Unilever PLC
Q4 2011 Earnings Call Transcript

Published: 2 Feb 2012

[James Allison:]

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 will 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.

[Paul Polman:]

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 could see as well. And Personal Care is now 1/3 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 2 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 will 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 EUR 50 million. We could have found that 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 are 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 EUR 2.2 billion in turnover, gained market share, strengthened our brands with more investments. Again, we invested in advertising and promotion, as you see, which is now over EUR 6 billion for the company, and built capabilities in many areas

[Raoul Jean-Marc Sidney Huet:]

Thank you very much, Paul, and good morning to everybody here. 2011 was by any measure a good year for Unilever. Turnover reached EUR 46.5 billion. 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're pleased that the 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 0, and it was negative in the fourth quarter. We set out to do things differently in 2011

[Paul Polman:]

Okay, thanks, Jean-Marc. These results illustrate how much Unilever has changed over the last few years

[James Allison:]

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. [Operator Instructions] So as normal, we will start in the room. Bob, you had your hand up first. Why don't you go ahead?

[Robert Waldschmidt:]

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 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? And 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? And then on the second question, you've mentioned as 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?

[Paul Polman:]

Yes. Thanks, Bob, for the question. Indeed, the 4% to 5% is what we are seeing right now, and that's also what we see already in the last quarter, not different from what we talked in Turkey. As you see in our numbers, and I 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 interest of time, I won't take more. Look at the previous 4 quarters, you will see the same. I deliberately mentioned 4 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 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, you want to quickly talk about?

[Raoul Jean-Marc Sidney Huet:]

Well, no, I'll 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.

[James Allison:]

Michael?

[Michael Steib:]

It's Michael Steib from Morgan Stanley. Also 2 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? And then secondly, given that you're now 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?

[Paul Polman:]

Yes, thanks, Michael. On mix, obviously, what you see is using Europe once more to finance the faster expansions in the emerging market is what you'll read. That's why we're launching so many brands in the emerging markets as well. That actually is a negative mix to some extent, but you're investing in the future. That's what we're dealing with in 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 margin’s flat. All of our energy, and increasingly so, is focused to being sure that whatever we do, we drive mix in the positive direction, despite these trends that I 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, we saw a 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 it's 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 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 3 or 4 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 points.

[James Allison:]

David?

[David Hayes:]

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 underinvestment in the brands, and therefore, looking to 2012, do you feel that there's maybe some risk to having to spend a little bit more to catch that up? And then the second question is on emerging markets slowing, which you mentioned a couple of times, 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?

[Paul Polman:]

Yes, David, 2 things on the A&P. First of all, it's up EUR 150 million 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 to 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 affects everybody's bonus. Instead, that'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 the emerging markets. I remember when I came in 2008, "Oh, you guys are so exposed to emerging markets." Then in 2009, "Oh, competition is coming in to the emerging markets." Then in 2010 or '11, "Oh, you got all the input cost in the emerging markets." Then I made a statement trying to be honest and say emerging markets are slowing down, "Oh, he's giving a warning about the emerging markets." I don't know what you 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 2 billion 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.

[James Allison:]

Okay, Jeremy.

[Jeremy Fialko:]

It's Jeremy Fialko at Redburn. A couple of questions. The first one is that you have mentioned certain commodity prices have come up, so edible oil is 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 second question is just a recap on your volume market shares. I think you've mentioned throughout 2011, those have been broadly flat. I just want to check that was the case in the final quarter?

[Raoul Jean-Marc Sidney Huet:]

So 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 market 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 3, 6 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 are 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 are prices that have already been implemented in the market, and we feel good about that. And when we're looking at anticipating price increases 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.

[Paul Polman:]

On the pricing, just very quickly, Jeremy, the whole year, you saw about the focus in 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. We're pleased 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.

[James Allison:]

So we'll take 2 more in the room. Harold, and then we'll go to the lines.

[Harold Thompson:]

Harold Thompson, Deutsche Bank. Just 3 questions, if I may. As a follow-up on input cost -- or is it 2, sorry. A short one on input cost. The way things have gone in recent years here, when input cost first rose in this latest 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? I mean, because I guess if you had to increase them you might push your volumes negative. So it's kind of trying to see what -- 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 it the white elephant finally realizing that he's not worth fighting a war which he won't win and you are 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 -- changed the way you think Unilever should be run for the short, medium term given all the various precious points you pick up from those kind of important events?

[Paul Polman:]

You're way too flattering in asking your questions, Harold. Let me just go very quickly on all of those. On input cost, I think our brands are stronger. That's really what we're telling you. Our innovations are stronger. And unlike 2008, you 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 cost or shocks like we've seen in 2008 and 2011. So your question is a little bit theoretical, but we will certainly -- we are in certainly 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%. For 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. On -- 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. But -- so I'm sure the organization understands what needs to be done. But having said that, we are determined to 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, in function also of 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. And then there was a -- but more importantly, what I was interested in, is this what is this new form of capitalism that is needed? Now 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 6 seconds from hunger. So how can we get an inclusive growth when more than 2 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 McDonald's, or you saw Netflix or Bank of America trying to change. Or you saw the -- what happened in the U.S. behind the privacy laws when they all went blank and Congress had to come back. So -- 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 3 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 increasingly are going to see that. And if you can all do society a little bit more of a favor is 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 new vision for agriculture to get to smallhold farmers. We're committing ourselves as a company to, directly or indirectly, buy from 500,000 more smallhold farmers. Those are the socially responsible models. But it makes us closer to society. It makes us closer to consumers and increase -- 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 [ph] to work for us. But increasingly, you see that getting through to the bottom line, and that is what we're trying to get across to you 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 getting the attraction. 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.

[James Allison:]

Right. One more question in the room. Xavier, and then we’ll go to the lines.

[Xavier Croquez:]

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 the 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?

[Paul Polman:]

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 increasing. But more importantly, behind our brands, we keep a very competitive share of voice, and we'll continue to do that. And on -- 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 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 BAPs 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. You should not forget, just as an incident, 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 U.S. 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?

[James Allison:]

No, we've got 2 questions on the line. They've been waiting patiently. So Thomas, do you want to ask your question?

[Unknown Analyst:]

I'd be delighted to. This is Thomas Russo [ph]. The fixed income markets are really quite disrupted at the moment with extraordinarily low long-term rates which I think affected you adversely on the pension fund liability but probably give you opportunities 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?

[Raoul Jean-Marc Sidney Huet:]

Thanks, Tom. 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 of our debt, is just so much more important today than it's ever been before, just given the markets, the 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 that 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.

[James Allison:]

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

[Marco Gulpers:]

I have 2 questions, please. The first is, could you provide us further update on Russia and China profitability? And in that respect, again, congratulations on the emerging market delivery. The second question is did you bring forward the overhead cost in the second half of '11? Because if we're looking at the benefit, the second half is almost double that 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 than we've seen 2011?

[Paul Polman:]

Yes. 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, 1 stable. So Alan Jope and his people are doing an outstanding 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. And then Russia has become -- has not become, sorry, 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, Jan Zijjerveld’s 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 had 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.

[Raoul Jean-Marc Sidney Huet:]

Sure. I mean, very specifically, we haven't bought anything forward, just to use your words. If you look at our overheads leverage, it's been 0, then 40 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 2/3 is actually structural. And then there are one-off initiatives that I talked about in my talk, which is around 1/3 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 we will also -- 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 2 years. We need also to invest in capabilities where it's required.

[Paul Polman:]

I think there's one last question.

[James Allison:]

Yes, so one more question in the room. Jon [ph]?

[Unknown Analyst:]

Just a couple of follow-up questions. Is it your best guess, Paul, for 4% to 5% market growth for 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 0.5 point. Just wondering where you see it going forwards. Do you think 2012 will be a one-off because of the restructuring in Europe, and we will go back down to 50 basis points? And then tied to that, do you think the underlying operating margin, as now defined, will be improved upon in 2012?

[Paul Polman:]

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 clearer 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 done. When I came, I thought I could get it done 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'm a little bit -- become a little bit more cautious in my overall aggressiveness and say next year, count about the same in restructuring. And then the numbers should come down -- not only should come down, will come down. And I think this increased responsibility that we give to the operating units to manage this, which frankly wasn't the case right now, was done corporately, will enhance that confidence I have in that. But we will be very clear now that -- and we are always aware that where we spend 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 U.S. We talked about the TRESemmé 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.