Unilever Q4 2009 Earnings Call Transcript

Unilever PLC (UL)
Q4 2009 Earnings Call Transcript
February 4, 2010 3:30 a.m. ET

Executives

Paul Polman – Chief Executive Officer
James Allison - Head of Investor Relations
Douglas Baillie - President, Western Europe
Manvinder Singh Banga - President Food, Home & Personal Care
Pier Luigi Sigismondi - Chief Supply Chain Officer

Analysts

Jeremy Fialko – Redburn Partners
Christopher Wickham – MainFirst
Nico Lambrechts – Bank of America/Merrill Lynch
Sara Welford – Citigroup
Marco Gulpers – ING Financial Markets
Julian Hardwick – RBS Securities
Charles Pick – FinnCap
Olivier Croquet - Cheuvreux
Warren Ackerman – Evolution Securities
Simon Marshall-Lockyer – Jefferies
Pierre Tegner - Oddo Securities

Presentation

Paul Polman

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 is 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, Manvinder Singh 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 is 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''s 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. 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.