WEBVTT 1 00:00:08.265 --> 00:00:11.135 Hello and welcome to this Vidcast, which is dedicated 2 00:00:11.235 --> 00:00:14.535 to a change of leaders at the head of Unilever. 3 00:00:15.085 --> 00:00:16.415 With the underlying question, 4 00:00:16.565 --> 00:00:21.175 does this reflect a change in strategic perspective in terms 5 00:00:21.235 --> 00:00:23.015 of ESG? 6 00:00:24.485 --> 00:00:26.385 In the previous video, which was dedicated 7 00:00:26.385 --> 00:00:28.905 to Unilever in February, 2022, 8 00:00:29.865 --> 00:00:33.065 I had introduced a not desired intrusion 9 00:00:33.205 --> 00:00:36.545 of a very well-known shareholder activist shareholder, 10 00:00:37.125 --> 00:00:38.265 Nelson PEs. 11 00:00:38.805 --> 00:00:42.705 The consequence of his appearance on stage was a significant 12 00:00:43.225 --> 00:00:47.265 increase in the stock price of Unilever moving from 48 13 00:00:47.365 --> 00:00:50.145 to almost 53 per share. 14 00:00:51.545 --> 00:00:55.725 Nelson wanted a seat at the ball to completely restructure 15 00:00:55.905 --> 00:01:00.565 and transform the organization, and he got it in July, 2022. 16 00:01:01.505 --> 00:01:04.805 He is also a member of the board of Madison Square Garden 17 00:01:05.745 --> 00:01:08.365 Sports Corporation, which basically means 18 00:01:08.365 --> 00:01:10.965 that he knows about fights and conflicts. 19 00:01:11.355 --> 00:01:13.205 He's a CEO and founding partner of three 20 00:01:13.205 --> 00:01:14.605 and fund, et cetera, et cetera. 21 00:01:15.445 --> 00:01:17.805 Previous experience, he was also a member of the board 22 00:01:17.805 --> 00:01:22.365 of Proctor and Gamble and Heinz Company for the same reason. 23 00:01:22.795 --> 00:01:24.365 Shareholder activist, 24 00:01:26.075 --> 00:01:28.855 the 2023 annual report communicates 25 00:01:28.855 --> 00:01:33.575 that Nelson Peltz attended to one general board meeting out 26 00:01:33.575 --> 00:01:37.935 of eight, which is not that much in terms of contribution 27 00:01:37.935 --> 00:01:40.095 to the strategic vision of the company. 28 00:01:40.435 --> 00:01:44.375 He received a remuneration of 132,000 sterling pound 29 00:01:44.435 --> 00:01:46.815 for the year, which demonstrate 30 00:01:46.815 --> 00:01:50.775 that per hour is value is absolutely huge to be honest. 31 00:01:51.035 --> 00:01:54.255 He participated to the remuneration committees 32 00:01:54.355 --> 00:01:58.255 and as far as remunerations are concerned, it is obvious 33 00:01:58.255 --> 00:02:01.895 that Nelson PE really has a talent and a knowledge. 34 00:02:03.345 --> 00:02:06.445 Now, what is a consequence of Nelson on board? 35 00:02:07.145 --> 00:02:08.605 To be honest, not that much. 36 00:02:09.265 --> 00:02:12.565 If you look at the evolution of stock price of Unilever 37 00:02:12.565 --> 00:02:15.165 and you benchmark that against the SIE 100, 38 00:02:15.425 --> 00:02:19.565 the stock market index starting in July, 2022, 39 00:02:20.315 --> 00:02:23.565 it's quite parallel in terms of evolution. 40 00:02:24.265 --> 00:02:25.405 Of course, at the beginning, 41 00:02:25.685 --> 00:02:28.445 Unilever stock price was a little bit more sustainable 42 00:02:28.445 --> 00:02:31.685 and the SIE then it went up and the SIE went down 43 00:02:31.825 --> 00:02:33.645 and it went down and so on, so forth. 44 00:02:34.225 --> 00:02:37.325 So basically no change except 45 00:02:37.845 --> 00:02:39.525 probably the last six months, 46 00:02:40.105 --> 00:02:42.165 and we are going to have a look at what happened 47 00:02:42.165 --> 00:02:43.365 during this last six months, 48 00:02:43.485 --> 00:02:48.315 a little bit later in this video, the very big question was 49 00:02:48.895 --> 00:02:51.955 why did Nelson showed on stage? 50 00:02:52.855 --> 00:02:57.475 If you observe the evolution during the last 24, 25 years 51 00:02:57.815 --> 00:03:02.485 of Unilever, you understand that from 2000 to 2007, 52 00:03:02.795 --> 00:03:05.125 there's a kind of stability in the stock price 53 00:03:05.505 --> 00:03:07.645 and stability in stock market as well. 54 00:03:08.515 --> 00:03:12.445 Then there was a period of fast growth in the stock price, 55 00:03:12.725 --> 00:03:17.045 a dramatic increase from 2009, I would say 56 00:03:17.205 --> 00:03:20.565 to 2017 to 2018, 57 00:03:21.225 --> 00:03:25.525 and then from 2018 on there's a kind of stabilization 58 00:03:25.705 --> 00:03:30.565 of the stock price of Unilever with quite some volatility. 59 00:03:30.625 --> 00:03:32.245 And then the question is very much about the 60 00:03:32.245 --> 00:03:33.445 performance of the company. 61 00:03:35.025 --> 00:03:37.725 As you know, performance on stock markets 62 00:03:37.865 --> 00:03:40.525 and performance in business are strongly correlated. 63 00:03:41.445 --> 00:03:44.285 Economic performance in the business is return capital 64 00:03:44.605 --> 00:03:47.405 employed or return invested capital before or 65 00:03:47.405 --> 00:03:50.125 after tax, depending on how the company calculates it. 66 00:03:50.865 --> 00:03:54.285 And market to book is very much about stock market 67 00:03:54.485 --> 00:03:57.605 performance and relative value creation dividing the 68 00:03:57.605 --> 00:03:59.925 enterprise value by the capital employed. 69 00:04:00.785 --> 00:04:02.445 So they are strongly correlated. 70 00:04:02.545 --> 00:04:05.125 And if you look at what happened to Unilever, 71 00:04:05.235 --> 00:04:09.485 there's a strong correlation up to 2014, 72 00:04:10.065 --> 00:04:14.325 not 2018, up to 2014, 73 00:04:14.575 --> 00:04:16.085 there is a strong correlation 74 00:04:16.225 --> 00:04:20.445 and then the return capital starts declining a little bit. 75 00:04:20.985 --> 00:04:23.365 The market to book is also declining, 76 00:04:23.465 --> 00:04:27.245 but at a higher rate than the return on capital employed. 77 00:04:27.305 --> 00:04:31.525 So it seemed that the investors are quite disappointed about 78 00:04:31.685 --> 00:04:34.445 their sustainability and a bit suspicious about the 79 00:04:34.445 --> 00:04:36.445 evolution of the performance of the company. 80 00:04:37.305 --> 00:04:41.965 The market is more anxious than what the return on capital 81 00:04:42.485 --> 00:04:43.765 employed would suggest. 82 00:04:45.445 --> 00:04:47.905 The put in the move formula says that the return capital 83 00:04:48.565 --> 00:04:51.025 is a combination of the return on sale, 84 00:04:51.025 --> 00:04:54.305 the commercial profitability eeb divided by revenues 85 00:04:55.145 --> 00:04:57.945 multiplied by the assets productivity, the assets turnover, 86 00:04:58.115 --> 00:05:01.865 which is calculated dividing revenues by invested capital. 87 00:05:03.345 --> 00:05:04.945 Interestingly, when you observe the evolutions 88 00:05:04.945 --> 00:05:08.265 of the return on capital up to 2012, 89 00:05:08.685 --> 00:05:10.825 you have a stability in the assets turnover 90 00:05:11.445 --> 00:05:14.505 and a small increase in the return on sales. 91 00:05:15.005 --> 00:05:17.545 The increase in the return on sales will keep on 92 00:05:17.595 --> 00:05:20.665 after 2012 to stabilize 93 00:05:21.385 --> 00:05:23.145 starting in 2018. 94 00:05:23.565 --> 00:05:26.105 But what is interesting is that the assets turnover is going 95 00:05:26.105 --> 00:05:29.585 to start declining in 2013 96 00:05:30.085 --> 00:05:33.425 and the assets is a consequence of acquisitions. 97 00:05:34.085 --> 00:05:36.065 So it seemed that investors are not 98 00:05:36.085 --> 00:05:38.385 so happy about these acquisitions 99 00:05:38.925 --> 00:05:41.665 and they are not so confident in the ability of the caper 100 00:05:41.725 --> 00:05:44.545 to transform goodwill into return on 101 00:05:44.545 --> 00:05:46.225 capital and performance. 102 00:05:48.105 --> 00:05:50.445 In the previous video, I was observing 103 00:05:50.445 --> 00:05:52.685 that the return on capital was down, 104 00:05:52.745 --> 00:05:57.275 but the market to book was more down up to 2020. 105 00:05:57.825 --> 00:05:59.875 What happened during these last three years? 106 00:06:00.265 --> 00:06:02.995 Well, the problem is that the gap widened 107 00:06:03.695 --> 00:06:06.875 and if you observe the return on capital employed, it's more 108 00:06:06.875 --> 00:06:09.275 or less stable, whereas pluses and minuses, 109 00:06:09.375 --> 00:06:14.275 but the market to book kept on declining, which demonstrate 110 00:06:14.275 --> 00:06:16.515 that at the end of the day the investors are 111 00:06:17.075 --> 00:06:20.315 absolutely not confident in the future of Unilever. 112 00:06:20.985 --> 00:06:23.635 This had dramatic implications for the company. 113 00:06:24.935 --> 00:06:27.955 Before we get back to this question of confidence 114 00:06:27.955 --> 00:06:30.715 and credibility gap, it's interesting to observe 115 00:06:31.335 --> 00:06:35.235 how much money was dedicated by Unilever 116 00:06:35.235 --> 00:06:39.355 to its customers in terms of customer intimacy, marketing 117 00:06:39.355 --> 00:06:43.275 and sales and customers in terms of product renewal, 118 00:06:43.615 --> 00:06:45.595 in terms of research and development. 119 00:06:47.165 --> 00:06:50.125 Interestingly, over the long run, almost a quarter 120 00:06:50.185 --> 00:06:52.205 of century marketing 121 00:06:52.205 --> 00:06:56.245 and sales is quite stable, around 13% 122 00:06:56.395 --> 00:06:59.085 between 12 and 15%. 123 00:06:59.945 --> 00:07:04.605 It went to a maximum in 2014 at 15, then it went down 124 00:07:04.705 --> 00:07:06.205 to 1213 125 00:07:06.625 --> 00:07:08.765 and last year up back 126 00:07:08.765 --> 00:07:11.805 to 15% in 2023. 127 00:07:13.345 --> 00:07:17.505 Interestingly, the evolution of r and d is not quite stable. 128 00:07:18.245 --> 00:07:22.185 It got to a maximum of 2.5% in 2004 129 00:07:22.285 --> 00:07:26.185 and then gradually decline year after year 130 00:07:26.525 --> 00:07:30.465 and it went down from 2.5% to 1.5%. 131 00:07:30.525 --> 00:07:34.705 Of course, a difference of 1% is not dramatic in terms 132 00:07:34.765 --> 00:07:36.385 of operating income, 133 00:07:37.205 --> 00:07:42.065 but basically 1% out of 2.5% means 134 00:07:42.065 --> 00:07:44.265 that the focus on research 135 00:07:44.265 --> 00:07:47.665 and development when down relative to revenues 136 00:07:47.765 --> 00:07:52.505 by 40%, which definitely demonstrate that you try 137 00:07:52.505 --> 00:07:55.465 to make money out of selling your products, 138 00:07:55.485 --> 00:07:58.065 but the renewable is really at stake. 139 00:07:59.595 --> 00:08:02.265 Let's go back to stock market credibility 140 00:08:02.485 --> 00:08:03.985 and Wall Street opinion. 141 00:08:04.765 --> 00:08:08.065 The economist in November, 2021 142 00:08:08.685 --> 00:08:11.225 is making its title out of pricing. 143 00:08:11.315 --> 00:08:14.265 Power is highly prized on Wall Street. 144 00:08:15.085 --> 00:08:18.825 We have some inflation which we observe on the operating 145 00:08:19.065 --> 00:08:22.345 expenses, and the question is passing the buck. 146 00:08:22.725 --> 00:08:25.025 So investors are like very much those businesses 147 00:08:25.025 --> 00:08:28.225 that can pass on cost to consumers. 148 00:08:28.925 --> 00:08:31.105 So you have to transform your inflation 149 00:08:31.205 --> 00:08:34.905 and cost into increase in your selling prices. 150 00:08:35.685 --> 00:08:38.865 And the power of the brands is something which is absolutely 151 00:08:38.865 --> 00:08:40.105 fundamental in this process. 152 00:08:41.365 --> 00:08:45.305 If we look at the presentation of the accounts full year, 153 00:08:45.325 --> 00:08:47.865 2021, Unilever did a job. 154 00:08:48.655 --> 00:08:50.385 They increase their prices. 155 00:08:50.935 --> 00:08:55.145 Pricing growth is 4.9%, accumulated 156 00:08:55.725 --> 00:08:57.285 Q4 2021. 157 00:08:57.945 --> 00:09:01.605 And so the underlying sales growth was 4.5% 158 00:09:01.625 --> 00:09:04.685 for the full year with volume 1.6, 159 00:09:04.825 --> 00:09:06.525 and the difference is the average 160 00:09:06.735 --> 00:09:08.325 price increase over the period. 161 00:09:08.825 --> 00:09:12.925 So the company is combining increasing its selling price in 162 00:09:12.925 --> 00:09:15.565 order to maintain the margins at a high level, 163 00:09:16.265 --> 00:09:19.925 but also growing in terms of volume, acquiring 164 00:09:20.465 --> 00:09:23.645 new customers, this is 2021. 165 00:09:24.615 --> 00:09:27.075 2022 is a very different picture 166 00:09:27.425 --> 00:09:30.195 because the company accelerated the 167 00:09:30.795 --> 00:09:32.315 increase in the selling prices 168 00:09:32.825 --> 00:09:36.195 from 4.9 Q4 21 169 00:09:36.455 --> 00:09:39.475 to 13.3 Q4 22. 170 00:09:40.215 --> 00:09:43.475 So this very dramatic increase in the selling price 171 00:09:44.095 --> 00:09:46.435 add an impact on the growth full year growth. 172 00:09:46.485 --> 00:09:49.315 Underlying sales growth is now a 9%, 173 00:09:49.895 --> 00:09:52.955 but it's made of 11 point something in terms 174 00:09:52.975 --> 00:09:56.875 of average inflation on a selling price combined 175 00:09:56.875 --> 00:10:00.435 with a decline in volumes by 2.1% 176 00:10:00.815 --> 00:10:04.155 and it accelerated at Q4 2022 177 00:10:04.625 --> 00:10:08.595 with underlying price growth of 13.3 178 00:10:09.335 --> 00:10:12.595 and volume declined by 3.6%. 179 00:10:13.055 --> 00:10:15.995 So definitely growth in terms of 180 00:10:16.535 --> 00:10:21.475 profit growth in terms of revenues is made at the expense 181 00:10:21.655 --> 00:10:23.915 of customers volumes. 182 00:10:25.695 --> 00:10:28.045 It'll take 18 months for Wall Street 183 00:10:28.185 --> 00:10:32.565 to change its mind about these selling price increases. 184 00:10:33.385 --> 00:10:37.045 In July, 2023, the Wall Street Journal mentioned 185 00:10:37.045 --> 00:10:41.125 that investors are no longer happy with all these price 186 00:10:41.805 --> 00:10:44.645 increases generated by the power of the brands, 187 00:10:45.145 --> 00:10:48.565 but which are generating volume declines. 188 00:10:49.465 --> 00:10:53.805 The reason why a company exists is to serve its customers. 189 00:10:53.915 --> 00:10:55.685 It's about the purpose of the company. 190 00:10:56.225 --> 00:10:58.805 Now, if you lose your customer, what happens 191 00:10:58.985 --> 00:11:00.485 to your sustainability? 192 00:11:01.465 --> 00:11:03.165 Now Wall Street is changing 193 00:11:03.785 --> 00:11:07.885 and if Wall Street changes, the company has to change also 194 00:11:09.465 --> 00:11:11.405 in order to transform the companies. 195 00:11:11.855 --> 00:11:15.525 Quite often boards decide to change the CEO first, 196 00:11:16.225 --> 00:11:18.485 and it's quite interesting to look at the list 197 00:11:18.485 --> 00:11:21.005 of the last three CEOs at the head of Unilever, 198 00:11:22.115 --> 00:11:26.605 Paul Paulman, CEO, from 2009 to 2018. 199 00:11:27.385 --> 00:11:31.205 So it was there when the stock price skyrocketed 200 00:11:31.625 --> 00:11:32.725 during 10 years, 201 00:11:33.425 --> 00:11:36.805 but it was also there when the disappointment 202 00:11:37.345 --> 00:11:42.045 and the suspicion of the investors started in 2014. 203 00:11:42.955 --> 00:11:46.525 Paul Polman had spent 27 years at p and g 204 00:11:46.545 --> 00:11:50.805 and only three years at Nestle as a chief financial officer. 205 00:11:51.385 --> 00:11:52.445 It was a short period 206 00:11:52.585 --> 00:11:56.765 and probably not a full credibility for the Nestle board. 207 00:11:57.035 --> 00:11:58.485 Then he became the CEO. 208 00:11:58.485 --> 00:12:02.245 During 10 years at the head of Unilever, he was replaced 209 00:12:02.385 --> 00:12:03.885 by the number two of the camp 210 00:12:03.885 --> 00:12:08.325 and Alan job, who spent his entire career at Unilever, 211 00:12:08.385 --> 00:12:09.765 38 Euros. 212 00:12:10.585 --> 00:12:15.285 And Alan job was CEO from 2018, inheriting from 213 00:12:15.515 --> 00:12:17.125 what Paulman had started, 214 00:12:17.985 --> 00:12:21.045 but he stayed only five years at the head of the company 215 00:12:21.045 --> 00:12:24.325 because he has not been able to convince the investors 216 00:12:24.855 --> 00:12:27.405 theta confidence should be back on stage. 217 00:12:28.355 --> 00:12:32.325 Then he was ousted by the board in July, 2023 218 00:12:32.325 --> 00:12:34.165 and replaced by Chuma. 219 00:12:35.195 --> 00:12:38.125 He's a Dutch person who started his career in a distribution 220 00:12:38.185 --> 00:12:39.925 retail business at a hall. 221 00:12:40.355 --> 00:12:42.125 Then he moved to consumer goods 222 00:12:42.125 --> 00:12:46.605 and he spent 15 years in different jobs out 223 00:12:47.265 --> 00:12:51.685 of the Europe and everywhere on the planet, first at Heinz. 224 00:12:51.835 --> 00:12:56.485 Then after the merge at Kraft Heinz where it probably learn 225 00:12:56.555 --> 00:13:00.925 what distribution is, what brands mean for the customers, 226 00:13:00.985 --> 00:13:03.405 and what cost cutting means for the company. 227 00:13:04.835 --> 00:13:08.895 The presentation of the accounts 2023 is quite interesting. 228 00:13:09.345 --> 00:13:12.535 There are a few slides with the executive committee, 229 00:13:13.275 --> 00:13:16.895 the new CEO insists on the performance culture, 230 00:13:17.025 --> 00:13:20.015 which is in his opinion something fundamental. 231 00:13:20.715 --> 00:13:24.175 But to transform the company, to lead the change, 232 00:13:24.515 --> 00:13:25.895 you need a renew team. 233 00:13:26.675 --> 00:13:28.135 So he is new on board, 234 00:13:28.755 --> 00:13:31.135 the chief financial officer is a new person, 235 00:13:31.275 --> 00:13:33.455 and if you take the list of the 11 members 236 00:13:33.555 --> 00:13:37.975 of the executive committee, six of them are completely new. 237 00:13:38.315 --> 00:13:42.815 So it's a completely renewal of the team to lead the change 238 00:13:42.915 --> 00:13:45.135 of the new Unilever. 239 00:13:46.525 --> 00:13:48.655 What does it mean changing Unilever? 240 00:13:48.965 --> 00:13:50.695 Well, the first thing you have to do is 241 00:13:50.715 --> 00:13:52.095 to stop the bleeding. 242 00:13:52.715 --> 00:13:56.695 You have to stop losing volumes and customers, 243 00:13:57.715 --> 00:14:00.495 and this is what is communicated by the company. 244 00:14:00.675 --> 00:14:03.855 In the same presentation, volumes are improving 245 00:14:04.875 --> 00:14:07.535 as price growth is slowing down. 246 00:14:08.635 --> 00:14:11.295 So if you look at full year 2023, 247 00:14:12.035 --> 00:14:14.495 the increase in the revenues is 7% 248 00:14:15.035 --> 00:14:17.855 and the increase in the prices is only 6.8%, 249 00:14:17.855 --> 00:14:20.455 which means basically that over the year, 250 00:14:20.635 --> 00:14:23.255 the volume remains the same growth 251 00:14:23.675 --> 00:14:25.695 across all business groups. 252 00:14:26.815 --> 00:14:27.855 Positive volume growth 253 00:14:27.915 --> 00:14:30.015 for the Europe, positive volume growth. 254 00:14:30.115 --> 00:14:33.975 For Q4, of course, we had to increase the selling prices, 255 00:14:34.195 --> 00:14:36.895 but it slowed because inflation is easing 256 00:14:37.275 --> 00:14:38.975 and we have power brands. 257 00:14:39.075 --> 00:14:40.655 We have 30 power brands. 258 00:14:41.125 --> 00:14:45.855 What is their contribution growth with 8.6 revenues, 259 00:14:45.855 --> 00:14:48.335 but 1.6 volume growth. 260 00:14:48.635 --> 00:14:53.205 So the company and the CEO are very much insisting on price, 261 00:14:53.305 --> 00:14:55.565 but volume and volume growth. 262 00:14:56.145 --> 00:14:58.005 And what we can observe is that quarter 263 00:14:58.095 --> 00:15:00.845 after quarter, the bleeding was stopped. 264 00:15:01.065 --> 00:15:05.365 And even Q4, you get back to volume growth, 265 00:15:05.365 --> 00:15:07.165 which is absolutely fundamental. 266 00:15:08.545 --> 00:15:10.045 The problem of growth is 267 00:15:10.045 --> 00:15:12.845 that it should not be observed at the expense 268 00:15:12.945 --> 00:15:14.085 of performance. 269 00:15:14.865 --> 00:15:17.445 Growth is consuming financial resources, 270 00:15:17.465 --> 00:15:20.685 but growth can contribute to economies of scale. 271 00:15:21.105 --> 00:15:23.885 And then growth is great in terms of contribution 272 00:15:23.885 --> 00:15:25.645 to the return on capital employed 273 00:15:26.065 --> 00:15:30.165 or as Unilever names, it return on invested capital, 274 00:15:30.415 --> 00:15:32.325 which they communicate after tax. 275 00:15:33.105 --> 00:15:34.885 The company's communicating on the fact 276 00:15:34.885 --> 00:15:38.245 that the return on invested capital is a little bit up 277 00:15:38.885 --> 00:15:43.285 compared to full year 2022, the growth not at the expense 278 00:15:43.285 --> 00:15:47.685 of performance and growth is transforming to performance 279 00:15:47.685 --> 00:15:49.725 and performance into cash. 280 00:15:50.035 --> 00:15:52.445 Cash conversion is more than 100%, 281 00:15:52.705 --> 00:15:54.965 and the company is generating a free cash flow 282 00:15:54.965 --> 00:15:57.165 of 7.1 billion euros, 283 00:15:57.295 --> 00:16:00.645 which is almost 2 billion more than the year before. 284 00:16:01.475 --> 00:16:02.845 What do you do with your cash? 285 00:16:03.595 --> 00:16:05.925 Well, part of the cash is used to be returned 286 00:16:05.925 --> 00:16:08.765 to shareholders, but part of the cash is also used 287 00:16:08.765 --> 00:16:10.085 to reduce debt. 288 00:16:10.425 --> 00:16:14.245 And the leverage net debt divided by EBITDA is down to 289 00:16:14.985 --> 00:16:18.605 2.1, which is basically reasonable. 290 00:16:19.765 --> 00:16:22.625 But what is interesting to observe is that most 291 00:16:22.885 --> 00:16:26.865 of this 7.1 billion of free cashflow is going 292 00:16:26.865 --> 00:16:28.145 to be returned to the shareholders. 293 00:16:29.055 --> 00:16:33.705 5.9 billion capital return to shareholders in 2023 out 294 00:16:33.705 --> 00:16:36.705 of which you have dividends and share buybacks. 295 00:16:37.455 --> 00:16:39.905 Capital allocation is definitely about 296 00:16:40.535 --> 00:16:42.225 growing organic growth. 297 00:16:42.615 --> 00:16:45.425 It's still about investing in capital expenditure, 298 00:16:45.555 --> 00:16:49.185 which represent about 3% of revenues, which is quite stable. 299 00:16:49.405 --> 00:16:53.345 But we have to return cash to shareholders to demonstrate 300 00:16:53.345 --> 00:16:54.505 that we are back to growth. 301 00:16:55.085 --> 00:16:56.425 We are back to performance, 302 00:16:56.845 --> 00:16:59.785 and this money belongs to the investors. 303 00:17:01.365 --> 00:17:03.625 Now, what about ESG? 304 00:17:04.455 --> 00:17:07.345 Well, it seems to be tier two in the financial 305 00:17:07.785 --> 00:17:08.985 communication of the company. 306 00:17:09.605 --> 00:17:14.185 Are we still preoccupied by climate change and the water? 307 00:17:14.565 --> 00:17:18.385 We are preoccupied by plastic and nature and forest 308 00:17:18.645 --> 00:17:21.985 and livelihoods and so on, so forth, quality of life. 309 00:17:22.645 --> 00:17:25.865 But definitely the focus is on productivity, 310 00:17:26.445 --> 00:17:29.425 is on performance, is on financial metrics 311 00:17:31.245 --> 00:17:33.745 in an effort to improve its reputation. 312 00:17:34.265 --> 00:17:37.825 Unilever had acquired Ben and Jerry's in 2000. 313 00:17:38.885 --> 00:17:42.905 The company had been created in 1978 by Ben 314 00:17:43.045 --> 00:17:47.505 and by Jerry, and they were producing the best ice cream 315 00:17:47.655 --> 00:17:51.765 over the planet, but there was a very, very strong social 316 00:17:51.945 --> 00:17:55.005 and environmental awareness inside the company 317 00:17:55.465 --> 00:17:57.445 and a little bit of sense of humor. 318 00:17:57.905 --> 00:18:00.805 For example, the CEO 319 00:18:01.345 --> 00:18:04.285 is a Chief euphoria officer, okay? 320 00:18:04.665 --> 00:18:06.365 And you need this kind of humor 321 00:18:06.365 --> 00:18:08.685 because you have to remember that at Ben 322 00:18:08.685 --> 00:18:10.525 and Jerry, there is a board of directors, 323 00:18:10.935 --> 00:18:13.645 which is independent from the board of Unilever. 324 00:18:13.705 --> 00:18:17.925 So if you are the CE O, you need a little bit of humor 325 00:18:17.925 --> 00:18:21.525 because you report to both Unilever and Ben 326 00:18:21.525 --> 00:18:24.685 and Jerry's board, which is sometimes a little bit difficult 327 00:18:24.685 --> 00:18:27.405 to manage, and there will be obvious 328 00:18:28.095 --> 00:18:30.685 discordant communication as far 329 00:18:30.745 --> 00:18:34.485 as dramatic events are concerned inside the Unilever group, 330 00:18:34.815 --> 00:18:36.605 which is going to put the company in a 331 00:18:36.605 --> 00:18:37.805 very difficult situation. 332 00:18:37.945 --> 00:18:40.005 The acquisition was made for the reputation, 333 00:18:40.025 --> 00:18:43.005 but there were plenty of very difficult 334 00:18:43.225 --> 00:18:45.565 and negative consequences for the group. 335 00:18:47.615 --> 00:18:51.425 When you have a problem, what do you do? Two alternatives. 336 00:18:51.805 --> 00:18:54.185 You solve the problem or you sell it. 337 00:18:55.045 --> 00:18:58.105 And what did Unilever do? They solved the problem. 338 00:18:58.495 --> 00:19:01.025 They had a problem with fair pain, Kenya, 339 00:19:01.315 --> 00:19:02.825 about the T activity. 340 00:19:03.135 --> 00:19:05.745 They sell the tea activity to CVC partners. 341 00:19:06.215 --> 00:19:09.265 They have a problem on the societal aspect 342 00:19:09.485 --> 00:19:11.585 and environmental aspect of margarine. 343 00:19:11.695 --> 00:19:14.705 They sell the margarine to Kohlberg, Kravis Roberts, 344 00:19:14.705 --> 00:19:18.025 in both case, private equity investors so 345 00:19:18.025 --> 00:19:20.985 that you can privately manage the problem. 346 00:19:21.845 --> 00:19:25.185 Um, this sale generated the cash inflow of 6 billion 347 00:19:25.905 --> 00:19:27.625 sterling pounds, which was devoted 348 00:19:27.645 --> 00:19:29.825 to the reduction in the debt. 349 00:19:29.925 --> 00:19:33.865 And Warren Buffet named that Gene Rummy Management. 350 00:19:34.085 --> 00:19:37.185 So you have a number of cards in your hand, 351 00:19:37.565 --> 00:19:41.025 you don't improve the cards, you try to get rid 352 00:19:41.045 --> 00:19:44.225 of these cars, and generally when you know how to play it, 353 00:19:44.225 --> 00:19:45.345 you keep on playing it. 354 00:19:45.805 --> 00:19:49.585 So basically the company announced a few weeks ago 355 00:19:50.055 --> 00:19:53.785 that it was going to cut 7,500 jobs, 356 00:19:54.425 --> 00:19:56.745 probably a skill coming from Kraft Heinz. 357 00:19:57.245 --> 00:20:00.145 And they announced also that they were going to spin off 358 00:20:00.695 --> 00:20:02.505 sell Ben and Jerry's 359 00:20:02.505 --> 00:20:05.545 because it's more a problem than a value creation 360 00:20:05.645 --> 00:20:07.185 for the company so far. 361 00:20:08.915 --> 00:20:11.975 The company presented its accounts full year 2023, 362 00:20:12.315 --> 00:20:15.255 but then life goes on and we are in 2024. 363 00:20:16.675 --> 00:20:19.055 The last presentation was about the first semester, 364 00:20:19.055 --> 00:20:21.095 the first quarter of 2024. 365 00:20:21.555 --> 00:20:23.135 And then you have a complete 366 00:20:23.135 --> 00:20:24.655 transformation of the communication. 367 00:20:25.245 --> 00:20:27.895 It's no more about stop the bleeding, it's about 368 00:20:28.575 --> 00:20:30.295 re Concur customers. 369 00:20:30.915 --> 00:20:32.375 We have power brands, 370 00:20:32.755 --> 00:20:34.575 but we don't use these power brands 371 00:20:34.595 --> 00:20:35.855 to increase the same price, 372 00:20:36.075 --> 00:20:38.255 but to improve volume growth, 373 00:20:39.275 --> 00:20:43.695 the revenue growth is 4.4%, which is divided evenly 374 00:20:43.695 --> 00:20:47.485 between price and volume 2.2%. 375 00:20:47.715 --> 00:20:49.885 Each power brands led growth 376 00:20:50.195 --> 00:20:53.285 with 3.8% volume growth. 377 00:20:53.345 --> 00:20:54.805 We have growth everywhere. 378 00:20:55.465 --> 00:20:57.725 The growth will continue to improve 379 00:20:58.065 --> 00:21:00.565 and price growth is moderated. 380 00:21:01.345 --> 00:21:02.965 So you understand that the role 381 00:21:02.965 --> 00:21:06.725 of these power brands is moving from price increase 382 00:21:07.185 --> 00:21:08.485 to volume growth, 383 00:21:08.865 --> 00:21:10.885 and it is definitely the message 384 00:21:11.065 --> 00:21:14.885 of this financial communication for Q1 2024 385 00:21:16.515 --> 00:21:19.125 consequence on the stock price consequence on the market 386 00:21:19.125 --> 00:21:20.805 capitalization of you and the liver. 387 00:21:21.465 --> 00:21:25.685 If you observe the last six months, you observed that first, 388 00:21:25.705 --> 00:21:29.765 the CEO was appointed in July, 2023 389 00:21:30.435 --> 00:21:32.885 when it was announced as the stock price went up 390 00:21:33.345 --> 00:21:34.365 and then it went down. 391 00:21:34.515 --> 00:21:38.085 It's exactly when you change the coach of a soccer team, 392 00:21:38.145 --> 00:21:41.045 it doesn't change anything except for the first two matches. 393 00:21:41.835 --> 00:21:44.165 Then the stock price is down together 394 00:21:44.235 --> 00:21:45.765 with the stock market index, 395 00:21:46.195 --> 00:21:49.285 then the stock price is down even though the stock market 396 00:21:49.575 --> 00:21:51.205 index is a little bit back. 397 00:21:51.905 --> 00:21:53.285 Why? Because nothing happens. 398 00:21:54.235 --> 00:21:57.165 Then you present the full year 2023, 399 00:21:57.265 --> 00:21:59.925 and there is a stock price increase, 400 00:22:00.465 --> 00:22:02.365 but it is followed by a kind 401 00:22:02.365 --> 00:22:04.405 of disappointment from the capital market. 402 00:22:04.705 --> 00:22:08.205 And then there is a presentation of Q1 2024, 403 00:22:08.505 --> 00:22:11.045 and then you understand that the company has dramatically 404 00:22:11.045 --> 00:22:14.725 changed moving from imposing price 405 00:22:15.385 --> 00:22:17.645 to increasing volumes. 406 00:22:17.865 --> 00:22:20.325 And it seems that at least in the short run, 407 00:22:20.705 --> 00:22:24.725 the market likes very much this new communication 408 00:22:24.865 --> 00:22:27.405 and this new realization of the company 409 00:22:27.715 --> 00:22:30.045 because it's important to communicate, 410 00:22:30.065 --> 00:22:32.005 but it's even better to do it 411 00:22:32.005 --> 00:22:33.845 and show that in the financial metrics. 412 00:22:34.385 --> 00:22:38.485 So definitely, at least in the short run, it seemed 413 00:22:38.485 --> 00:22:39.845 that the market and the investors, 414 00:22:39.875 --> 00:22:43.245 they like very much the new version of Unilever. 415 00:22:44.465 --> 00:22:47.045 But it also seems that this new Unilever 416 00:22:47.645 --> 00:22:50.725 focusing on performance, financial performance metrics, 417 00:22:51.115 --> 00:22:54.005 cash return invested capital, uh, 418 00:22:54.145 --> 00:22:58.845 is implemented at the expense of ESG, which seems now 419 00:22:58.845 --> 00:23:00.205 to be tier two A. 420 00:23:00.205 --> 00:23:02.165 No more tier one X equal. 421 00:23:02.745 --> 00:23:07.605 So is it rose against e sg? The traditional conflict? 422 00:23:08.315 --> 00:23:11.005 This question has no definitive answer, 423 00:23:11.785 --> 00:23:13.885 but there's something which is quite sure in 424 00:23:13.885 --> 00:23:14.965 terms of conclusions. 425 00:23:15.745 --> 00:23:19.285 If you increase very much your attention to a SG, 426 00:23:19.295 --> 00:23:21.485 don't forget that you have customers. 427 00:23:22.105 --> 00:23:24.845 The role of the company is to serve its customers. 428 00:23:25.545 --> 00:23:28.005 The role of the company is to remain competitive, 429 00:23:28.005 --> 00:23:30.605 which means sometimes productivity and cost reduction 430 00:23:30.835 --> 00:23:32.885 because if you are not competitive, 431 00:23:32.945 --> 00:23:35.365 you cannot compete against your competitors 432 00:23:35.665 --> 00:23:38.645 and you have to take care of your shareholders. 433 00:23:38.865 --> 00:23:40.805 You have to generate a return, which matches 434 00:23:40.875 --> 00:23:43.245 with the risk they have taken investing in the company. 435 00:23:43.675 --> 00:23:46.525 Because if you lose your shareholders, it's going 436 00:23:46.525 --> 00:23:48.365 to be at the detriment of the sustainability 437 00:23:48.385 --> 00:23:49.645 and the ability of the company 438 00:23:49.705 --> 00:23:51.525 to invest and create a future. 439 00:23:52.545 --> 00:23:56.645 So the problem is not R against ESG, 440 00:23:56.825 --> 00:23:59.205 but the problem is that sometimes you have 441 00:23:59.205 --> 00:24:00.765 to change your prioritization. 442 00:24:01.625 --> 00:24:05.325 Of course, as far as Unilever is concerned, the credibility 443 00:24:05.325 --> 00:24:08.765 of the company was so much damn that they had to prioritize 444 00:24:09.315 --> 00:24:12.445 performance, but performance in the short run. 445 00:24:13.345 --> 00:24:15.925 Now, you should not forget ESG in the long term 446 00:24:15.925 --> 00:24:18.965 because without ESG, there is no sustainability 447 00:24:19.225 --> 00:24:21.485 and long term survival for the company. 448 00:24:22.625 --> 00:24:24.685 So it's not a question of conflict 449 00:24:24.705 --> 00:24:27.805 and trade off between Rose and ESG. 450 00:24:27.995 --> 00:24:31.765 It's a traditional trade off between short term perspective 451 00:24:32.305 --> 00:24:33.645 and long term perspective. 452 00:24:34.705 --> 00:24:36.405 The long term is always the winner, 453 00:24:36.945 --> 00:24:39.565 but you should not forget about the short term. 454 00:24:40.595 --> 00:24:41.345 Thank you very much.