to sharing the platform with Jean-Marc over the course of the coming years. Jean-Marc is a great addition to the executive team, and we'll obviously welcome -- happy to have him here.

Besides we have other members of the UEX here, Vindi who is sitting next to Jean-Marc, Vindi Banga our President of the Categories is here. Doug Baillie, I see him sitting there, our President of Western Europe. Genevieve Berger, our Head -- Chief R&D Officer. Sandy Ogg, our Chief HR Officer. And Pier Luigi Sigismondi, sitting here in the front row, our Chief Supply Chain Officer. And then I saw Steve Williams here as well, our General Counsel.

Not joining us today are Mike Polk, who is the President of the Americas, and Harish Manwani, President of Asia, Africa and Central and Eastern Europe. They're in their respective markets, driving their business. And I thought it was a good thing that they continued to do that.

So let me say a few words about the highlights of the year before handing over to James who will actually cover our business performance in more depth. After James takes you through the details, I actually will review what is driving our performance, what we will do more of, and what we will need to do better.

I am convinced that the environment is going to stay competitive, and it's by no means clear that life will get any easier for our consumers and our customers in the coming year. I believe we are ready and prepared for this, for this environment that will continue to be tough, but obviously time will tell.

I will conclude my comments by sharing our priorities for 2010, and then opening up the floor for questions. So let's get going. Let me start by drawing your attention to the usual disclaimer, which is related to the forward-looking statements and the non-GAAP measures.

As we have discussed in prior quarterly reviews at the beginning of 2009, there were a number of areas where Unilever was insufficiently competitive. There's a few exceptions, volume market shares had been declining for too many quarters. Brand equities were weakening in too many markets. Many of our products lacked the superior performance that we were looking for. And many of our innovations were under-supported and deployed in a fragmented way. Service levels were unsatisfactory in too many places. At the same time markets were soft and uncertain in the context of the global recession.

To build long-term shareholder value we felt that the priorities for Unilever in 2009 should be to restore volume growth whilst protecting cash flow and operating margin. We set out to do this whilst addressing the underlying weaknesses of the business. I am pleased with the progress we've made, recognizing, and I'll be the first one to do that, that still more needs to be done.

Volume growth of 2.3% for the year as whole is a significant recovery from the 2% decline we actually started with in the first quarter. Volume market share has improved as the year as progressed, and was strongly positive in the fourth quarter. More importantly, the growth was widespread. At the beginning of 2009 we were actually growing share in roughly a third of our turnover. By quarter four we were growing share in nearly two thirds of our turnover. This is clear and measurable progress. Actually 10 out of our 13 brands are gaining share, and the others are maintaining share.

Value share has equally improved, trending in the same direction as volume share, suggesting that we have retained -- that we have retained our relative price position and competitiveness.

Underlying operating margins, although we had started the year by going for flat, are actually up 20 basis points. We've done this whilst, at the same time, increasing the support levels behind our brands by a whopping 80 basis points for the year as a whole. You know as well as I do that building brand equity is a cornerstone of the long-term success of consumer goods companies. And this is very important to me and the way I certainly think about running the business.

I'm also delighted with our cash and cost discipline during the year. Again, we started the year by saying protecting our cash flow, but we ended the year with cash from operating activities up by EUR1.4b, despite an incremental contribution to pension funds of EUR0.5b, more than exceeding the stretching internal targets we had set ourselves, and reflecting the good discipline across the organization. This has been driven by a strong focus on working capital. And you've seen the results of this progressively coming through the year.

We're also seeing the benefits from the accelerated restructuring and the fast reduction of all discretionary costs that do not add value to the consumer or the customer. In fact, overall cost savings were EUR1.4b for the year. Again, this is ahead of the stretching internal targets we had set for ourselves.

So frankly I am pleased with the quality of the results and the progress we've made in a relatively short period of time. We have definitely raised the bar on performance. We must now do this consistently as we move forward.

Before I give you my perspective, let me just pass over now to James who will cover our performance in a little bit more detail. James, go ahead.

So thanks, Paul. Good morning everyone. I intend to focus on the key aspects of the results rather than repeating a lot of what is already in the announcement text. In the attachments to this presentation you will find some additional details which we will not cover specifically in the presentation.

Underlying sales growth for the year was 3.5% with 2.3% from volume and plus 1.2% from price. Turnover was EUR39.8b. That's 1.7% down on 2008, reflecting negative currency of minus 2.7% and disposals net of acquisitions of minus 2.4%.

Underlying sales growth in quarter four was 1.8%, with volume up 5% and underlying price growth of minus 3.1%. During the year we saw volume momentum building. At the same time the lapping of prior year price increases and early price corrections to reflect lower commodity costs reduced the component of price growth as the year progressed.

Turnover in the fourth quarter was EUR9.7b. That's down by 4.8%, impacted by negative currency movement of 5.7% and disposals net of acquisitions of minus 0.8%.

The size of the negative currency exposure in the final quarter reflects the strength of the euro against most currencies, but particularly against the US dollar, pound sterling and Indian rupee. The devaluation of the Venezuelan bolivar on its own accounted for 60 basis points of the negative currency movement in the quarter.

Let's look at volume in a bit more detail. This chart tells its own story, with momentum building each quarter and ending the year at plus 5%, albeit against the weak prior year comparator. This compares with estimated market growth of about 3% in the same period.

Within this it's worth looking beneath the surface of the quarter four performance of Western Europe. Here, volume growth was lower on a reported basis by 0.7%. But you'll remember that there were two fewer trading days in quarter four 2009. On a like-for-like basis the volume growth in Western Europe was between 1% and 2% positive. That's faster than the market, and is reflected in improved volume and value share performance. So here too a strong sense of momentum, albeit in market conditions that continue to be challenging.

Volume growth in D&E markets has improved sequentially, finishing the year very strongly with volume up by 9.5% in the fourth quarter, helped by the timing of Ramadan, prior year trade de-stocking in Russia, and some easy comps in a few of our markets.

For the year as a whole we are encouraged by volume growth of over 4%, close to the average of the last 20 years of 5%, and so soon after the recession, with share growth in most markets. This reflects not only the robustness of the D&E markets, but also the strength of Unilever's competitive positions across so many geographies.

We stepped up innovation in 2009 with bigger initiatives rolled out to more markets, more quickly and better supported. This chart shows a number of products which we introduced during the course of the year.

Examples of more recent launches include Dove Nutrium, launched in the US in quarter 3, Dove for Men, launched in six countries in Western Europe in quarter 4, and Sunsilk Co-Creations, launched in Brazil, Argentina, Turkey and India also in quarter four. All have started well. For example, Dove for Men + Care is already the number two male shower brand in Belgium.

Advertising and promotional expenditure increased substantially in the second half of the year as we supported innovation strongly and continued to build brand equity.

Media impressions for the year as whole were up by over 15%, partly through incremental expenditure and partly through lower media rates. We substantially increase our expenditure on digital support, leading the expansion into this media across a number of our brands.

Let me now say a few words about pricing and costs. This chart shows the development of commodity costs set against the trend in underlying price growth. From this it is clear that prices have been increased and subsequently reduced in line with the movement in commodity costs.

Pricing in quarter four was minus 3.1%, at the bottom end of our guidance, because of actions taken in specific categories and markets to protect our competitive positions. So, for example, in some areas we did not take price increases that we had planned and in others we took actions to ensure that our consumer propositions remained competitive. This should be seen in the context of the very substantial price increases taken in 2008, ahead of our competitive set in the face of unprecedented commodity cost increases.

In fact, price levels in the fourth quarter of 2009 are still around 5% higher than in the same period two years ago. We now feel that pricing levels are appropriate given our strategy. But this remains subject to any competitor pricing moves. We expect to see commodity cost tailwinds, albeit at a lower level in the first quarter of 2010 as we work our way through forward covers and inventories.

For the year as a whole, and based on today's exchange rates, we expect to see commodity costs 2% to 3% higher than in 2009 and this will put upward pressure on prices during the course of 2010. We expect to see underlying price growth turning positive around the middle of 2010.

As Paul mentioned, cost savings in the year were EUR1.4b, a real step up. This comprised around EUR700m from buying savings, EUR500m from restructuring and EUR200m from local efficiency programs. We expect savings in 2010 of at least EUR1b.

Let me say a few words about the status of the restructuring program which we initiated in 2007, and which you will remember we called One Unilever. We anticipated restructuring spending of roughly EUR1b a year. From 2007 through 2009, that's EUR3b in total. In fact we've charged EUR2.6b to the income statement over this period, despite increasing the scope of manufacturing rationalization.

And we targeted restructuring savings of EUR1.5b in 2010 versus the 2006 base. As at the end of 2009, we have delivered cumulative restructuring savings of EUR1.2b, with at least a further EUR300m to come during 2010.

This chart also shows the progress we are making in manufacturing restructuring. You can see that by the end of 2010 we will have closed or streamlined 88 sites, higher than the 50 to 60 previous planned. The bulk of the costs associated with the 2010 closures and streamlining have already been charged to the income statement.

Restructuring charges will now reduce to nearer to our longer term guidance of 50 to 100 basis points from the 250 basis points of recent years. This, for normal ongoing productivity improvement.

The planned completion of the Sara Lee personal products acquisition in 2010 will lead to further restructuring costs. And this will come over and above the 50 to 100 basis points. And we'll provide further guidance on this after completion.

For the year as a whole, gross margin was up by 100 basis points, regaining much of the ground lost in 2008. The increase in the second part of the year reflects the benefits of our strongly improved volume performance, lower commodity costs and savings programs, offset by lower pricing. Gross margins were strongly ahead in all regions in quarter four.

Operating margin before RDIs was up by 20 basis in the year, with gross margins strongly ahead. Overheads were flat, despite dilution from disposals. And A&P was up by 80 basis points, with advertising spend in particular strongly ahead.

Let's have a look at earnings per share, and I'll start with quarter four. Basic earnings per share before RDIs were EUR0.27, down 6% versus the same period in 2008. This is despite a strong contribution from operational performance which added plus 10%.

The negative currency impact, which I described earlier in relation to turnover, reduced EPS by 6% in the quarter. Finance and pension costs reduced EPS by 7%. Minorities impacted EPS by a further 3%, reflecting cumulative adjustments to prior year minority interest booked in the fourth quarter of last year. So, as you can see, non-operational factors reduced EPS growth substantially in the quarter.

For the full year, earnings per share were EUR1.21 down 33% versus 2008, which benefited from substantial disposal profits. Earnings per share before RDIs were down 7%, with EPS from operating performance up 4%. This was, however, more than offset by negative impacts from currency of minus 2% and finance and pension costs of minus 6%. In the year, disposal dilution impacted EPS by 2% and minorities a further 1%.

Based on exchange rates as at the end of quarter four, we expect currency impacts to be broadly neutral in 2010, with pension financing cost contributing positively to EPS growth in 2010.

The pension deficit reduced from EUR3.3b at the end of quarter three to around EUR2.6b at the end of quarter four. With corporate AA discount rates broadly stable, this reduction reflects strong investment returns and the additional Company contributions paid in the quarter. With long-dated government bond dates rising, local pension deficits for funded plans will also have improved.

Cash expenditure on pensions in 2009 was EUR1.3b that's up EUR500m on 2008. We expect payments in 2010 to be closer to EUR750m. We expect the pension financing charge to be close to zero in 2010 after a debit of EUR164m in 2009. At the same time, we expect additional charges in operating profit of approximately EUR30m as we return to normal levels after some one-off benefits in 2009.

Net debt ended the year at EUR6.4b, down from EUR8b at the start of 2009. This reflects the strong cash generation in the year. Cash proceeds from the disposal of most of our minority interest in Johnson Diversey contributed EUR300m in quarter four.

Interest on borrowings was up slightly at 4.9% from 4.5% in 2008, reflecting a longer maturity profile on our debt. The tax rate before RDIs in 2009 was 26.6%. In 2010 we expect the tax rate before RDIs to be close to our long-term guidance of around 26%.

As previously discussed and agreed with shareholders, we will now pay dividends quarterly. We have announced today that the first quarterly dividend will be EUR0.195. That's one quarter of the total cash payment made in 2009. This will be paid in March. And the next quarterly dividend will be announced with our quarter one results on April 29.

With that, let me return you to Paul.

Thanks. Okay, so you've heard the good set of results from James. So let me spend a little bit of time to reflect on what we've been doing, what's making the difference, and frankly what's left to be done.

I see 2009 as the first step towards a consistent long-term top and bottom-line growth. We recognize the severity of the economic crisis, and actually we recognized it earlier than some of our competitive set, and actually took the steps to protect both the financial and the business fundamentals.

For example, we refocused the organization on volume growth, operating margin and cash flow. We simplified the remuneration scheme. I think this helped us drive alignment and a sense of urgency.

We removed cost wherever we could. And we accelerated restructuring where possible. We reduced our head office headcount by approximately 1,000 mangers. We froze salaries. We cut travel budgets, and all other elements of discretionary expenditure.

We simplified our portfolios, our SKU line-up and rationalized packaging and material and ingredients to drive more efficient buying. And we simplified or eliminated many of the internal non-value-added processes.

We started to leverage scale more effectively than before, with all of our main supply contracts, for example, being renegotiated, including those related to media buying and planning.

Now we used these savings to invest more strongly than ever before in our brands and in our products. In so doing we have been laying the foundations for sustainable profitable growth.

We also launched towards the end of the year a new and exciting vision for the Company, built on sustainable growth and leveraging increasingly our unique competitive advantages, an energizing vision to double the size of the business whilst actually reducing the environmental footprint.

Before I go into a bit more depth on our strategic priorities, let me just say a few words about the economic environment. You've heard me say this before, but we expect the economic environment for our business in 2010 to continue to be tough. With the reduction in stimulus packages by governments and an increase in taxes, consumer spending will continue to be under pressure. Unemployment will continue to stay high, and consumer confidence is likely to remain low. And those are the key drivers of our business.

We expect continued deflationary pressure in many markets as customers compete on value. Competitors are equally increasing their activities in many of the markets, trying to frankly to regain share on the back of more brand support, hopefully, and innovations. So, as I said earlier, we do not underestimate and we should not underestimate the size of the challenges we face. But we believe that we have been building the competitive strength necessary to continue on the journey we started in 2009.

D&E markets, which account for about half of Unilever's turnover, have actually been more robust than many have feared. As you have already seen, our volume growth here has quickly and very quickly returned to pre-recession levels. In fact volume growth in the last quarter was over 9%.

We've spoken before about what makes the opportunities in the D&E markets so exciting. The demographic trend, an extra 1b consumers will be able to afford to buy our products in the next 10 years. That's exciting. Levels of per-capita consumption are actually much lower than the developed market and offer enormous scope for more consumption.

Categories, the categories where we have the global strength have actually still low usage. Just to give you a few examples. The use of branded deodorant products is not yet a part in many of these places of the daily grooming routines. And our ranges of household cleaning products will be perfectly complementary to the needs of millions of consumers that enter new home ownership. The hair conditioning and fabric conditioning markets are not yet well established in many of the D&E markets, etc., etc.

And sometimes it's easy to forget the size and the scale of the existing D&E business that we can leverage. In fact it's well ahead of our competitive set. If we take the home care and personal care categories, for example, we reach 96% of the 1.9b consumers in Asia and South Africa. That's 33% more than the next biggest competitor. Per-capita consumption of Unilever products is also nearly double that of our next biggest competitor. So we are well placed in these markets.

And it's good to see that our businesses are performing well in the areas, even in the areas where we are being attacked by our competitors with increased competitive activity. Just take Indonesia, for example, where I recently visited. We've seen an increased activity from both international and local competitors. Despite that, our value market shares are up by 270 basis points in the last 12 weeks alone. A market like Turkey, with increased competitive activity, saw equally strong performance.

Now let me just briefly say a few words about the four strategic thrusts that underpin our business performance. Now just to remind you, these are winning with brands and innovation, winning through continuous improvement, winning in the marketplace and finally winning with people.

Let's just take them each in turn. First and most importantly let me address winning with brands and innovations. Now that's now new to us. In fact, the most recent Best of the Decade Award, which was published by AdAge in the US, recognizes two of the Unilever brands. Axe was named the third best new product of the decade. In fact it came just behind iPod and the Wii, and well ahead of other competitors. Not bad. And if that is not enough the Dove Evolution campaign was recognized in the top 10 Non TV Ads of the decade. That's outstanding recognition of the great work that is being done on two of Unilever's leading brands.

Now during 2009 we have significantly stepped up the quantity and effectiveness of our brands and our brand support. Our share of voice as a result of that has been improving. And at the same time we've been improving the quality of our communication as well as the quality of our products. So it's not just about more advertising, but better advertising behind better quality products.

Now we will continue to improve our products when we move forward. In fact, on product quality of 2010 alone, we plan to invest over an additional EUR100m to improve our product quality.

Here are some examples of the advertising behind some of our recent launches and product improvements. Just have a look.

(Video Presentation)

That's about as far as we go. Now then plenty of Klondike bars for you to try afterwards for the people that are here. This brand actually had underlying sales growth in the US, or in North America, of over 15% in 2009. So my recommendation to you really is get those bars as long as they last.

Now we've been working hard to improve the quality of our innovation funnel as well, as you can see from the chart here. We expect to significantly increase the incremental turnover from key innovations in 2010. The incremental turnover expected from projects launched in the next three to five years has also doubled.

And you've seen that we are focused on fewer bigger innovations which we are rolling out to more markets, more quickly. Dove For Men + Care was launched simultaneously in six markets in quarter four of '09, and will be in 50 markets by the end of 2010. Axe Variants routinely travels to over 50 markets inside a space of 12 months.

This chart shows other examples of the quickening speed of our rollout. It's now truly becoming embedded and a good habit and a proven way to build sizeable incremental turnover.

But we also recognize that not everything needs to be everywhere. Axe hair, for example, has generated over EUR50m incremental turnover in North America alone, 12 months since launch. And this despite the simultaneous launch of a key competitive brand that is disappearing now from the shelves.

These are high-quality innovations, from a pipeline which is increasingly becoming healthier. With a stronger R&D organization in place, open innovation accelerated and genesis projects underway, our flow of innovation is strengthening each year a bit more. I believe certainly that now our innovations are at par with the best of the rest.

Now not all great brands are leveraged as much as they should be, and there are still many opportunities to introduce our brands in more markets that we're not yet in, growing those markets and taking share from our competitors. Examples of this include the launch of our Ice Cream brands in Vietnam, Cif in India, Ben and Jerry's in Norway and now Australia, Sunlight in Nigeria, Ponds in the Middle East, getting to market leadership in year one, and the list goes on.

M&A activity is equally helping us to take our brands further as well and to fill our wide space and category positions. The acquisition of the Napoca brand in Romania gave us a foothold in ice cream from which we were able to launch a broader ice cream portfolio. The addition of Baltimor ketchup in Russia allows us to fill out our Dressing portfolio there. And last but not least, the acquisition of the Personal Products brands of Sara Lee, brands like Sanex, Radox, Neutral and Dushdas will allow us to meet the consumer needs across a wide range of price points in the skin cleansing and deodorants market.

The second key thrust I briefly want to touch on is winning in the marketplace. How well are we serving our customers and consumers? And this runs from the basic requirements of delivering our products on time and in full, right through to the business planning where we work together for the benefit of our retailers and ours. As we have discussed before, in-store execution is critical to our long-term success. Whilst we have great examples within our business, our performance frankly has been uneven in this area, and we have prioritized this over 2009 for improvement.

In 2009, for the first time we have mandated a single score card across all of our key operations to track performance on the key sales fundamentals. By establishing aligned KPIs we have become clearer about our performance in critical metrics, such as on-shelf availability and share of shelf. And not surprisingly we are showing improvements there.

With sharper accountability and clearer metrics, we can now drive performance improvement. Where we were behind some of our competitors, we are catching up. And where we are ahead of our competitors we are increasing our gap. We are striving to understand the needs of major customers better, and the behavior of their shoppers, so that we can grow their business and grow the business with them.

Now I'm pleased with the way we have rolled out, with discipline, our joint business planning across the business to a wide range of customers. We are now using it to identify and to take opportunities to our mutual advantage.

Our actions are starting to be recognized as well, gaining preferred supplier status in a number of markets, or indeed awards, Supplier of the Year in some of our key markets from some of our key customers.

You can see from the chart that we are improving service levels in almost all key markets. On-shelf availability is improving as well, up to 89% in the second half.

The customer insight and innovation centre concept, which some of you experienced in New Jersey at our investor seminar that we held in November, is now being rolled out globally. Last week we opened the second center here in the UK in Leatherhead at our MCO. Later we will do the same in several other countries around the world.

Now let's turn to the third area which is winning through continuous improvement. Equally important. I will not go back over the numbers which you already have heard, tempting though they may be because these numbers are good. But let me remind you of the model.

Volume growth leads to operating leverage which, in turn, lowers unit costs. At the same time we are removing, with discipline, costs which do not add value for the consumers or customers. Taken together this creates substantial fuel for growth and gives us scope to reinvest in the business while steadily improving the operating margin.

Up until 2009 too many of our brands lacked the investment and the support to compete effectively. In 2009 we took the first steps towards fixing this by materially increasing advertising as well as promotional expenditure, realigning prices which had in certain places become uncompetitive and investing substantially in product quality. We were able to do this while still increasing underlying operating margin. And this model certainly hasn't run out of [fuel] yet. It sounds simple, but it requires a growth mindset and the confidence to invest in our brands, and yes, it requires a lot of hard work.

Overheads as a percentage of turnover have been held flat in the year, despite the dilution impact from disposals we've had in 2008. The full year benefit of the headcount reductions that we made in the second half of 2009 will provide further scope for savings, I believe, in 2010.

To further leverage scope -- scale, to further leverage scale, we have announced our move to global business services. Our plan is to build on the excellent work started in the regions. We will bring HR and finance transactions, IT services, information management services, office and facilities services all together under one roof in first-class organization. In so doing we will improve services and reduce costs at the same time.

Our cash flow performance has been equally good. By getting working capital into everyone's targets, linked to pay, and by adopting best practices from around the globe, we've made good progress, I believe, in all elements of trade working capital, but especially inventory, despite the fact that our starting point for this Company was already fairly competitive. You can see from the chart here that this has not been a flash in the pan, but a sustained improvement throughout the year.

Now we will target lower average working capital in 2010 rather than quarter-by-quarter-end positions, we will now go through average working capital. This will put further emphasis on keeping working capital always low rather than simply achieving the period end reduction. It's a much more transparent and honest way to get sustainable working capital improvement.

Turning to the fourth thrust, I am particularly pleased with the progress we are making on the organization and performance culture. We've always said it will take several years. But here again we're making good progress. And we are calling this winning with people.

During the year we have reduced the number of managers from around 16,000 to nearer to 15,000. The number of senior managers has been reduced in size by almost 50% from the levels of 2005. Taking out layers of management has allowed us and the organization to become flatter, more agile and more externally focused. We've seen management changes in over half of our top roles in the last 12 months alone, and almost all involving internal changes. And we have better skill matched against the new roles that are required with each new appointment.

Our management system around targeting and alignment have been systematically sharpened during the year and improved. Individual performance against measurable criteria is now more visible, and individual performance assessments are becoming more robust, more differentiated and, as a result, also reflected in more differentiated pay.

And as we toughen the benchmarks, we will also improve the potential rewards for exceptional performance. At the same time we will expect management to also increase further long-term share ownership.

Now you will hear more about this at the Annual General Meeting. In short, more stretching targets, driving superior performance and only if achieved, only if achieved, more reward.

So as I draw towards a close, there has been much that is good, but not everything in the garden is rosy yet. You've heard me say that the progress we are making is helping to narrow the gap to best-in-class, keeping in mind that best-in-class companies never stand still either. I expect the catching up to continue for the next couple of years. And while there are many things to be pleased about, there is still much more to do.

Although improving, we still have some countries and category positions that need to do better. Our competitive positions in India and Spain and in Eastern Europe have not yet improved to the extent that I would have expected. Our sequential performances in hair and SCC are improving, but still we need to build share consistently everywhere.

I talked about product quality. Yes, it is getting better, but we need to do more to get more of our products start showing the superiority. Yes, brand equities are strengthened, but not yet everywhere.

And our internal surveys with our employees indicate that we're not yet as consumer and customer-focused as I'd like and that we can be faster in the way we operate. So there is still much more to do and much improvement still to be made. But, as the saying goes, Rome was not build in one day. I do believe though that in 2009 we've made a good start.

And I fully expect that the environment in 2010 will be just as tough as in 2009. And we are prepared for that. We have the confidence that comes from a strong delivery in 2009. We expect volume and value shares to further improve throughout the year, behind a clear step-up again in brand support and innovation.

We expect stronger delivery of savings like we've done in 2009. And we expect further shaping of the organization and culture. But we are far from complacent. We know that competition will be tougher and that consumers will be even more demanding, and rightfully so. Our priorities therefore for 2010 are to drive volume growth whilst providing a steady improvement in underlying operating margin and strong cash flow.

With that, I'll finish my talk and we'll open it up for questions. Thanks for your attention.

Just the usual routine on housekeeping, if I may say so. If you're in the room and you want to ask a question then stick your hand up. If you are selected then please press the little button on your console and that will allow everybody to hear you. Please tell us who you are. And if you don't mind, please restrict yourselves, at least at the outset, to no more than two questions.

If you're listening via the teleconference, and hello Marco, then -- and you want to poll for a question, then you can key star one and you'll get in the line for the question, and Marco you're in on that. And if you want to retract that then you press start two. We are also taking questions via the web, and if we've got time we'll take them as well.

So, without further ado, then let's have your hands up and take some questions from the audience.

(Inaudible question - microphone inaccessible). This is your most challenging region, the price volume elasticity -- sorry, beg your pardon, price volume elasticity equation is not as good as the other regions, and it looks as if you are investing a lot in A&P. So I'd just value any general commentary on how you are seeing Western Europe.

Specifically could you comment on the spreads business in Western Europe? It looks to me as if pricing in particular has been difficult there. And I'd value some specific commentary on how that part of the business has performed. Thanks.

Yes. I'll let Doug add to this. Obviously Western Europe is a tough environment on a macroeconomic level, and that's reflected in our results and our competitors' results. Despite that, I believe that Doug and his organization do an outstanding job. We have actually in our volumes progress throughout the year, and we've seen actually our shares increase throughout the year in fairly tough conditions. In our personal care business, our foods and homecare business, I think we have many examples where we have built here, and countries like the UK we've actually grow our business as well.

But you are right to say, and it's fair to say as well, we've made a conscious decision that we should not manage Europe just for profit but that we should actually grow Europe for long-term shareholder value creation. I've mentioned that to you last year that that was our strategy. And we're executing against that strategy.

And part of that reflects also into A&P spend in Europe to support that. And despite that, we're ending the year more or less in Europe with good progress and margins in line with the Company average. So I think that is delivering against that objective. And we'd hopefully see a lead coming in in quarter two, more or less, of 2010, we expect to actually accelerate on that.

On STC, very simply there have been price investments. But again, in 2008, prices were taken up about 18% to 20% in that category on the -- as a result of input cost inflation. And some of that, if the price is coming down in this year, we obviously have reflected in prices to stay competitive. And that was again the right decision, because we've built share on that business across the year.

So I don't know, Doug, if you want to add to that anything specific.

I don't think so. I think just that there's been just a dramatic step up in terms of our execution capability, our focus on the real basics in the organization. And we've made a number of changes in terms of the leadership of the team. I was just working out quickly, we've changed nine people out of the 15 people that directly report to me. Actually we have a really fired-up team now that is getting the business really competitive.

We still have a long way to go. We still have much to do. A lot of the points that Paul covered today really apply to Western Europe in terms of the areas that we've got to step up. But I think there's a growing sense of confidence in the team. There's a growing sense of belief that we can win. And the best result from the industry was to see the share start to move and get back to competitive growth.

On SCC specifically, we've worked very hard this year at filling the portfolio and covering price points. Those of you who were with us in November, about 18 months ago, will remember I spoke about getting tool boxes in place to cover price points and portfolio gaps. And in SCC that's been particularly good for us as we've gone out and covered right from the very bottom of the pyramid, right up to the more premium sort of areas. And having that coverage allows consumers to stay with the Unilever portfolio as they trade up and down. So lots to do. But a bit of a step-up certainly for us, but hopefully a lot more to come in 2010.

I was on Monday and Tuesday with Doug and the management team, the European management team in Barcelona. They had their annual powwow of how are we going to meet the 2010 target. And I'm sure they're going to do that. But it's very good to see that the growth curve is better and we have very strong initiatives that we're launching.

On the laundry, we had the Small & Mighty that we're introducing, and both Persil and Surf we talked about. The Dove for Men is a very strong initiative being rolled out in Europe. The Signal White Now and the mouthwash that comes with it are very strong initiatives. Our deodorant business is growing again. So Europe is back in the game.

I'm European. Most of you are European. And what I always remind myself is that Europeans are human beings as well and they will go for product improvements if it makes sense. So let's get rid of all the excuses, shake them off and start growing.

Next question.

Yes. Jeremy Fialko, Redburn Partners. A couple of questions. First of all on A&P. Obviously there've been some big increases in the latter part of 2009. Can you just talk about what you think is going to happen there in 2010, when you might start to see more incremental increases in A&P as a percentage of sales?

And secondly, you've changed an awful lot of managers over the course of the last year. Would you say you're pretty much done with getting the people you wanted in the top jobs and we're going to see much fewer -- much less turnover of the top managers in 2010? Thanks.

Thanks, Jeremy. On the A&P, we're up 80 basis points for the year and obviously a little bit more to see towards the back half. In the last quarter we're up about 250 basis points roughly from memory. So with a bit A&P investment at a time when the rates have come down as well, so there's a double effect. You'll be pleased to hear that most of that investment, about 80% of that, is in the A and not in the P part. And that's good because that's even better collateral to build our brands long term. So I'm happy about that.

And the reason it is steeper at the back half of this year, that's because we've had so many innovations that accelerated over the back half of the year as we were getting ready for them during the year. There is no reason, as we will continue to capture efficiencies over 2010, that we reinvest some of that into A&P to further strengthen our brand and support our innovations. We have increased our relative share of voice. Today we lead it. But we still have many places and many [shelves], as we call them, where we are not as competitive as we should be. And as these innovations are being rolled out, we certainly will look at quality support behind that. And without giving you more details of that, I expect a significant increase in A&P spend in 2010 as well.

The second question that you had is on the management changes. The change is inevitable in this business obviously, and we will continue to look for changes where they make sense. As we aspire to double our business and become an organization of EUR80b or more, we also need to be sure that we have the capability and the people that are [EUR80b] of more. We broadly have that in the organization. But we will continue to look at skill sets inside and outside that we need to have -- to get there.

And I think a lot of people now have rather new assignments over the last six to nine months and those people obviously will be in those assignments for the next three to five years. But there is no reason why we will not continue to look at other changes, if I may be frank. I like to quote always Mario Andretti, one of my famous friends and race car drivers, who said if things around me change faster than I am, I am in trouble. So I do know the competition also continues to look at improving their organization. And we should do the same thing like we do with our brands and like we do with our [sales].

Yes, hi. It's Chris Wickham from MainFirst. Just two questions on the D&E markets. Where do you -- I appreciate that across most of the sales and the categories you're gaining share within category. How do you feel that your categories are performing in terms of gaining share within the D&E wallet and in terms of prioritization?

And the second point is you're talking about adding 1b customers in the next 10 years. Just could you remind us perhaps how does that compare with the progress that was made in the past 10 years in D&E?

Yes, as you have seen in the D&E in the last quarter alone our growth is over 9%. So that's healthy growth. Fortunately we've been blessed as the D&E market has held up well, but we've outperformed those markets in terms of GDP growth. And we've mentioned before that one of the key drivers for us in the emerging market is actually market development. It's growing the [type]. So a lot of that growth is actually coming from market development.

The 1b incremental customers are coming from the two things there, the growth in the demographics in those countries and actually the consumers entering our choice set, if you want to. Our products are very well placed there. And in most of the places where you see that strong consumer growth we're actually market leaders. If you take a market like Vietnam where, in a lot of categories, we have the leading brand. And even if -- or Indonesia. And even if competitive activity increases, this obviously is a good thing for the consumers there, to accelerate the rate of innovation. But we do our jobs. We see not only the market accelerate further, but we also see our share increase.

But we think that the bulk of the growth moving forward and the incremental 1b consumers, the main driver behind that will be market development.

Nico Lambrechts from Bank of America-Merrill Lynch. Paul, last year, towards the back end of the year, around November, I think you explicitly cautioned the markets not to assume continued increases in volumes going from zero, 3 and then 5. You did end up with a 5% volume growth. What would you ascribe the main reason for the better than your expected volume growth? Is it the lower price or is it stronger growth from emerging markets? Or is it the impact from innovations? That's the first question.

And then the second question is, you mentioned that half the top management team are in new roles. Almost all of those are internal. Could you maybe just remind us how much of the new top management are external appointments versus internal changes? Thank you very much.

I appreciate the question. The growth actually is -- what I would still caution for is that life is not made out of three months. I'm personally not a big proponent to have discussions with all of you on two months' numbers and of one more trading day or one less trading day, our systems change last year, or a little bit of a climate change in some country affecting our ice cream. I think if you run the business like that and have an honest contact with all of you on quarterly numbers with all these little adjustments, I think you miss the big picture, and obviously.

So what I think is our markets are growing 2% to 3%, are indeed growing 5% now. I don't think we should assume accelerations of that growth. I'd say the same thing as what I said before. I think these are very healthy growth levels in competitive markets, ahead of the markets for building share.

And the main driver of that obviously, as you rightfully say, is not pricing because our volume and value shares, if you look at very carefully, our volume and value shares are both going up. So our relative pricing stays the same. We've just been, very early in the year, compensating for price increases that were frankly out of whack in 2008. And it's been mainly in these categories of SCC or household cleaners or laundry that we have done that.

And what you see in the last quarter is the full year effect of that. These guys all understand that when you analyze the numbers. We have in the last quarter of 2008 and '09 a little over 9% price increase. The highest price increase of any of our competitors, despite what they said, you go back to the numbers, was 7%. So we were early in adjusting that to stay competitive.

Our pricing strategy has not changed, and don't be mistaken. Our pricing strategy is to stay competitive with the market. And the fact that our volume and value share both go up confirms that. So the key driver of our innovations is the -- the key driver of our volume growth is the acceleration of innovation.

If you go to the second element, which is the top 100 people, in fact only 8% of the top 100 people come from the outside. It happens to have a little bit of a higher exposure, and I can only apologize for that, by the fact that I came in from the outside or Jean-Marc or Genevieve in R&D came in from the outside, or Pier Luigi. So it looks like if you look at the top, all the three or four people are coming in from the outside. But you have not seen, and perhaps we haven't talked enough about that, about the many appointments we made inside in the Company by giving people other challenges and better skill-matching of promoting people. And we've done plenty of that.

So if you take the top 100 that really are the key change leaders, if you want to, or the people running this business, about 8% come from the outside. And that's a very healthy mix of 8%. Yes, so eight of 100 is eight people. So it's a very -- that's an easy calculation I can make. It's about as far as I go. So it's a very healthy ratio, by the way. But I think -- we don't run by ratios, but even if we got to 10% or 15% it's still fairly healthy for running a company like this, because we also increasingly need to bring in this external benchmarking and be sure that we not only are internally strong but also against the competitor set.

We'll take one more question here because otherwise I will (inaudible), and then we go to the -- yes?

Hi, it's Sara Welford from Citigroup. Two questions. Firstly on the innovation pipeline, can you must talk about is there going to be any skew at all that we should be aware of for 2010 like there was in 2009?

And secondly, going back to the D&E market, the perception at the moment is that perhaps competition is increasing there. But, as you mentioned, this partly helps the markets evolve. How do you see this moving forward on a longer-term basis?

Those are good questions. I'll start with the last one, if you don't mind, and then go to the first one. I think it's quite normal that competition [starts weaker] where the consumers are growing. And look at where the 100m plus consumers are. And those are markets we should focus on as we want to expand. That's frankly not a new phenomenon. And the fact that someone talks about it now, you might ask yourselves where have they been before.

So Unilever has had a strong presence historically in a lot of these markets. And we've always said that our strong competitive position in a lot of these D&E markets is an advantage. Now some people were worried about that at the beginning of 2009 with the economic crisis. But these countries have now achieved a certain level of maturity and stability.

So if we do our jobs well and continue to innovate our brands and stay close to consumers, we should welcome that competition. That is what the business we've chosen to be in. It's good for the economies. It's good for consumers. But it's also good for us. And over and over, where we see this increased competitive activity, you actually see an acceleration of market growth.

So, looking forward, I don't expect us to decrease. But I think that's very healthy. And we certainly know how to operate in that environment.

In terms of innovations, I will obviously not share with you some of the new innovations that will be coming in 2010 until we launch them. But to give you a little bit of an idea and to build on the previous question, Dove Nutrium that I have here, it is a wonderful product and certainly superior than anything else on the market. We've just introduced that in 30 markets in the last quarter alone -- sorry, in three but going into 30 markets. But we've just introduced it first. We've just introduced it going into 30 markets now as we talk. So that's a big improvement.

If you look at Dove for Men, you know male cosmetics increasing tremendously with the advertising. Dove for Men is a tremendous strong product that will go into 50 markets as we talk. And those are big improvements that we're putting in. The act swift that we see here. Again tremendous products going into 50 markets as we talk.

I just had a Board meeting yesterday and we had them all taste Magnum Gold. And there's one thing about ice cream, it makes people happy. So we had a happy Board which is good for me as well. And so I decided from now on to give our Board ice cream before they do my performance review. But the Magnum Gold which is one of the leading ice cream products, is growing very fast. We're launching that now in about 30 countries, 27 countries to be exact.

So you see an acceleration. And the list goes on, by the way. So you see an acceleration of our innovations clearly coming through that will benefit us for years to come.

We'll take one question on the line then. I hope we've answered it, yes?

Yes. I see two that are on the telephone line. Marco Gulpers is first up. Marco, can you come through?

Yes. Good morning, all. I have two follow-up questions. The first is indeed on an update on the underlying market growth, and maybe you want to split that into regions, to share with us what you're seeing on underlying market growth, and basically combining that with current consensus in the market of about 3% volume growth in 2010, i.e., a further acceleration compared to 2009.

The second question is basically on the dividend, the EUR0.195. What does it actually mean for the full year '09 number? Thanks again.

Marco, let me just take the first part of the question on the market growth and then the second part of the question James will give you an answer on that. By the way, it's different for the plc (inaudible) [currency and capacity].

On the market growth itself, we see -- we continue to see actually North America and Europe being sluggish in general. Slightly more growth and not different, but slightly more growth on food in Europe than on the HPC side, but the market growth, the way we read it, in our portfolio of products, these mixes of us and our competitors might be slightly different and that's why we might get slightly different numbers. But it's about 1% to 2%. And in the emerging markets we have seen a healthy growth of 3% to 4%.

If you average that out and you get to about a market growth a little bit above 2% for us, if you read that. And the consensus, as a result of that, seeing our volumes accelerate over the next year from 2.3% to 3%, I would be fairly comfortable, Marco, if this is what you're saying.

So the next part is the dividend itself.

Marco, yes, we've now moved to quarterly dividends. We've set the first quarterly dividend at EUR0.195. And now we will always set the dividend in euros and then it will translate into sterling and into US dollars based on the exchange rate that prevails two days before we announce what the dividend is. But we will always announce the dividend in euros.

So EUR0.195 is one quarter of the actual cash dividend that we paid out in 2009. Our policy remains. We seek to increase in a sustainable way the dividend year on year. All we've done so far is to announce what the first interim dividend is. And as we go through each of these quarterly announcements we will then indicate what the dividend is going to be for the subsequent quarter.

So we're not giving guidance at this point, Marco, in terms of what the dividend is going to be for the year. You'll just have to wait and see what comes as each quarter progresses.

It's Julian Hardwick of RBS. Can I just follow up on the dividend? Could you just help us understand what sort of parameter the Board is looking at in terms of payout ratio? If you look at it on an EPS pre-RDI basis, you're up close to 60% payout ratio. Is that a payout ratio that the Board is comfortable with or would the expectation be that over time you would look to reduce it? And is EPS pre-RDI the basis that the Board's setting the dividend on?

And on a second question in terms of Board parameters, capital structure. Could you just say something about the Board's current thinking about what the appropriate capital structure for the Group now is?

Yes. So again let me start with the last one because I think [the first one], it's probably better to start first. And again we had that discussion yesterday in the Board and (inaudible). We're of the opinion that our A plus rating is well [cost]. We're of the opinion that we want to keep that. And I think the example of the last few years has brought to light why a solid capital structure is preferred. We look at our normal capital investment. As I have said before, we'll slightly increase as we grow again and build new factories. It has been relatively low in this Company and we should welcome that.

We more or less are happy with our dividend payout ratio. And percentage plus or minus, I'm not going to argue. And then we do the 1% to 2% bolt-on and it happens -- sorry EUR1b to EUR2b bolt-on acquisition. And it happens to be there in 2010 I need to pay for the Sara Lee acquisition.

So all of that taken together will put us in a capital structure and situation that maintains our A plus rating. And we feel comfortable about that. So that's how we look at 2010. And then obviously assumption of how the business is doing, we will assess moving forward. And that actually also then answers the dividend question.

Do you want to add to that?

Just to acknowledge that the payout ratio is indeed high. It's in the high 50s, and that's higher than most of our competitor set. So I guess in the longer term you can imagine that as earnings per share starts to ramp it up, maybe the dividend increase isn't quite in line with the rate in which we're increasing EPS until such times as we're perhaps a little nearer to the rest of the pack.

I think we will continue to increasingly look at opportunities to give you the return for giving us the money. And we have to earn that right and that's what we're working on.

Thanks. Good morning. Charles Pick at FinnCap. I have two questions please. You identified EUR1b of extra cost savings in the current year, of which EUR300m comes from restructuring actions. Is the bulk of the remainder coming from purchasing economies?

Secondly reference the A&P, is it possible to give some sort of pointer as to how much of that is now being directed at Western Europe?

No, contrary to what people think it, when input costs go down, for example, because markets of raw materials go down, that for us is not a saving. We don't book that as saving. Savings in our system, which are EUR1.4b, so they're a little bit higher than what you said, are truly doing things differently than we did before. And that's the area that Pier Luigi is responsible for and we still think that we have enough to go to set again the target fairly ambitiously for 2010.

So those are real savings and efficiencies. As you see, our competitors worked that as well so I don't know what the relative [saving] would be. But I think for the size of our business, coming out with EUR1.4b in Europe, we are probably are close to get in terms of efficiencies versus our competitors. For 2010 we're talking. Yes, correct.

I'm just wondering how that's split, because you gave us [EUR300m] from (inaudible).

Okay. We don't really split that, to be honest. We're not -- we have our own internal target for all of the components. But I think that's not too relevant any more for the market where the differences come from. I don't think we split that.

No, but most of it is going to come from [buying] savings.

No. Okay. I don't think we'll go into the split.

And then the second thing was your question on A&P, the question being if we would continue to -- yes, I'm including Western Europe. We have -- if you look at Western Europe right now, our gross margins are up in Western Europe and our A&P is up significantly if you look at 2009. And these investments are starting to pay out. So I think there'll be further investments again in A&P in Western Europe.

If you take the 80 basis points as a whole for the Company, it's about the same basis points for Western Europe, more or less. I'm doing this from memory so don't quote me on this, the [10] basis points it's up. But I see Doug nodding his head, so --

It's in proportion. It's not longer.

Right. So Doug is saying, yes, so that is part of it. Yes, go ahead.

[Olivier Croquet], Cheuvreux. Two questions. The first one is on this chart with commodity prices and your pricing. At the end of the day, two years later you say you are 5% higher than in Q4 '07. What does it mean in terms of price point and premium versus own label or your key competitors? Broadly speaking, and if anything, would you sense that 2010 you will have to reduce that premium, or you said you are happy where you are, but getting a clearer picture on this point in time.

And the second question is having a brand review. What are the brands where you still have lots of work to do? Specifically I would be happy to hear the update on (inaudible) and Knorr and any other one you would like to comment on?

Okay. When you said work to do, what do you mean?

You are not happy with the brand equity. You still have to crack the nut and you don't know exactly how you will move forward in the next two or three years.

Yes. You know when there was a lot of price inflation in 2008, branded products, reflecting a price increase, it had to be done. And we were very early to do that and took more pricing than our competitor set once more. It increases the absolute [depth] of private label. Private label is at 50 and you're at 100, you both do the 10% price increasing, you're actually increasing the absolute gap by 5. Not surprisingly we saw private label growing a little bit, especially in the European and the US environment on top of the economic pressures that were taking place.

So the same token, as these prices have come down with the easing of input costs, the relative price difference versus competition actually has come down. And if I was just looking at the Bernstein report on European private label, so I'm quoting an external source that you can take for what it is, but actually private label growth in Europe has slowed down. In our categories it's actually down. It's not up. And in markets where private label is very strong, like the UK, we're actually growing.

Now that's not just a combination of -- that's not just pricing and relative pricing, it's a combination of the product and the innovation with our relative pricing. But obviously, when we set prices in our categories, we look at a broad array of products -- our competitors' products, private label being one of them. And I think we broadly are happy with our relative pricing position that we have. But that has to be monitored in our industry on a daily basis.

On the brand equity, we're never happy with our brand equity. It sounds a little bit like a flat answer, but we have a lot of brands that we will -- all of our brands, for that matter, we will continue to look at strengthening our brand equity. 10 of our 13 EUR1b brands are actually growing share and the others are holding share. So that's an indication, a relative indication, that our equities are getting stronger. And we feel good about that. And we monitor that. We call them [confection] scores, whatever you have. So we have our testing techniques on that.

But it is also true to say that in many of our categories we can certainly continue to strengthen our brands, and that is why we are fairly confident in sharing with you that we will continue to increase our A&P level over 2010 and obviously continue to accelerate on innovation.

I would not like to single out a specific brand or a specific category that we would say we need to accelerate more because the message here is that all of our brands need to continue to work at. Vindi is here. Vindi obviously is responsible for all of our strategies. I don't know if you want to add to that Vindi or not? No? Okay. Good.

(Inaudible). I just want to come back to your price positioning and being competitive which is the base of it. I just want to understand what has begun because I know that commodity prices were up, down. So I just want to know if, in some way, you were forced to cut price because of competition but not because your product was too expensive and not just because of commodity impact? And what needs still to be done to reposition your portfolio?

If you look at the last quarter. Let me just take the last quarter which obviously carries the full effect of the price adjustment made earlier in the year. But there are not really any more price adjustments in the quarter itself. We had thought we would perhaps increase prices a little bit more in the quarter which we haven't done. But the 2% to 3% is in line with what we told you regarding the 2%.

If you look at that, our gross margins are actually up over 300 basis points. Our A&P is up over 250 basis points, and our margins are up over 100 basis points. So we are building the economic model and staying very competitive on all of the measures that we should be concerned about.

So we have, especially in the categories where we have seen tremendous inflation, we have been fast [of all the best]. And as in 2010, inflation might be coming back in some of the categories, especially over the second half, we should see prices going up again in 2010, although at a lower level, in my opinion, although at a lower level. But they will -- we will -- I think we will have the maximum effect in this quarter, if I'm right, on the pricing [performance].

Now we will always adjust prices if that is needed for competitive activity. And it happens in some markets. But I wouldn't make that a drama. Broadly our competitors are operating under the same model as us to drive by innovation. But it is true that in some markets there is increased competitive activity that we're dealing with. But I would not make that a big part of what we're doing here.

What you're seeing here really in the last quarter is no further price adjustments, yet significantly increased competitive activity. And yet we're able to not only hold our business but grow our business in that environment profitably.

My second question was related to A&P. We've seen a step-up quarter to quarter in '09. What kind of split are we going to have for next year? And in terms of businesses, which businesses did more or in which -- what kind of efforts do you need to make in which businesses?

Yes. You will see the A&P, we're not going to give it by quarter for next year, nor am I too worried about that. Obviously we look at it in our own rolling list and the forecasts. But I'm not so worried about the quarter because it might be that we have a quarter where we have a lot of A&P and that our operating margin is down in that quarter, but we run it on a year like I did this year. I will do the same next year. And I unashamedly will explain that to you.

But we will invest behind our innovation. And sometimes these innovations fall slightly differently. Most of our brands have -- in fact all of our brands have an increased innovation pipeline and I would expect the A&P increase that we've seen in 2010 to be broadly across the board. It's not really just one or the other.

Morning. It's Warren Ackerman at Evolution. I had a question on the net debt. The net debt number looks very, very good, driven by extremely good cash flow for the year. The question is what was the actual working capital change in the year? And secondly, how much further upside is there on working capital, because when I look at you versus your peers on working capital for sales, it already look top quartile?

Yes, I appreciate that, Warren, because it is absolutely outstanding work from this organization. Our starting point was competitive, and yet we have made a step change of about EUR1.4b so -- in working capital. And without going into the details of that and all the ratios that you know, it's actually a broad -- across all of the elements of working capital. And it's not just done by driving the end of the quarter position either.

So we've see good improvement in inventory days that have come down where I think we still have quite a possibility. We see good improvements in both accounts receivable and accounts payable. And -- but having said that, we don't think it's finished yet. And we will continue in our consultation plans to have working capital as a component of that.

Structurally do you think this is a business that could be working capital negative as a percentage of sales?

Some people would believe that, yes.

Simon Marshall-Lockyer from Jefferies. You still don't seem to be fully satisfied with the progress made in India with Hindustan Lever. Can you give us maybe more detail of what you're doing with Hindustan Lever? Competitive trends are increasing quite sharply there both from the domestic competition and from the international competition. Can you tell us -- maybe give us more detail of what's going on?

Yes. It's obviously clear that India is all of a sudden on the map of everybody. And since Vindi Banga got all the awards from the Indian government, everybody is now looking to India. In fact, Vindi was just recognized, I have to say, with the highest award from the Indian government for the services to India and is a very respected Indian abroad. And so I want to congratulate Vindi. I know he doesn't like that, that I did it publicly. But it is a great honor that he has achieved.

And it is not surprising that India is increasingly on the map of many other countries, with the Indian economy increasingly looking better as well. And in fact the population in India will overtake the population of China in the not-too-distant future.

So we have always been in India, a long history in India. We entered there in the early 1900s and actually have established very strong share positions. Now for us what is more important, obviously we'd like to maintain these share positions or grow them but the markets are growing as well. And our overall Indian business is growing. Again there's no doubt about it. But in some of the categories, notably skin and laundry, we are still losing a little bit of share. In 75% of the categories we are gaining share.

What has happened really in India is we want to be, to give you the two minute spiel, is when the input costs went up so much, but especially on the food side, etc., we had to take our prices up. And then frankly a lot of local competitors entered, local and regional. Just to take laundry and cleaning products, we saw over 500 regional or local competitors, personal cleansing and laundry in India. So we got attacked from the bottom of the market.

If you have a longer supply chain, prices have to come down when these commodity costs ease. It took us longer to get that implemented. We're also making some changes to the sales and local market structure that probably weren't helpful to be done at the same time.

The good thing is, and with some certain level of modesty, we have learned from that and we've taken corrective actions. So our businesses are growing again. You've seen the last results from Lever Hindustan that they announced separately. So our business is growing again. 75% of them are growing share. And obviously we're pleased about that.

But we continue to work our laundry business where you now have not only local competitors but also branded competitors. And the same is true for our skin business where we are growing again, but not yet growing share. And obviously we'll focus on that. We had one of the, I would say, highest innovation and renovation rate of any country in India and have prioritized that again to get back to follow through.

Do you want to add to that or--?

Just very briefly to underline what Paul has said. I was there personally for a couple of days to look at the market situation, category positions. And I must say I've come back feeling very quietly confident of the extent of our innovation and renovation program. It's very broad. It's in all our categories. And it's very deep across all the brands that we cover there. So I think we should see a better performance and a competitive one.

It will continue to be a competitive market. Yes, the indicator is not only market share. You have to be a little bit careful because when we talk market share, if I may be honest and give you my opinion, but take it as Unilever's opinion and not take it for granted, but globally we look at gaining share. But in a country that is a developing country, if you have a 90% share, I'd rather have a 60% share of a market that is 10 times bigger than a 90% share of a small market.

So when we had these entrenched positions in these emerging markets and very high share, it might be that the market growth is faster and our share comes slightly down. So let's not get totally hung up on this share story there. You need to look at the overall business story in those cases. That is not an excuse at all. We need to grow India again and we need to grow it consistently and we'll focus on that. But it will continue to be a market where I expect the competitive battle for some years to come to [take this].

We will take one more question here and then we have one still from (inaudible) for people calling in.

Thank you. The first question is on Western European margins. Your margins are down 240 basis points in 2009 and you mentioned that [aim to be] at this point was A&P investment, thinking more or less. So there was effectively negative operating leverage, higher input costs. Some of those negatives may become positive next year. So how do we look at a path to recovery on margin in Western Europe? Shall we be optimistic or do you think that there is still up front the investment to be made there?

The second question is I would like to understand from Pier Luigi Sigismondi, he has been nine months in the job, what he sees, what's his perspective on the business and maybe all the good projects he wants to talk about.

Yes, we'll certainly give him the floor in a second. If I -- perhaps you said it or I misunderstood it, but our total margin in Europe at the end is 14.4 versus the total Company 14.8. So it's not that we are in Europe running with too much of a margin gap. The issue in Europe was it was managed for profit not for growth. So we are managing it for growth again. And I'm pretty comfortable with the margin we have. And we don't expect that to be significantly different on the Company's average margin, plus or minus 20 or 30 basis points obviously, which is the margin of error we operate in.

Now that's good performance for Europe, because 70% of the European business actually, or slightly less than 70%, is in food which tends to operate with a little bit of a lower margin, if we like that or not. So that's the reality of the mix that we have for now. With Sara Lee and over time in some other things, that might change. But that's where we are now.

So frankly if you want my honest opinion, is where we came from from Europe was not sustainable for long-term value creation. And actually that was the case. We might have been happy with the higher margins in Europe, but we certainly didn't get the shareholder return. Now you get the growth, admittedly margins more in line with the Company, but it is building shareholder value for the long term. So it's a good thing.

We have -- Pier Luigi, do you want to say a few words?

Yes. I think it's an energizing agenda. We have really a supply chain that is really best in class. And we're integrating ourselves with the business as well. Consumers and customers being at the center of the strategy that we have, and very much driving value more than just cost reduction. So everything is in place for us to keep delivering value as we integrate ourselves with the business and play more globally as well. So a very energized [product].

Okay. Thanks, Pier Luigi. We'll take one question from the call-in because we've [short-circuited] them a little bit. I apologize for that. And then we'll break up and we can continue after that.

There are questions here, from the people listening in on the line?

Yes. Good morning. Pierre Tegner from Oddo Securities. I have two questions. The first question is concerning market share gain. Significant improvement in growth you had during the past quarters. Are you estimating and are you feeling that you are simply confident with this volume growth recovery in market share gains? Do you think that you have gained some pricing power during the past few months? And are you willing in the coming months to use this gain of pricing power to offset higher commodity cost bases you would have to face in H2 of 2010?

And the second question is concerning the calculation of operating margin leverage on your volume growth. Could you help us in the calculation by disclosing the ForEx [and significant] effects you had on margin improvement for full year '09 or for the Q4 '09? Thank you.

Sorry, I couldn't hear the last one. On the first part of market share, the market shares actually are broadly, across the board, and as I said most of the categories, 14 out of our 16 categories that we're looking at are growing. If you look at our brands, 10 out of the 13 brands that we're looking at were growing. Our MCO is another cluster that's running it and we look at the combined shares of the clusters. We have 16 out of 24 of those clusters growing.

As I said, if you look at the sales, two thirds of the sales are growing share. So the growth is broad-based. And it is a function of the A&P and innovations once more. So our equities are getting stronger because our relative price position hasn't changed. We have to conclude that your equities are getting stronger. Now having been in this business for about 30 years now, you just don't get all your resources in six or nine months. We need to continue to invest in our brands the way we're doing for the next two to three years to really get to the levels that we aspire to. This is not just a six-month gain that we're after, and I continue to stress that.

I do believe though that we are in a good position with our brands. In 2008, when we moved prices up, up to 9% at the end of the year, I've never seen that before in my career. We maintained pricing. Don't forget that. And people were saying Unilever and their brands don't have much pricing power. We were well ahead of the industry, earlier and more. You might say too much. I agree. But we were earlier and more. And we ended up the year with more or less flat volumes, 0.2%. When I came in it gave me confidence because it's says there is something on the underlying strength of our brands. And I've, since I entered over the last 12 months, only got more and more confirmation of that.

So as we continue to strengthen our brands, as we put our money behind our innovations, as we strengthen our equities to do that, I also expect us to be able to price and to stay competitive but to be able to price behind commodity increases that we do expect again over the second half of the year, and as a result and into positive pricing territory over the second half of the year.

I will let James answer the second question.

Yes, Pierre, you didn't come through all that clearly. But I think what you were getting at was what is the operational leverage benefit that we get from increased volume. And just as a kind of rule of thumb, other things being equal, 1% on volume growth should give you something of the order of 30 basis points of operating margin. Of course it's never quite as straightforward as that because usually you're spending money supporting the brand, improving the product quality. So it's very difficult to be very precise about this. But as a rule of thumb that's what we use.

And reformulating my question, what should have been the margin improvement excluding ForEx and excluding [pick-up] effects for the full year '09?

We don't run the business on that basis. It's sounds like it's algebra. So we're very happy with where our margin ended up. In the year we're strongly ahead in quarter four, ahead of where we set ourselves the target at the beginning of the year, Pierre.

Okay. Thank you.

Okay. Thanks, Pierre. Thanks everybody. I appreciate the time you spent with us this morning and engaged in the discussion.

For the ones that are here, I invite you to have a drink next door. We have our wonderful Lipton brands there. We have our wonderful ice creams. Try a little bit of a Klondike or the new Magnum. And for the first time for the men also we'd be happy to share with you the Dove for Men, one of the leading product breakthroughs that we not only satisfy the women with our [combs] and other products, but finally get these guys to smell and look a little bit better.

So thanks for your time this morning and hopefully see you soon again. Thank you.

Thank you. This conference has been recorded. Details of the replay number and access codes can be found on Unilever's website. A video webcast will also be available on Unilever's website, www.unilever.com. Thank you for joining.