聯合利華 (UL) 2011 Q4 法說會逐字稿

So good morning, everyone, and welcome to Unilever's fourth-quarter and full-year results presentation. We appreciate your continued interest in our business and you taking the time to join us here today.

The presentation of our results this morning will be given by Paul Polman, our Chief Executive Officer, and by Jean-Marc Huet, our Chief Financial Officer. Also joining us this morning in the audience are several members of the Unilever leadership executive.

Paul will begin with his reflections on the progress we've made over the last 12 months. He will put our performance in 2011 into a strategic context, looking not only at the quality of our results but also at the foundations we've been building for the long-term future of Unilever. Jean-Marc will then take you through our 2011 performance in more detail, before Paul concludes his perspectives on what is sure to be another challenging year in 2012. Of course, at the end there'll be plenty of time for your questions at the end of the presentation.

As usual, I draw your attention to the disclaimer relating to forward-looking statements and non-GAAP measures.

And, with that, let me hand you over to Paul for his opening remarks.

Good morning, everybody. I'm actually pleased to see this photo here of this mood-enhancing Magnum, one of the great innovations that we have. And we certainly need a lot of those in Europe these days. So I hope that gets reflected in our sales numbers.

Anyway, glad to see so many familiar faces in the audience. And thank you for joining us today again, as well as for welcome to those that are listening to us around the world.

This year just ended, and it certainly has been a challenging year, it's probably one of the most challenging that I can remember in my career in fast-moving consumer goods. The global economy is not in the best shape ever. And I fully agree with the views that were expressed last week when I was in Davos by Christine Lagarde, who said the world economy is deeply in the danger zone.

In 2011 we had some major hurdles to overcome. Consumer demand across Europe and North America was sluggish at best. And even in the fast-growing emerging markets we've seen some signs of softening, as I had pointed out to you before. Inflationary pressures were high, almost as high as in 2008, and at a level not experienced by many of our major peers. And on top of this we had to contend with a series of natural disasters and geopolitical disruptions that you're well familiar with in many parts of the world.

Against that background, I'm actually pleased that our performance has been robust. We are growing again ahead of our markets, gaining share overall and maintaining reasonable volume growth despite having taken significant pricing, quite different than what we saw in 2008. And we're doing this whilst defending our profitability and strongly investing in our brands and the future of this great Company.

So the results for the year are good, particularly given the environment. But more importantly is the fact that we're taking the right actions for the long term, implementing our strategy with speed and discipline. And as a result we are now building sustainable growth models for our business.

Now let me begin with some brief highlights of the year's results. Our focus on innovation and discipline is starting to pay out. Underlying sales growth was once again ahead of the market and accelerated in the year to reach 6.5%, and double-digit as you've seen in the emerging markets. We're also increasingly seeing the benefits of making clearer choices. Good strategies are about clear choices.

Growth was especially strong in the emerging markets, as I said, 11.5% for the year as a whole, with a very encouraging 4% volume growth. This growth is ahead of the market and consistently so, both over time and across the wide range of emerging market geographies in which we compete.

Pricing and volume also once more are ahead of our competitive set, as you can see as well. And Personal Care is now one-third of our total business, and it continues to accelerate. Full-year underlying sales growth for that business was 8.2%, with more than half of it coming from volume. So our overall top-line performance has been strong and our market shares reflect this, with gains in our global value shares both for the last 12 weeks and for the year as a whole.

Now, we did set out to achieve modest margin expansion in 2011, in line with our delivery in the last two years. We came close but did not quite achieve this. And that, as you know, for someone who likes to achieve, like myself, this is a disappointment. But I think it also be fair that we put a little perspective here. In light of what our competitors are showing, you see that, but more importantly the 10 basis points decrease in operating margin, we're talking about EUR50m. We could have found it very easily. This was despite significant one-offs that I talked about, mainly related to these political uprisings and natural disasters and our mix not quite working for us yet, as we talked in Istanbul.

But more importantly, we were comfortable with that because we invested for the future, in the long-term future of this business, rather than striving to only hit cosmetically some short-term targets. As a result, we've actually grown strongly, added more than EUR2.2b in turnover, gained market share, strengthened our brands, with more investments. And again we invested in advertising and promotion, as you see, which is now over EUR6b for the Company, and built capabilities in many areas, leadership, the organization, our investments in 25 factories, and the list goes on. And that's an investment just in capital of EUR2b for the future of this Company.

Now this is performance which demonstrates that we're building the new Unilever for the long term and that we are getting closer to a stronger and more competitive business than you've ever seen in the past. I certainly would like to thank the organization for having gone the extra mile in these very difficult environments.

So let me explain to you what is helping us to build this new Unilever. We've invested heavily behind key areas of our strategy. For example, the move towards a leaner and more category-driven organization has been decisively implemented in just a few months' time. The fact that we have completed a rapid transition to our new structure so seamlessly is a real testimony to the growing strength of the organization and a great credit to our people around the world.

Also on the winning with people agenda, our cutting-edge leadership development programs have now reached all of our senior management and will be rolled out further in 2012. This is a major investment once more in the future of our business. Not surprisingly with the results and these investments we're becoming increasingly an employer of choice, reaching the number one fast-moving consumer goods rankings in no fewer than 14 key countries around the world.

We invest in our customer area. We continue to drive the on-shelf availability, the perfect store concept which is now increasingly being introduced in the modern trade as well and in our innovation centers. We're also investing strongly, as I said, in our manufacturing base, ensuring that we have the capacity, especially in the emerging markets, to support the volume growth over the long term that we're seeing.

Our product quality we don't talk enough about, but that's another element where we've continued to invest for the long term. Just in 2011 alone we spent over another EUR100m improving the portfolio so that now, for the first time in a long time, 90% of our formulations that we're selling are now equal or better than competition in blind testing.

One example is a business close to my heart, which is the Laundry business, where we have gained once more share globally, at least in part as a result of putting better-performing products in front of the consumers. And this, at the same time, when we've priced ahead of our competitors once more, as you've seen, that's for four quarters in a row that we've priced ahead of our key competitors just on laundry alone.

Our reshaping of the portfolio also continues with the M&A activities. No longer is Unilever a perennial net disposer of business. In fact, as you will hear from Jean-Marc a little later, acquisitions added more than 1% to our turnover in 2011. That's more or less an extra EUR0.5b. The first time we've added turnover through M&A in more than 10 years.

Each of our recent acquisitions has also strengthened our personal care business, very strategic. With Sara Lee we now span all the price points in the European skin cleansing market, strengthening our portfolio at the value end, which is incredibly important in today's climate, which I don't think will change in the near future.

More recently we were very fortunate to add Kalina in Russia to the portfolio. We were a distant player now, but are becoming, in one stroke, a serious challenger in the important and fast-growing Russian personal care market.

And with Alberto Culver the organization has done an outstanding job integrating it at a speed you wouldn't believe it. And we've now taken, as a result, hair care leadership in the US, alongside the leadership we already have in such categories like deo, skin cleansing, margarine, dressings and, more recently, ice cream in the US.

And I'm particularly pleased with the Alberto Culver acquisition. We have approached the integration with discipline that, yes, is becoming the norm of the new Unilever today. We've hit some demanding timelines in full and are on track to achieve a higher level of synergies than we anticipated. We are especially pleased that we've been able to retain so many of the talented Alberto Culver people who helped establish this great business.

And we've rapidly introduced the acquired brands into new markets, a tremendous sign of confidence also to those people. TRESemme just launched in Brazil, I'll be there in two weeks' time, as well as in Thailand, and Motions into South America. And more importantly, we've just announced the Simple launch in the United States. All more or less within the nine months of completion date of this wonderful acquisition.

Now this is a great example of speed that is becoming the new currency in Unilever. Our strategy is clear. The business is fully aligned behind our ambitions and vision -- our ambitious vision. The ambitious vision, once more, is to double the size of our business whilst improving our overall societal footprint. Tremendously motivating for everybody. It energizes and motivates all of our people in the organization. It leads to more efficient operations by being really careful on the resources, the scarce resources we use. You will agree with me that it is increasing relevant to the consumers that live on this planet earth and care about their future generations.

And it has made a step change in our corporate reputation. We've become more decisive in the choices we're making in our portfolio at the same time as we put this strategy in place. There are categories, such as Personal Care and Ice Cream, where we will seek to win globally, and you see it showing up. Others, like Laundry and Household Cleaning, where we aim to win with a very aspiring emerging market model. And it's worth remembering, by the way, that 85% of the world population already live in Asia, Africa and Latin America, more or less.

And finally there are the categories, like Spreads and Dressings, where we will seek to win differently. I will explain what we mean differently in a moment when I will discuss our spreads business in more detail.

Now this simple structure helps to make resource allocations more straightforward and transparent and gives our people much greater clarity of what is needed to achieve our results. Now not surprisingly, positive results are following when you do that. The shape of our performance over the last year is largely reflective of this strategy.

Let me go a little bit deeper to explain this theme in more detail. And after a three-year moratorium that I imposed upon myself talking about deodorants, I'll now do it again. For example, I think you'll give me permission after three years not having talked deodorants.

In deodorants, several competitors are making a determined effort to reduce the scale of our global leadership. Despite this, our shares are well over 40% and we continue to gain share globally and in almost every major market. Now this has been driven by the consistent long-term building of the equity of brands such as Axe, Rexona and Dove.

Innovations have played a key role in this. And over the last year we have once again delivered a series of successful launches. Over 2011 alone, these activities included the series of annual variants that have now become custom with Axe, most recently Axe Excite, the new range, which was launched in more than 100 countries; the re-launch of Rexona for both men and women, both with new and more effective formulations; and the launch of Dove Men+Care in deodorants, already in more than 40 markets from scratch.

Now let me now turn to an example of a business where we aim to win with an emerging market-led model. Our Laundry business has around 80% of its turnover, by the way, in these emerging markets or what I call aspiring markets, with very substantial share positions in many countries, and frankly far more unit sales than any of our competitors. The competitive intensity in our laundry business has been well documented. We've seen limited signs of easing as the year progressed. But this is a category where price promotional activity continues to be a key driver.

Now against this background we set out to defend our market share positions, and in 2011 that is exactly what we have achieved. Global shares are up for both the year and the last 12 weeks, and our success in laundry over 2011 reflected a combination of product quality improvements, stepped-up innovations and performance, and entries into white space, despite having priced ahead of our competitive set.

Our Dirt is Good range has been re-launched in 48 markets with an improved formulation. The patent of shading dye technology of our Radiant range gives consumers visibly whiter clothes longer in markets such as India, Brazil and South Africa, very relevant. And we have completed a number of launches into white space, showing our confidence, particularly on the Comfort brand, which in 2011 was introduced in Australia, South Africa, Pakistan and India, just to name a few.

Now let me now turn to the Spreads as I promised you. It's a very important business for Unilever. I told that to you all in Istanbul as well, where we're seeking to win differently the first -- the third part of our choice strategies. In practice, this means adopting a more locally tailored approach, with greater focus on taste and more consumer-friendly language about the health benefits of our products.

Volumes were not great in 2011; I'd be the first one to acknowledge that. But that was not really a surprise given the level of cost inflation we saw in edible oils and the substantial pricing we chose to take as a result. With underlying price growth in the double digits, we still on this business saw overall growth of around 7%. But yes, like you I would have clearly preferred a better mix between volume and price to see that more balanced. But let's not get carried away. Over the last five years this business grew on average 3.5%.

And here, as elsewhere, we took the tough actions that we needed, fully in line with our strategy. Spreads is a business that generates a significant amount of profit and cash for the Company, allowing us to finance exactly those expansions in other parts of the business that I've been talking about, with greater vigor and determination. Now looking forward, we are hopeful that 2012 will bring a more stable cost and price environment, allowing us to better judge the effectiveness of our actions we are taking to run spreads differently.

Now you can see on this chart a good example of our recent activities. Latta aerated margarine recently launched in Germany. This uses technology from ice cream, by the way, to give consumers a product with a lighter, creamier texture. Unilever has significant scale in spreads, and together with the strong leadership positions across the many markets, we're in a good position. On top of this our more locally tailored innovations and our focus on taste as well as health sets us up well to win differently with spreads in the future.

One area where we need to improve our performance in the year ahead is tea. I'm disappointed by the volume performance somewhat, especially in the fourth quarter. And whilst innovation phasing played a role in this, we must make more of our leading market positions. We have strong brands here and we will continue to build that in the future.

Our new organizational model under the leadership of Kevin Havelock, who's now running the total Refreshment category where this will fall, will undoubtedly address this challenge. Innovation will be key to improving performance. And as those of you who once more who joined us in Istanbul recently will have heard, we have much to anticipate in the tea business in the coming months.

In particularly the technology we are developing around tea liquid essence will be a key building block, already deployed in early form in PG Tips in the UK and Lipton in Russia. And this is an area in which we see great promise for the future of our tea business, with a wide range of potential applications that could flow through this base technology.

In the more immediate future we have launched the Lipton Green Tea superfruit range in the US, which is the first in a series of major activities which will, we hope, certainly will drive a turnaround in our tea business in this key market.

Now finally let me say a few words about Food Solutions. We don't talk that often, but I'm very pleased to see that this important part of the business, which indeed doesn't get too much limelight, has been performing extremely well as well, despite less people eating out of home. This business grew about 8% in 2011, with volumes up by more than 3%. With two-thirds of that business still in the sluggish developed markets, this is indeed a very strong performance.

And I'm extremely proud of our Food Solutions people. The success they have achieved reflected a number of building blocks, a concentrated effort to develop Unilever Food Solutions as a brand, emphasizing chefmanship as a key attribute, a significant and rapid expansion of distribution in China and other emerging markets and a steady flow of quality improvements and best-in-class recipe developments.

Now that concludes my review of the highlights of the year. And I'd like to pass on to Jean-Marc for a second, who will take you through the details of our performance in quarter four and the year as a whole. Thanks.

Thank you very much, Paul, and good morning to everybody here. 2011 was by any measure a good year for Unilever. Turnover reached EUR46.5b; that's the highest that we've achieved for many, many years, and it's a 5% increase versus 2010. Underlying sales growth was 6.5%, ahead of the market and another step up from the levels we achieved in 2009 and 2010, when we grew underlying sales growth at 3.5% and 4.1% respectively.

This was before the impact of M&A, which, as you can see from this chart, added another 1.2% to our turnover growth in the year. Currency FX moved in the opposite direction, reducing turnover by 2.5%. As we look forward, if rates remain where they are today, at the beginning of January, we can expect a positive impact from currencies of around 2%. But with the volatility we continue to see in currency markets however, this figure will inevitably move around, so we will communicate our updated view on a regular basis throughout the year 2012.

We are satisfied with the balance of our growth in 2011, price at 4.8% and volume up 1.6%. Naturally, as Paul said, we would have preferred more volume and less price. But in a strong inflationary environment, where significant pricing has been essential to protect profitability, we are pleased that volumes have held up so well.

Now the last time, and you will remember this, that we saw a similar environment was in 2008. Our volume growth then was zero and it was negative in the fourth quarter. We set out to do things differently in 2011; protect our volumes while pricing sensibly where needed. And that's exactly what we have done in 2011.

Turning to emerging markets, emerging markets continue to generate what we call outstanding top-line performance. In fact, it's been an acceleration from recent years, with underlying sales growth of 11.5% overall.

Now many of our key countries achieved double-digit growth. Those include China, India, Turkey, South Africa and Mexico. For the full year, emerging markets, despite the Alberto Culver transaction, contributed 54% of total Group turnover. That's a record high. Volume growth was again strong, mid single-digit levels overall, but into double digits for key markets such as China as well as India.

Turning to the developed world, underlying sales growth was more subdued, and that reflects the difficult consumer environment that we're in. At 0.8% positive, our growth was broadly in line with the market as we see it.

Our biggest developed markets, that's the US, Germany, UK and France, all saw underlying sales growth of anywhere between 1% and 4%. In all cases that is in line with or ahead of the local market, and in the case of France, if we can just mention specifically, significantly so.

Now turning to the categories. We saw particularly good performance in Personal Care, which is now a third of our business, with double-digit growth in Personal Care in the second half and 8% for the year as a whole.

If we now turn to Home Care, underlying sales growth for the year was also around 8%, and very good balance between volume as well as price.

For Refreshment and Foods the figure was lower, but still healthy, mid single digit at 5% approximately. In Refreshment, our growth was again driven by innovation and new market launches, particularly with Magnum in ice cream.

Turning to Foods, performance was driven by the strong pricing that was taken, especially in spreads, as Paul mentioned.

So turning to the fourth quarter, our sales growth was 6.6%. Volume was moderated by strong pricing as well as the impact of the successful SAP upgrade in North America in the third quarter, which we flagged at Q3. So the running rate of our volume in the fourth quarter was around 1%. Overall turnover for the quarter was EUR11.6b, which is up 6.9%, with a strong positive impact from M&A offsetting the negative impact of FX.

Underlying price growth was at 4.8% for the year as a whole. This increased throughout the year to reach a high of 6.5% in Q4. In-quarter pricing was marginally positive in the fourth quarter. We have had to balance to maintain, remaining competitive in our key markets, protecting consumers as far as we can through our saving initiatives and, at the same time, acting to preserve our margins. So I'm overall pleased with our success in achieving this balance in 2011.

For the year ahead, 2012, we do not expect significant new pricing moves in the developed world. However, carryover effects from 2011, modest incremental pricing in some emerging markets will mean that underlying price growth will again be positive in 2012, albeit at a lower level than we've seen in 2011.

Let me turn now to our margins. Underlying operating margin for the year was 14.9%. That's very slightly down from the 15% that we achieved in 2010. And, as Paul mentioned, 10 basis points is just shy of EUR50m. Given the context of substantial cost inflation, depressed consumer demand in around half of our business and continuing high levels of competitive intensity, we consider this to be good performance. And we certainly believe that the Unilever of a few years ago would not have had the agility needed to deliver market-beating growth and broadly flat margins in such an environment.

As you can see, the drivers of margin varied significantly in the year. Let me discuss each in turn, starting with gross margin.

Gross margin for the year was at 39.9%. That's down by 1.8%, 180 basis points overall and by 130 basis points in the second half. Now it's very important to be clear, this was after deducting distribution costs of 660 basis points, 6.6%. So, pre-distribution costs, the way many of our peers report, the gross margin was 46.5%.

Going forward, it is our intention in both the half-year results and in our Annual Report and accounts to report gross margin after distribution costs. So the way we look at the business internally and, as a result, also externally, it's about one universal language. The reduction in gross margin in 2011 should not be a surprise to anyone. With pricing typically lagging cost trends it is entirely normal to see such a pattern during periods of high cost inflation.

Although pricing was strongly positive and savings continued at high levels, these were insufficient to offset the substantial inflation we suffered in factory and distribution costs and as well, importantly, in our commodity costs. In the past year we've had to absorb around EUR2.4b of inflation in our commodity costs. Even for a business of our size, holding overall margins broadly flat against such a background is a substantial challenge. Of this inflation, around a third came from edible oils; another third from petrochemicals and other materials that are driven by the crude oil price; and finally, these are ranges, around a third from a wide range of foodstuffs and other commodities.

The commodity cost inflation in our income statement in 2012 will be far lower than 2011, but it will still be meaningful. In addition to the moderately higher spot prices, we also expect a negative foreign exchange impact from the recent weakening in emerging market currencies. So, based on today's spot prices and currency rates, we expect commodity cost inflation in the mid single digits for 2012. And that's measured against the cost base of EUR17b. And most of this increase will fall in the first half of 2012.

But importantly, if you take price, which I've spoken about, and savings, you take those together, this should exceed this level of cost inflation and means that we expect gross margins to be modestly higher for the year as a whole, 2012.

With this cost inflation continuing to challenge us in the year ahead, and again at a much more moderate level, the success of our savings programs will again be of paramount importance. I'm pleased to confirm that total savings for 2011 were in line with our ambitious expectations. And this has been an important contributor to our overall performance and it's a clear sign of the benefits of our continuous improvement mindset.

The savings were achieved in all parts of the business, a dramatic reduction in our overheads, which I'll go through, and wide-ranging programs across all areas of the supply chain. And let me just give you one good example, the major complexity reduction that took place and achieved in our Knorr brand, which resulted in 25% reduction of fewer recipes in our European business. And the savings just for this were in excess of EUR50m.

We will continue to drive our continuous improvement programs each and every year, and with the macroeconomic environment being as challenging as it is once again, we will not let up in our determination to eliminate cost again in 2012.

Let me now just turn to advertising and promotions. And here I'm actually quite pleased to report that despite this tough environment we're continuing to invest in our brands, which is the life blood of our business.

A&P was up 10 basis points in the second half of the year. Total spend for 2011 in constant currencies was at EUR6.2b, so we are investing. This is an increase of EUR150m on the 2010 figure, mostly reflecting A&P spent in our acquisitions, Sara Lee and Alberto Culver. But, as we said at the beginning of the year, we're continuing to invest. So this brings the total increase in our A&P spend over the last three years to around EUR850m, which is a major step up, which we're increasingly seeing reflected in our market shares.

In terms of real activity levels, the visibility of our brands to the consumers themselves, the increase is more significant because our money today is going further. Let me give you a couple of examples. Firstly, we've significantly reduced our non-productive spend during the year. As you know, that's the money we spend on production costs and agency fees, money that's not directly driving exposure of our brands to the community and consumers. Secondly, we've been driving much stronger activity in the digital field, and our spend is up around 15% in 2011 versus 2010.

So we've made good progress, but again, there's still much more to do in driving our A&P funds harder. The organization is strongly focused on this. We expect further improvements in the future.

We will again increase A&P in 2012 and we're targeting to maintain full-year A&P spend roughly as a percentage of turnover. So in absolute it will increase.

Turning finally to overheads, we've made excellent progress. Costs down by 100 basis points, 1%. And here you see on this slide, 2009 versus 2008 at zero basis points, 2010 down 40 and last year 100 basis points.

Let me just give you a word on definitions here again to avoid any ambiguity. We have been using indirects and overheads interchangeably. It's our intention going forward to use only the term overheads. The dramatic progress made in 2011 is a testament really to the discipline and the hard work of many people across the entire business. We've been actively driving a wide range of cost-saving initiatives, and you know this, and we will continue to do so in the year ahead.

Let me give one example. Our efforts to drive efficiencies in travel, the use of third party service providers generated savings of more than EUR100m in 2011. In IT, for example, we've made savings in a wide range of areas, including data networks, mobile usage rates, software licenses and helpdesk support services.

The overhead reduction was particularly strong in the second half of the year, down around 140 basis points. This figure was boosted by a number of positive one-off items, the largest of which relate to a number of changes that we've made to pension and healthcare arrangements in Western Europe as well as the US. This is just another example of how we're taking the tough and sometimes painful decisions needed to build a healthy and sustainable model for the long-term future of our business.

We intend to continue to drive down structural overheads in 2012. It's about continuous improving. And we would like to aim to match or better the performance achieved in 2011 despite the investments that we've made two years ago, last year, and we continue to make to further build capabilities.

Finally on margins, let me just spend a moment on restructuring costs. You will recall that for 2012, we spoke about that in Istanbul, we are moving our primary metric for profitability to be core operating margin. This means that business restructuring costs will be deducted before arriving at core operating profit. Business restructuring costs for 2011 amounted to 1.3%, 130 basis points of turnover.

We also use the core concept to measure our earnings per share, meaning that business restructuring costs are now included, but obviously M&A-related costs, business disposals and impairments will continue to be excluded. And on this basis EPS for 2011 was EUR1.41, which is up 4% on 2010.

Operational performance contributed EUR0.11 of EPS growth. This was offset by a number of other variables, the most significant of which was currency.

Now let's turn to cash. We continue to be a highly cash-generative business, free cash flow for the year at EUR3.1b. This is below the figure for 2010. We've been stepping up our investment behind the future growth of the business. Net CapEx increased to around EUR2b, which is approximately 4.2% of turnover. This was heavily directed towards capacity expansion in the fast-growing emerging markets. Just as an example, we opened the new deodorants factory in Mexico, a new savory factory in South Africa, and made significant investment across a wide range of categories in Indonesia specifically.

In 2012 we expect net CapEx at roughly the same levels as a percentage versus 2011, but we continue to invest. Although in cash flow terms working capital was a modest outflow in 2011, our overall performance I would describe is continuing to be impressive, and especially in the second half of the year. You will remember at H1 we flagged that was an area that we needed to improve on in the remaining six months.

If you take our trading working capital it's now been negative for nine quarters in a row. And importantly for us as we look at the business, we exit the year with a cash conversion cycle that's turned negative. That's the first time ever that we've done that. So looking forward and today, we're close to best-in-class in our management of debtors as well as creditors, so our aim is roughly to hold our current positions there.

But where we can improve and where we should is inventories, and they can still be lower. This will be the main focus for the year ahead as we look to harness greater benefits from our new organization and increasingly harmonized business systems and processes.

Turning finally to the balance sheet, our net debt was EUR8.8b at year end. And that's up from the EUR6.7b at the end of 2010. Let me just go quickly through the drivers of the increase. The first one is the overall significant cash outflow from acquisitions and disposals, around EUR1.7b, and that's obviously mainly Alberto Culver and Sara Lee; around EUR400m from the impact of movements in currency rates, especially in the second half of the year.

In 2011, just to talk a little bit about pensions, we saw a significant increase in our pension deficit. This reached EUR3.2b at year end. Now this is sharply up from the half-year figure, which was at around EUR1.5b, and also well up on the 2010 year-end figure of EUR2.1b.

Now the main driver is the increase in pension liabilities. And that's resulted from the steady fall-through throughout the year in corporate AA bond rates. Our valuation is based on a calculation that reflects bond rates in the various markets that make up our pension liabilities. A year ago we used a rate of around 5.2%. By the end of '11 this had fallen to 4.6%. And this alone has added around EUR1.2b in our estimated future liabilities.

Cash contributions to pensions will increase to around EUR700m, which is up from the EUR550m in 2011.

And then just turning to pension interest costs in the net finance cost line, this will move from being a credit of EUR70m to a debit of around EUR10m in 2012, so that's an increase of EUR80m.

Finally, I confirm that the quarterly interim dividend for the fourth quarter of 2011 will be EUR0.225, which will be paid in March

With that, let me just return to Paul.

Okay. Thanks, Jean-Marc. Now these results illustrate how much Unilever has changed over the last few years. Growth ahead of the market, protecting margins in a hugely challenging environment, whilst at the same time investing strongly for the long term. In short, a Unilever that is now fully fit to compete, as we talked.

We set out to reestablish growth as a primary driver of value creation and to build a sustainable, bigger and more sustainable business. To help us do this we put the consumer and customer firmly back at the heart of everything we do and we drive the culture again to where it needs to be. As you've heard, we're on the right track and it's once more a growing and healthy business.

We're also a faster and more agile business, tremendously important in this time, with a clear bias for action. The changes to our organizational model that we implemented recently will help us strengthen this new agility and performance culture even further.

With a more category-driven structure, we're able to drive innovations faster, reduce complexity further and more rapidly build our global capabilities. We will be able to compete more holistically with more focused competitors, particularly in Personal and Home Care.

Now our new cluster structure under the leadership of Harish allows us to delayer and to be much faster to bringing these new innovations we talked about to the market. It also helps us to spread repeatable models across the business at a more rapid pace. And examples of that, be it in how we set up our low-cost business models; or how we expand networks of perfect stores around the world, we already have 3m of those, with a significant increase still to come; or be it in the way we manage our out-of-home ice cream business.

Overall, I believe that this is an organizational structure that dramatically reduces the number of touch points in the organization. It drives speed and alignment even further. And its introduction may prove to be another key moment in the evolution of our business.

Unilever is also a business driven by a compelling new vision, to double the size of the business from the EUR38b to now already EUR46.5b, on the way to EUR80b, whilst improving our overall societal footprint. It's more important now than ever. We're well on the way to doing this and we don't intend to deviate from that path.

The Unilever Sustainable Living Plan is at the heart of this vision, and is increasingly becoming the driving force for everything we do in our business. As I hope you know by now, this is a plan that brings to life the many actions that we need to take to meet our bold environmental and social ambitions. In so doing we are not only acting in the interest of the communities in which we live and work, but we're also preserving our own interests and, as you've seen, those of our shareholders.

Last week at the World Economic Forum in Davos we announced a major new step in our work on sustainable living. In fact, we launched the global Unilever Foundation which will drive us towards our goal of helping more than one billion people across the world improve their health and well-being with our products. We will work in partnership with five leading global organizations you can see on this chart to help provide everyday lifesaving solutions in areas such as hygiene, sanitation, nutrition and access to clean drinking water that so many people are still deprived of.

We're also pleased to lead the work again, once more, on the food security for the G20 which President Calderon has asked me once more to chair. This will enable us to work closely with small-hold farmers an important for the business ensuring our long term supply.

So yes, we are a stronger business, we have more compelling vision, a sharper organization and an increasingly more effective performance culture. But the change that has most directly impacted performance has been the step-up we've made in innovation and in the speed with which we are able to introduce our brands into new markets.

The proportion of turnover coming from products launched in the last two years continues to be above 30% and our overall project portfolio is bigger and stronger than at any point in our recent past. This chart shows you some examples of new innovations from the last quarter just alone. To pick just one, skin, we're we've extended the Vaseline brand into the male segment across South Asia helping to drive this fast-growing brand and probably the fastest growth that we've seen on Vaseline in the brand's history

The last quarter has seen some significant examples of our brands also being introduced in new markets. For example, once more, we've launched successfully Clear anti-dandruff brands in South Africa meaning that the brand is now present in over 40 markets. We introduced the Simple skincare brand in North America, extending it from its strong base that we have in the UK. And moving in the opposite direction we've introduced Axe Hair range now in all of our Western European markets with very encouraging early results. We're on the front foot.

Now let's pause for a few minutes to look at the advertising that has accompanied these last two launches I talked about starting with Simple in the US.

(Video playing).

So those are some important recent launches and as we move into 2012 we will again, once more, increase the pace of this. Our plans for expansion into white space in the year ahead are probably the most ambitious we've ever taken on.

Now let me close with a few comment on the outlook for 2012 overall. The outlook for the consumer economy remains gloomy in North America and especially in Europe where growth is low and at best is likely to be the norm for what we need to become accustomed to for years to come, no differently than as I've said before.

More encouragingly, particularly for a business with more than half its turnover in the emerging markets, the consumer economy across Asia, Africa and Latin America is much more robust. Even though there are some signs of softening we should be pleased with the growth we're seeing there.

We also see continued rapid expansion of middle class in the BRIC MIST countries and the so-called Next Thirteen. Given this we should not be surprised to see competitive intensity in these markets to remain at high levels as well in the years ahead.

Now despite these challenges we look forward with confidence to the year ahead. We've entered 2012 with good momentum, especially in Personal Care once more and our emerging market business is extremely strong. Unilever is now a more confident business and with a strong foundation in place we feel upbeat about our ability to, once again, grow ahead of the markets.

So finally, what are some of the key areas that we will be focused on in the year ahead? Let me call out a few that I think will really make a difference. Firstly, we will work further to strengthen our brand equities particularly for our EUR1b brands, we will seek to step change innovation here even further with a particular focus on driving harder those innovations that will most positively improve our mix.

Secondly, we need to sharpen our channel and customer strategies and build an even firmer discipline on how we prioritize and allocate our resources.

And thirdly, our margins are still on the low side so it will, again, be essential for us to keep very tight control on our costs and to drive our mix. We will also watch our working capital closely and look to increase returns on a wide range of investments, whether in manufacturing capital, advertising and promotion spend or, indeed our IT systems. The discipline around that will increase even further.

Finally, we will take our performance culture another notch higher focusing in particular on diversity and continued heavy investments leadership development.

In conclusion, I expect certainly another challenging year out there in 2012 but, as you'll hear from our talk, we believe that we are well prepared and clearly focused on what we need to do to further enhance our competitiveness. Our primary objective for the business remains unchanged. In 2012 we continue to aim to grow our volumes ahead of the market, to achieve a steady and sustainable increase in four core operating margins, albeit it modest, and to continue to focus with discipline on delivering a strong cash flow.

And on that note let me open it up to questions. Thanks.

So, ladies and gentlemen, we've taken a bit longer than usual to do our presentation but let me reassure you that we will extend our time to take the questions that you have in your mind.

So we're going to do it the usual way, so if you're in the room and you want to ask a question then you raise your hand, if you're selected please don't forget to activate your microphone, please tell us who you are and who you represent and please no more than two questions at least at the outset.

If you are listening on the telephone and you wish to poll for a question, the usual form, press star 1 on your keyboard. If by the time you get to your question that's already been asked and you wish to withdraw it then you press star 2.

So as normal we will start in the room. Bob you had your hand up first, why don't you go ahead.

Morning, it's Bob Waldschmidt from Merrill Lynch. Two questions if I may. You mentioned in Turkey market growth rates would be circa 100 basis points lower in 2012 versus 2011. You've just stated that market growth rates were around 5% to 6% so do we draw the conclusion that the growth rates are around 4% to 5% then in terms of your guidance? Then in that context with P&G losing share and vowing to potentially be rolling back pricing in certain markets, does that impact the expectation?

Then on the second question, you've mentioned it's a continued priority but are you in a position to commit to core EBIT margin growth this year given you've guided to gross margin expansion, A&P remaining flat and savings coming in maybe in line with a year ago. Thank you.

Yes, thanks, Bob, for the questions. Indeed the 4% to 5% is what we are seeing right now and that's also what we've seen already in the last quarter, not different from what we talked tin Turkey.

As you see in our numbers and I'll take, for example, one of the categories, Home Care, as an example, Home Care grew 9% in the last quarter, we're very pleased about that. 8% of that is pricing, that is pricing ahead of what we see our competitors doing. You can do the exercise yourself; for the interests of time, I won't take more. Look at the previous four quarters you will see the same. I deliberately mentioned four quarters to get a whole year and the quarter before that was flat. So we are taking the pricing in the category and we are actually seeing a robustness behind our business but we will continue to watch the competition.

What you see in this model that we're delivering here is that we're able to stay competitive with our brands where the fights are, which obviously some are not talking about. Someone talked about the [kettle] and the, whatever, I forgot the expression now, but where the fights are we will stay competitive at all times, and yet we're able to deliver a total model that we're putting up and that's what you should be focused on.

On the margins Jean-Marc do you want to quickly talk on that?

Well no I just go back to the same page which hopefully each and every year we'll be presenting to you because it's all about sustainable, consistent performance be it on the top line, and our aim is sustainable, margin increase and that's what we plan on doing.

Michael.

Good morning, it's Michael Steib from Morgan Stanley. Also two questions please. Can I ask a question on mix, Paul, I think you mentioned earlier that mix wasn't really working for you in 2011? Is it likely to work better in 2012 particularly as the Home Care Division is likely to show some margin improvement as you've indicated, in Turkey, hopefully?

Then secondly, given that you now are taking the business restructuring charge above the line, what level of ongoing restructuring should we expect? It was clearly in 2011 well ahead of the 100 basis points, is that likely to be repeated this year?

Yes, thanks, Michael. On mix obviously what you see is using Europe much more to finance the faster expansions in the emerging market is what you read and that's why we're launching so many brands in the emerging markets as well. That actually is a negative mix to some extent when you're investing in the future and that's what we're dealing with on one side. The other part is where the competitive battle is, you singled out Home Care, our margins are lower, no doubt about it, and yet we're showing good share progress and fast growth, that doesn't help our mix either. We have some elements of channel that also work against us in the mix, again, despite that, more or less, operating margins flat.

All of our energy, and increasingly so, is focused to being sure that whatever we do we drive mix in a positive direction, despite these trends that think we will have to deal with for some time to come, but being more focused on ensuring that all of our innovations are margin accretive, that we focus on channels that are more margin accretive, that we focus on mix in our total portfolio with our more focused strategy that is margin accretive and bringing that lens even further to the company.

The reason we put the restructuring now in our total company's performance, because we were performance driven for sure, but that was limited to operating margin. Now with the core concept that we're launching we're extending that to restructuring. I think it will be a good thing. I would have liked to get rid of it in the first place, as I mentioned right when I came, but now making everybody responsible and actually building that into the bonus will give a much greater focus on this.

If it comes down or not I plan right now, if I may be honest with all of you, I plan right now on keeping that stable at the 130 basis points realistically and for a simple reason. The European market where most of the restructuring is is actually growing slower than we would have said three or four years ago, all of us together. We're doing reasonably well in that environment, you see the margins enhanced as well, but it is because we keep the pace on restructuring and I would like to keep that pace going as the environment in Europe most likely is going to get tougher before it will be easier, unfortunately. So that's why I'd be conservative, or realistic call it, in keeping the restructuring at about 130 basis point.

David.

Hi, David Hayes from Nomura. Just on the A&P, you kept A&P flat year on year underlying basis, you talked about the efficiencies, but do you feel you suffered a little bit towards the end of the year on under investment in the brands? And therefore looking into 2012 do you feel that there's maybe some risk to having to spend a little bit more to catch that up?

Then the second question is on emerging markets slowing which you mentioned a couple of times. I'm just trying to quantify that, as you say you showed this year a strong development to 11.5% growth from around 8% to 9%. Is that slowdown going to bring you back to the 8% to 9% levels that we've seen historically or do you still see you're able to perform better than that kind of medium-term average? Thanks.

Yes David, two things on the A&P. First of all, it's up EUR150m again once more, as Jean-Marc showed, so it's up. But it's up on top of the efficiencies we've driven. A tremendous effort has gone into the year on return on investment behind marketing spend, more productive spend, and then increasingly the move to digital. So we feel that we are competitive.

In fact if I may privately say, I was actually worried that in the last quarter of 2011 we would have the same behavior of 2010 last quarter that the markets would hold back A&P for making the 10 basis points because it effects everybody's bonus. Instead it's not been the case, we actually spent more A&P in the quarter to be competitive which gives us a strong start for 2012, which also shows you the culture change. People are willing to compromise the short term for the benefit of the long term, I'm particularly proud of that and that's very important. Secondly, the cholesterol is better because it's more A than P so we're very pleased with that.

In 2012 we expect, again, to have a further increase in A&P behind some of the big expansions and the support on our brands as we've talked about. So in that area we're getting better and we will continue to look at opportunities of investing there to strengthen our brand equities as I mentioned in my talk.

On the emerging markets it is indeed right that you say that we had a tremendous growth of 11.5%. Some of you naysayers out there were always worried about emerging markets. I remember when I came in 2008, oh, you guys are so exposed to emerging markets. Then in 2009, all competition is coming into the emerging markets. Then in 2010 and 2011, oh, you've got all the input costs into the emerging markets. Then I made a statement trying to be honest and saying emerging markets are slowing down, oh, he's giving a warning about the emerging markets.

I don't know what you do guys do in your private time but you're making your life incredibly miserable. We see 11.5% as good growth and the organization should be complimented on that and we will continue to look for opportunities as 2b people come into this world and improve their standards of living to get more than a fair share of that and that is a lot of effort by a lot of people. So whilst these markets slow down a little bit I don't think that has to be an excuse for us to do less in any form or other. Now 11.5% is an exceptional growth, I do agree with that, but we are certainly setting our ambitions high there.

Jeremy.

Morning, it's Jeremy Fialko at Redburn. A couple of questions. The first one is that you have mentioned certain commodity prices have come off, so edible are perhaps the main example of something which is looking like it's going to be down year on year. So do you expect there will be some areas where you will be taking price reductions and could we see negative pricing growth within the Spreads business in 2012?

And the second question is just to recap on your volume market shares. I think you've mentioned throughout 2011 those have been broadly flat; I just wanted to check that was the case in the final quarter. Thanks.

Let me just take the point on commodity costs firstly. If you look at oil today it's at around $110 and it's been at that level for a long period of time and we have an important exposure to exactly that. So we see today in the spot markets low single-digit growth in our commodity costs, including FX mid-single-digits, that's the best that we can see today. And obviously when we're talking about hedging and the like we have a three, six months good view but not to the back end of the year. So I think it is still an area to be cautious, it's not going to be the same as 2011 by a long shot and we're happy that with pricing, savings, mix, gross margins will be modestly higher.

On your point on price reductions what you will see is that the in-quarter pricing, as I said in my talk, has only been marginally positive and so the carryover prices that have already been implemented in the market and we feel good about that. And when we're looking at anticipating price increased in 2012 it's very much around emerging markets. So we feel good where we are but obviously we're going to be dynamic and reflect the health and situation of the consumer. But that's where we stand today.

On the pricing just very quickly, Jeremy, the whole year you saw about the 4% pricing, at the end of the year a little bit more in the last quarter. As a result what we see is our value shares are actually up, slightly more or less 60% of our business is still growing share, or at least about that. Our value shares are up, our volume shares are more or less flat, which also shows you that who is building value in this market. One of the reasons the retailers increasingly like us, because we are bringing value to this market driven by innovation and responsible pricing.

So we'll take two more in the room, Harold and then we'll go to the lines.

Yes, thank you, Harold Thompson, Deutsche Bank. Just three questions if I may. As a follow-up -- is it two, sorry, can I try three?

Don't worry about, we'll take it.

On input, it's a short one on input cost, the way things have gone in recent years here, when input cost first rose in this later cycle you were starting from a very strong volume position so that was fine, but now volumes in absolute terms are relatively modest, so if input costs were to surge again what would you actually do? Because I guess if you had to increase then you might push your volumes negative, so it's kind of try and see how you would respond to that situation.

The next question is on Household, that one's doing 10% organic growth in Q4 alone, standard growth really. What's changed for that division to effectively be accelerating? Is the white elephant finally realizing it's not worth fighting a war which he won't win and you're defending your shares very successfully and therefore the intensity of the industry is just improving a bit for everyone?

And finally Paul, you're a big man in Davos, what did you learn from there which would change the way you think Unilever should be run for the short/medium term given all the various pressure points you pick up from those kinds of important events. Thank you.

You're way too flattering in asking your questions, Harold. Let me just go very quickly on all of those. On input costs I think our brands are stronger, that's really what you're telling you, our innovations are stronger, and unlike 2008 we really have to put the last quarter of 2008 with the last quarter of 2011 and you can see the change that has happened in this company. I personally don't expect significant increases in input costs, or shocks like we've seen in 2008 and 2011 so your question is a little bit theoretical, but we are certainly in a better shape with our brands and our innovations to carry the pricing and maintain volumes at low levels.

I think the volume growth that you're now seeing is not bad in light of the pricing, especially if you look at HPC, Home and Personal Care, where actually the volume growth is still 4%, 5%. Or the emerging markets over a longer period of time, you're still talking about that volume growth. So plus or minus 1% in your scenario is very manageable for this business but, once more, it's an unlikely scenario to be honest.

It is true, and thanks for the compliments, that Household Cleaning is showing improvements and, as I've mentioned also margin improvement over the second half that you see very clearly on our business. I could answer very shortly and cheaply by saying that's one of the businesses, if I may remind you, that I was running now myself, so I'm sure the organization understands what needs to be done.

But having said that we are determine do stay competitive, we have invested in Surf and have significant improvements behind our Dirt is Good in 40 or 50 countries at the same time. We see the same on our Domestos brand where we've come up with very good innovations. These are markets that are growing as the population develops in these emerging markets and we have strong positions and we are determined to stay competitive. And what we are showing over the second half that we can do that and slowly but surely improve the profit situation and we're determined to keep doing that, by the way, and function also where competition is and that's important.

The last thing on Davos, I think what I've learned about Davos also a lot of talk, we don't need to go through that, there was a lot of talk about Europe and what we need to do and if our politicians are doing anything? But more importantly what I was interested in is what is this new form of capitalism that is needed. People are clearly seeing that we've come quite far in the world with what we've done in terms of wealth creation and giving many, many more people a better life with the globalization that has happened, but people are also discovering that there are some cracks in the system. The wealth isn't equally distributed, increasingly so, also in the emerging markets, we're using more resources than we want, every day a billion people go to bed hungry, a child still dies every six seconds of hunger.

So how can we get an inclusive growth when more than two billion more people are coming into this world that is more social cohesive, that is more in sync with our environment? And consumers are asking for this, you see it every day more.

And consumers are also discovering that they have a power to participate in a process that is paralyzed at the institutional or governmental level. You saw the recent incidents of McDonalds or you saw Netflix or Bank of America trying to change, or you saw what happened in the US behind the privacy laws when they all went blank and Congress had to come back. You see the Arab Spring. Consumers are understanding that their communities are more powerful to make this world a better place and it gets to the heart of the Unilever Sustainable Living Plan, that's what we're trying to tell you guys. Invite the consumers in and say we are doubling our business but instead of saying how can we borrow from society and the environment to do that, how can we give to society and the environment to do that?

And increasingly we find that that is a business model that we can succeed in and we get very excited about without disappointing our shareholders. Over the three years the TSR has been 65% at the same time. Some of you were worried if we were just talking the long term and not delivering the short term. Some of you were worried that we would put other priorities ahead, which we do, we put the consumer ahead, we put making this a better place in the world ahead. But what I keep telling you guys is that there is no need to compromise whilst you do this on building shareholder value and I think you are increasingly going to see that.

And if you can all society a little bit more of a favor it's to preach these models but also demand these models from other companies you invest in. Because the more companies do that the more you can assure that you have a better future for this world and that's the responsibleness that we talked in Davos.

As a result I'm very proud to sponsor the Food Security Task Force on the G20, I'm very proud that Calderon keeps it as a priority after Sarkozy did it in Cannes to be sure that we solve these issues. We've put emergency supply in place for food security now, a global monitoring system called AMIS. We're expanding networks of what we call a new vision for agriculture to get to small-hold farmers. We're committing ourselves as a company to directly or indirectly buy from 500,000 more small-hold farmers.

Those are the socially responsible models, but it makes us closer to society, it makes us closer to consumers and it puts the burden higher on innovation and increasingly you see that being an accelerator in our business. The first signs are the corporate reputation, the desireness to work for us, but increasingly you see that coming through the bottom line and that is what we're trying to get across to your guys. But because it's sort of soft for some of you it's not a hard measure of this or this, what we call in the income statement or the balance sheet, it has a little bit more difficulties get that traction.

So sorry to give you a long answer to this but this is absolutely key in what we're trying to do and why we want the right long term investors with our models. This is the essence of what you're buying into with Unilever now, but no compromise on the delivery, that's what is the key thing in this.

One more question in the room. Xavier and then we'll go to the lines.

I have only one question to bring the average down. It's on the share of voice. I'd like to know if the share of voice is still on the front page of what you track on a monthly or whatever basis? And what the trend in share of voice has been this year despite the overall flat spend in advertising and promotion. Thanks.

Yes, it depends what you call voice, the share of voice of Unilever in the global debate is sharply increasing, the share of voice in our contributions to what needs to be done is sharply increasingly. But more importantly behind our brands we keep a very competitive share of voice and will continue to do that. I can hardly think of any brand where I'd say we have been uncompetitive in terms of supporting our brands, but I can think of many brands where we'd like to set the bar higher to continue to strengthen our brand equities.

So we would like to, and that is what we're flagging to you guys, we would like to continue our journey of increasing A&P, increase our effectiveness of that spending by driving and continuing to drive the return on investment and moving to digital as well where we are really on the foreground under Keith Weed's leadership and Babs and others, we've really made a step change in that area and that gives us not only effectiveness in spending but it gives us also a much better connection to our consumers.

We should not forget, just as an incidence, the increase over the last few years in China in use of social networks has been more in absolute than the total number of people using social networks in the US. In the emerging markets half the people are below 25 or 30 years old, they're all social media savvy. So you will see a shift to that and it will be more efficient in our spending. So once more the absolute A&P number is becoming less relevant, just like the absolute R&D number is becoming less relevant if you move to open innovation.

So I think we're running out of time or is there one more question?

No, no, we've got two questions on the line and they've been waiting potentially. So, Thomas, do you want to ask your question?

I'd be delighted to, this is Thomas Russo. The fixed income markets are really quite disrupted at the moment with extraordinarily low long terms rates which impacted you adversely on the pension fund liability, but probably give you opportunity to extend the debt at attractive rates? How are you balancing your steps to take advantage of this unusual long-term fixed income rate in the markets around the world?

Hi, Thomas, it's Jean-Marc. You indeed mentioned that also the last time we saw each other and the first point I would say is that cash flow forecasting maturity over our debt is just so much more important today than it has ever been before just given the markets, economic markets as well as the fixed income markets. I would say that as it stands today we have a very good maturity profile of our debt over the coming future but let me say nothing else except for that I see the same statistics as yourselves and from a scarcity perspective these are great times to tap different markets. And I think there is a premium to not having to think about cash buffers but really just focusing on our brands and growth. So let me not say more than that but it's something that I track very closely.

Many thanks.

Thank you, Thomas. Marco, do you want to ask your questions?

Yes, good afternoon, guys, sorry morning. I have two questions please. The first is could you provide a further update on Russia and China profitability? And in that respect, again, congratulations on the emerging markets delivery.

And the second question is did you bring forward the overhead costs in the second half of '11 because if we're looking at the benefit in the second half is almost double what it was in the first half? And could you provide, for instance, a guidance for 2012, are we going to see a similar positive impact that we've seen in 2011. Thank you.

Yes, an update on Russia and China, both are doing well indeed and China actually doing a little bit better than Russia. We're building share in most of the categories, very strong share growth in Hair and in Skin. The business that was going down, Oral Care, is more or less stable, so I think by memory 11 or 12 categories, 11 growing, one stable, so Alan Jope and his people are doing an understanding job in China. We are obviously continuing our expansion of our products there. We introduced, just in the last quarter alone, our Dove business doing extremely well and we're ready for some of the other activity.

So China I feel very good about, even in the year of election. We might see a little slowdown as we talked about but we are well prepared as a company there.

Then Russia has not become -- is a little bit more difficult than China because they never really fully recuperated from the 2008 recession and that economy is actually growing slower than I had anticipated. Despite that, Sanjiv and his people are doing a tremendous job in putting the bases in place and the Kalina acquisition will give us a good platform to grow competitively there as well. We've seen our Knorr brand becoming more established, we have a leading Household Cleaner business, a leading Tea business, so increasingly we're getting critical mass.

The business I'm not satisfied about in Russia, not to just give you all the good news, was our Hair Care business which has been underperforming and we've taken actions there as well to bring more focus to that and to build our brands.

So I still see Russia long term, although the demographics are going down, long term it's a market still with a tremendous opportunity for us and it's a market that has an enormous natural wealth. So we will invest and continue to invest in that for the longer term.

On the second question on overheads I'll quickly refer to Jean-Marc.

Sure, very specifically we haven't brought anything forward, just to use your words. If you look at our overheads leverage it's been zero basis points and then 40 basis points and last year 100 basis points. So as a result today we're at 11.9% of sales. Out of those 100 basis points I would say that through growth cost discipline, more than two-thirds is actually structure and then there are one-off initiatives that I talked about in my talk which is around a third or less.

But most importantly as we start 2012 the basis upon which we see the business is from 11.9%. So whatever we've done, some of it strategic, I've always told you that there will also be one-offs within the actual leverage itself, our vantage point is from 11.9%. But we cannot promise this type of improvement given the fact that we've done 140 bps in two years, we need also to invest in capabilities where it's required.

Yes, I think there's one last question.

Yes, there's one more question in the room. John.

Yes, just a couple of follow-up questions. Is it your best guess, Paul, for 4% to 5% market growth in 2012 in terms of underlying, I think you said that's where we were Q4.

Back to this whole underlying operating margin, core margin, restructuring charges issue, 130 basis points seems very high compared to your peers which is closer to half a point and I'm just wondering where you see it going forward. Do you think 2012 will be a one-off because of the restructuring in Europe and we will go back down to a 50 basis points? And then tied to that, do you think the underlying operating margin as now defined will be improved upon in 2012. Thank you.

Yes, well, they're very clear questions, you get very clear answers. The 4% to 5% I already mentioned, so that is clear.

On the core operating margin what we're trying to do is obviously be clear with what you see and what we see internally and give that clear responsibility into the company. If I have failed on something it's to get this restructuring down. When I came I thought I could get it down to earlier and already folded in. Clearly, more needed to be done in restructuring, especially in Europe, and we've seen the European market change a little bit so that we will continue with that pace. Now you've seen that being translated into the European operating margins that then helped us finance our overall model, especially in the emerging markets, so it's not that we're not transparent of where that money goes. But in all honesty, more needed to be done in that area than we thought.

For that reason I've become a little bit more cautious in my overall aggressive and say next year count about the same in restructuring and then the number should come down, not only should come down, will come down. I think this increased responsibility that we give to the operating units to manage this which, frankly, wasn't the case right now, it was done corporately, will enhance that confidence I have in that. But we will be very clear now, and we always were, that where we've spent that money we really need to see the benefits coming in.

And then your last part on operating margin, will we see operating margin expansion or not. Obviously a lot of things can happen during the year that we don't forecast well, although we've been pretty good last year on the forecasting front when we said 550 basis points and all the other things. So under the assumptions that we have now we will see a slight pricing and the carryover, we will see cost as Jean-Marc said, in the low single-digits, we will have savings more or less in line with what we've done, we have to still fight a little bit the mix, that will result in modest gross margin expansions. I don't think there's much coming from overheads, I don't think there's much coming from A&P and that results in a modest overall margin expansion.

If our margin expansion would be more, for whatever reasons, the first thing we would do, like we did in 2011 is to invest that in our business. In fact investing it in our consumers, to ensure that we continue to get the quality growth. Once more, it was very easy to find 10 basis points or 20 basis points, but we clearly make this choice and then the total environment decides on which side of the operating margin you come out, slightly positive 10, 20 basis points, or in this case last year 10 basis points negative. But we will manage the business towards that direction more than anything else.

I sincerely hope that we would come out with a slight positive on operating margins with above market growth maintaining our current momentum, enlarging furthermore, again once more, our footprint. We have some very big bets in 2012 on new brands that are very crucial for the long term of this company. We talked about the Simple launch in the US, we talked about the TRESemme expansions, we talked about the Axe Hair Care expansions that, again, show you that this company is on the front foot.

I've lived my life with a very simple principle, that it's better to make the dust than eat the dust and I think you're looking here at a company that feels confident enough that it's making the dust.

Thanks for your time and hopefully see you soon. Thank you.