We are about to hand over to Unilever to begin the conference call. [Operator Instructions] We will now hand over to James Allison.

Good morning and welcome to Unilever's Full Year Results Presentation, which as usual will be given by Paul and Jean-Marc. Paul will share his reflections on the year as a whole and then Jean-marc will cover the financial performance. Paul will finish by highlighting some of the areas where we want to step up our performance in 2015 and beyond and after that of course we’ll have plenty of time for Q&As. As usual I draw your attention to the disclaimer relating to forward looking statements and non-GAAP measures. And with that let me hand over to Paul?

Thank you James, good morning everybody. The speed of business these days is so fast that even in a few weeks a lot can change or be accomplished. So it seems odd for me to be wishing you a Happy You Year but I do. And I hope that you will all be rewarded for your efforts in a year, which may well turn out to be just as challenging as the last one. So let me start with giving my perspective on our performance. Over the last six years we have delivered consistent, competitive top and bottom line growth. The 2014 results again demonstrate this. We grew ahead of our markets, with 2.9% underlying sales growth and 60% of our business building share. Core operating margin was up by 40 basis points. We increased EPS despite some very significant currency headwinds and we again delivered a strong cash flow. Importantly we achieved this whist continuing to invest in the pillars of long-term growth, building our core business, expanding our foot print, investing in our operations and our people and sharpening the portfolio through M&A. In so doing we’ll be building a more resilient Unilever, more able to withstand the external shocks. And it’s worth reflecting for a moment on just how difficult the year it was. First the slowdown in emerging markets continued. China stands out but almost all of the major economies weakened. Growth in consumer spending in 2014 hit multi-year lows in many countries. In South Africa it is half to less than 2% and in Brazil it had fallen to just 1%. Exchange rates were again volatile, with further rounds of devaluations. It was a mixed picture, with some currency slightly recovering at least part of their losses from 2013. But even so in many markets…

Thank you very much Paul and good morning to everybody. Let me also wish you a very happy new year. Now you’ve heard me talk a number of times about our financial growth model and over the last 12 months or so I have stressed the importance in a lower growth environment of applying all the levers of earnings per share growth. The 2014 performance demonstrates the robustness of our model. As Paul said at the start, despite markets where there is no volume growth, very significant currency headwinds, we have delivered another year of competitive top line growth, margin expansion, EPS growth and strong cash flow, and we have done this while continuing to invest in our brands and in our infrastructure. So let’s have a look at each of the levers in turn, the first being top line growth. Underlying sales growth of 2.9% for the year included 1% from volume, 1.9% from price. Our emerging markets business grew 5.7%, volumes up 1.3% and pricing at 4.3% up. Developed countries declined by 0.8%, Volumes here grew 0.5% but pricing was negative with deflation in a number of European markets. M&A reduced turnover by 0.9%. Now this as Paul said includes the effect of disposals, brands like Wish-Bone and Skippy in 2013 and the U.S. pasta sauces and Slim-Fast in 2014. It includes the acquisitions of T2 and Qinyuan, but importantly does not include Talenti which we just closed, nor Camay/Zest, which is expected to close in Q2. Turning to foreign exchange, exchange rates had a negative effect of 4.6% for the year. This comes from the weaker emerging market currencies, particularly Argentina, Indonesia and Brazil, but also significant movements from Turkey, Russia, India and South Africa, and as a result of this turnover was down 2.7% to $48…

Thank you Jean-Marc, and let me finish by looking ahead. At our Investor Event last month, we set out our priorities for 2015 and beyond, an agenda for growth that is consistent, competitive, profitable and responsible. I won’t repeat everything I said then, but let me just remind you of some of the headlines. First, we need to recognize that we are in a lower-growth environment and this is not likely to change in the near future. So as in 2014, it is essential that we keep driving cost savings hard. We are building on a strong track record here but I believe that there is still ample room. Disciplined cost reductions is now becoming ingrained in the organization. We will continue to deliver the 1 billion plus savings each year across our supply chain. As we extend the low-cost business model approach to new countries, we can even do better. You have seen the strong improvements in overheads in 2014. I’m convinced that there is still more opportunity here as we drive to best in class levels. We will drive further efficiencies in brand marketing. Just take for example the cost of production of our advertising alone. This has reduced by more than 10 percentage points over the last five years. And in 2015, we will focus on increasing the return on digital, which is still only 20% of media actually as Jean-Marc said and where we’re learning fast. The second part of the agenda is making sharper category choices to get more out of our core categories. For example in laundry we have good growth momentum and have now set a clear target of doubling the core operating margin over the next few years, while still growing ahead of our markets. In spreads, consumer habits have been changing…

So thanks very much. You’ll be happy to note that our disciplined cost-reduction programs have extended to the heating of this building. It’s absolutely freezing in this room. So I just hope that I can get Paul and Jean-Marc to continue for another 20 minutes so here in the subzero temperatures. So let me just tell you the format as usual. (Operator Instructions). Please begin by telling us who you are, use a telephone handset and please no more than two questions, because there is always more people than we can accommodate. So first of all I think we’ve got Celine Pannuti on the line. Celine, hello.

My first question is just regarding on what -- as it has been said in terms of market pricing in the category to ease, could you give us an idea of your overall material cost spill for the year? What would be the level of deflation if this is what should one expect, and the level of pass through, I noted yesterday that there was already some price for investment in India. So if you could comment on that. And on the same question why you would expect volumes to return, or is there any specific regions you can pinpoint? My second question is the competitive environment that you called out in personal care, if you could give us a bit more background on that. And I also wonder in personal care whether there was any positive from India one off or why was it just in home care? Thank you.

Yes, so why don’t we start Celine with the cost picture and I’ll hand it over to Jean-Marc and then I’ll pick up in a minute on some of the volume questions and the competitive environment if you don’t mind.

Yes.

Sure, hi Celine. This feels like four or five questions. So let’s do our best. The first one is on just raw materials and commodity cost for 2015. At this point in time we expect low single digit tailwind. Crude oil, obviously the reduction benefits, plastics, chemicals, specifically in home care and personal care and if you take our commodity cost base of $20 billion, around 20% to 25% is either indirectly or partly affected by the oil price. So, if you take forwards stocks takes around 4, 5 months to work through, I would say at this point in time the favorable impact on commodity costs is basically low single digit.

So if you just take the volume side first if I may start there and then I’ll just talk a little bit about the competitive hot spots if you don’t mind, but I think on the volume side we’re sort of hitting the bottom. We see now -- partly helped by the oil price in my opinion, we see in some countries, the disposable income going up and that gets translated a little bit more into the volumes. Whilst pricing might ease in this environment, we see volumes starting to pick up a little bit in the U.S. for example. You’ve seen the global forecast again this morning from the IMF. Although that is lower, for example China is still forecast to be north of 7%, the lowest growth they’ve ever seen, but 7% still is a healthy volume component and when our China issues are out of our base, as we are getting into next year, again I think we will see there our volumes picking up a little bit. I’m less optimistic about Europe if I may be honest, where we continue to see the markets being under pressure both in volume and value terms, but we think a modest volume increase should be possible as pricing probably eases a little bit. In terms of competitive battles, we have many and we’ve decided not to enter all of them in the last quarter. As you know I’m adamant that we stay competitive, but it’s also important that we maintain both top and bottom line progress. We’ve seen especially intensive battles on hair in the U.S. where Nielsen doesn’t pick up the enormous amount of coupon activity that is out there by some of our key competitors and we are not participating in that. So we’re careful about that and we’ve seen the same with deals where one of our competitors, it feels sometimes is giving away the products, and again we’re not competitive there in some of the markets by choice. If that situation continues, we’ll obviously have to adjust, but I think for the moment we feel comfortable with the balance that we’re achieving on the top and bottom line.

There was then a question Celine that you had on the real estate sales in India. It also benefits personal care but to a lesser extent versus home care and I think most important for us is no false illusions about the margin of home care and where we’re starting from and our need to double the margins there.

Yes, so if we can just try and keep that discipline of two questions please, not a five and two that just Celine has made into a fine art. So James Targett now on the line.

A couple of questions. Just firstly I guess on home care margin, you’ve obviously called out the impact from the India disposal, but looking at momentum in the second half and thinking about the -- at least about the oil price and FX, is that the sort of momentum, the underlying momentum we should be expecting in home care margins as we go into 2015? And then secondly in terms of -- just a clarification Paul on you said on in Q1. I think you said Q1 will be down again due to the strong base. I just wanted to check what you’re referring to. Was that just the personal care because of the destocking or was there anything else I was missing? Thank you.

James, I think we can do this fairly quickly. On the last one, it’s an affirmative. It’s actually -- I was referring to China. If I was not clear I apologize. Although the absolute numbers will go up, we will still be down a little bit because of the first quarter effect of last year, but we see an improvement coming through now. I just came off the phone with Sam Moraine [ph] yesterday. It was an extensive discussion and he feels really comfortable about that. So I was talking specifically China. On home care margins were actually fairly pleased. As we have mentioned to you, we have the competitive battles and we will stay competitive, but at the same time you’ve seen a big improvement over the second half, and again lots of the factors were against us in home care, notably the high oil prices. We cannot claim that twice. Now that these oil prices are coming down, we should also see a little bit of positive effect there. So Nitin is squarely focused on growing ahead of the market, perhaps a little bit more moderately than we have done in the past but then was a firm focus on improving the bottom line situation. We’re doing that extremely well in home care, a household cleaners, which is doing very well for the Company. It’s actually one of the best performing if not the best performing category that we have, with brands like Cif and Domestos. We now need to get that translated into the laundry side. Obviously the other factor that has played a role on laundry, which I’ve pointed out at the investor meetings is our investment in the future, was the Omo launches in the Middle East and the Omo stain remover launch in Brazil. We will continue to look at these opportunities, because obviously that builds this category for the longer term.

Thank you very much. James. From one James to another, James Edwardes Jones joined on the line.

Two clear ones for me as well please. Your gross margin stand 20 basis points. How would you reconcile that with the whole Maxing the Mix agenda, and particularly, is Maxing the Mix more about having some flexibility to optimize some competiveness rather than having absolute potential for gross margins to increase. And secondly should we read anything to change in wording in your outlook statements. I know in the presentation you refer to the same growing ahead of the markets and EBIT margin growth, but that wasn’t on the competitive statement. Is there anything in that or nothing at all?

Okay. So just on the first one, if you look at gross margins, please don’t forget the impact of the decline in China as well to a lesser extent lower leverage from volume. Maxing the Mix remains strategically very important in driving gross margins, a very important part to our business model. That was the first one. The second question --

Yes, on the outlook statement it’s very simple. I tried to make it a little bit more human. But if you change one word, some of you are getting very excited and I was getting a little bit pleased by this excitement that we are creating, but we are running the business with the same way and outlook as we have done in previous years, and that’s basically what we’re trying to say there, no change.

Warren Ackerman.

Warren Ackerman here. Couple of questions. So just market shares generally, with personal care volumes down in the quarter and home care sort of flattish, I was just wondering what’s happening to market share generally. I think at the Q3 stage you said at the company wide level you’re gaining share in 60% to further the portfolio. Just wondering where we are now and specifically in those two categories. And then just secondly on Europe, Paul you’re sounding obviously a bit more cautious. I guess with oil well below $50 a barrel, I can imagine some difficult price negotiations upcoming. Where do you think pricing might be? I know it’s a very difficult one to answer, but where do you think -- could pricing in Europe in 2015, given oil and the importance to your COGS, could we be looking at price deflation down 4%, down 5% in Europe in 2015 or some sort of quantification or some sort of thought around that would be very helpful. Thanks.

Warren let me just establish the market shares for a second. The whole year we have about 60% market share growth and at the end of the year, it has come slightly down but not significantly and based on these competitive battles I mentioned that we’ve decided not to join, but if you look at the categories that you are talking about, in personal care we continue to grow ahead of the markets. Even with the growth of 3.5%, we think that the growth of the markets are about 3%, which are the numbers that I have seen from our people. In home care its well ahead of the market in both developed markets and emerging markets. In food we’re holding more or less share and actually declining markets. We are just in segments that are not growth and it’s more of the segment issue than it is a competitive issue. And while the refreshments, just to complete the picture for us, I would say it’s mixed, if I may be honest. We have actually seen very good market share gains on ice-cream across the board, about 90% winning plus. So that business has done very well for us. But our tea business is a mixed picture. We have reinvested back in North America. As you know we’re doing well, but we are down actually in too many other places, and this is excluding the T2. On the European, now the second half definitely has been a little bit softer than the first half. I’m the first one to acknowledge that. So we need to be sure again that we rebuild that momentum for next year and we’re all geared to doing that. I would have liked to do a little bit more over the second half, which was not our best performance, but I also think that we have identified the key reasons for that and are addressing them. Regarding Europe, where the oil prices are coming down for sure, in some of the cases, I think what you are seeing in Europe is the risk in our categories at least of a slightly deflationary environment. We’re seeing that already in some countries. I don’t think it’s going to be minus 4% or minus 5% but it would certainly be fair to say that there is very limited, if at all pricing power in Europe right now, and we need to get it from innovations which we have plenty coming out and trying to grow volumes again in the right segments and that is where young and as people are focused on. I don’t think we’ll sit here a year from now with all the things that are being worked in Europe and say prices have come down 4% to 5%. That frankly for me would be a little bit too much in this environment.

I think we’ve got Catherine [ph] on the line now.

Just a couple from me. Firstly on your guidance, and in terms of margins, as you talked about the further cost savings. Are you really expecting another 40 basis points of margin improvement in FY15 or do you expect it to be a margin improvement that is perhaps a little more modest? And secondly if I can ask this, on your sort of softer outlooks for Q1 particularly versus the rest of FY15, is this sort of based on [indiscernible] to the market. I know you mentioned China. Perhaps if you could give some clarity on some of your other regions, that would be really helpful.

So we don’t go into the margin for the year. We will say margin expansions. So I won’t answer that. But I think we have enough elements going. What we have shown in 2014 is really that even in a low growth environment we are increasingly becoming very disciplined. I think if I want to comment on the positive side of the organization’s delivery, it is certainly on the stellar work that they have done in cost management. Not to be indirect, but also in many of the other elements. And I think we’re getting far more disciplined of taking these cost out of the system, even though we are already in many of the areas very competitive. I just believe that as we continue in this low growth environment; which undoubtedly will be there for 2015, we will continue to maintain that same pressure on our cost structure. How we at the end bring some of it to the bottom line and some of it invest in long-term growth depends also on the opportunities that arise during the year. But we feel that we are now in a system, as we’ve talked many years, that we’re finally in a system where Unilever can deliver that consistency. This is the 6th year in a row. The quarter one softer outlook, obviously there is already some transparency of quarter one, because we’re in the middle of it, but -- the China situation I talked about, but it’s also some of the innovations that we’re spacing out. We have the stronger comparisons of the first half of last year. Some of these markets are still weaker and some of these effects that we’ve talked about of the lower oil prices et cetera need to come through into these markets still. So all in all the forecast that we’re getting from the markets, especially on some of the other regions still, the Middle East, the Russian region, I think we’ve not quite seen the bottom yet. Argentina is obviously rumbling. So we have a little bit more issues that need to be shaken out over the first three months, if not the first half and then we’ll see a pick up coming in over the second half.

Javier Escalante.

I have actually a couple of clarifications. One with respect to the guidance. So basically you are saying that with respect to currency neutral EPS growth to be similar to the one in 2014, this is what you meant to say? And number two, coming back to the gross margin compression in the second half, currency was less of a factor. I understood that it was mentioned that China there was volume deleverage, but to what extent is also the negative mix that you’re growing through refreshments and Home Care that are low margin businesses. And what do you need to do to accelerate personal care, given that food is very unlikely.

Javier its Jean-Marc. On the point of margin progression, absolutely personal care slowing down, being high gross margin goes against us and China with an important personal care business as well. Those are two important factors going against gross margin in the second half next to the lower leverage from volume, as well as the full effect of devaluations working through our cost of sales. On the point of guidance for 2015, let me make it crystal clear. We expect a foreign exchange tail wind on top line as well as bottom line. So a positive impact from foreign exchange, no other mention on bottom line except for that and at this point in time its approximately 3% impact positive on top line, 3% positive impact on bottom line.

And we have Alain Oberhuber for the last question. Please Alain.

I have just a question again on gross margins. How does it look about the shaping of the gross margins? Now you said that China will be -- destocking should be over in Q2. So we could expect gross margins to improve in the second half? Or will there be earlier? And coming back to the gross margin of the refreshment, seeing that milk prices are down, cocoa input costs are stabilizing, could we already expect refreshments improvement in gross margins in Q2?

It depends how the Swiss franc is doing. I hope you’re still sleeping at night. For us fortunately, the 99.99% of the world population that we cater to don’t live in Switzerland. So we’re little bit fortunate there. If you look at -- I just want to take one step back here on the gross margin issue. If you look at the personal care, we’re up 90 basis points in profit. We don’t have a gross margin issue there. As the business grows, the gross margin grows. By the way we have now -- 75% to 80% of our innovations are margin accretive. That’s about where you will be at a cruising speed. This is a very good performance from coming from less than 5% or 10% five years ago. And that will be the engine of margin pool has slowed down a little bit the overall growth of personal care, but a very healthy gross margin expansion. On Home Care, we’ve seen the second half. Although the total year is more or less flat now, we have seen the second half significant improvement in gross margin. Here again, although there is a little bit of property sale in there, I think where we’re starting to benefit from the actions that Nitin and his team is taking, and I think the trend is our friend is this case with the raw material cost. So can we have the discipline? Is competition pricing it away? There are some factors, but I would say that we have a good opportunity to move our gross margins forwards there as well. Then you look at food, food we have always said in the low-growth environment we’re are -- because of market shares are well placed to manage costs. You see the same on margarine.…

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