Unilever PLC ADR UL
Q1 2013 Earnings Call Transcript
Transcript Call Date 04/25/2013

Operator: Welcome to Unilever's First Quarter 2013 Conference Call. This will be presented by Mr. Jean-Marc Huet, Chief Financial Officer; and James Allison, Head of Investor Relations, M&A and Strategy concluding with a question-and-answer session.

We will now hand over to Mr. Allison, he will be with you shortly.

Jean-Marc Huet - CFO: So instead of Mr. Allison, this is Jean-Marc and a good morning and welcome to Unilever's first quarter results presentation of 2013. You will see that we are celebrating a birthday, a hundred years since the Hellmann's brand was born New York.

You might also remember that last year marks 50 years in Brazil. The milestones keep coming and the brand Hellmann's goes from strength-to-strength. Hellmann's is actually one of our EUR14 billion brands with sales now EUR2 billion and rising.

I will begin with the context for this set of results, our overall performance in the first quarter and the category highlights. James will then review our geographical performance and I will conclude with some remarks before taking your questions.

Let me draw your attention to the usual disclaimer relating to forward-looking statements and non-GAAP measures. So now let's begin and to start with the wider context for this set of results in Q1.

If anything, the economic background has deteriorated in many parts of the world. In Northern Europe, consumer sentiment continues to be eroded by fiscal tightening. In the South, countries are in varying degrees of crisis mode with no real sign of improvement anytime soon.

In the U.S. signals are mixed. Employment housing indicators suggest a pickup in the pace of growth, but consumer confidence is at a nine-month low and reduced payroll tax relief is hitting disposable incomes.

The situation in emerging markets is mixed. Brazil remains muted, India relatively stable, China improved somewhat. Growth has slowed in South Africa and Russia as examples. In a number of countries, tensions are high, and we continue to plan on the assumption of an unpredictable and volatile world.

Turning to commodity markets; they have been more subdued, less pressure from the demand side and somewhat less speculation. Crude oil has traded within a tighter range than in recent years, edging down in the last couple of weeks. Edible oil prices have eased, but on the other hand, tea and dairy are up.

There is no letup in competition in our markets, and we wouldn't expect it. Emerging market countries are where the big growth opportunities lie, and that's why major multinationals as well as locals are putting so much of their resources there. It's also where we see the rise of strong local competitors in many of our markets.

In developed countries, consumers remain focused on value and retailers continue to compete to drive footfall. As a result of this, promotional activity continues to be high.

So, in summary, it remains a challenging environment for all of us. But our strategy is working, and against the background of this macroeconomic context, we are pleased with the continued good momentum in our business. Growth of nearly 5% in this environment and against the very high prior-year comparator demonstrates the resilience of Unilever today, very different to a few years ago. In part, it reflects the inherent strengths of our geographic footprint and our brand portfolio today, but it is also clear evidence that the strategy to transform Unilever is working.

Let me give you some examples of this; our innovation delivery to start off with is more consistent, more impactful with a 75% increase in the average project size over the last three years. It is also progressively more premium, be it example such as the new men's face care ranges just launched in a number of D markets, or Comfort anti-bacterial fabric conditioners which are sold at higher price points, or another example, the latest additions to the Magnum range, which raised the bar for ice cream enjoyment.

Secondly, our investment in product quality has allowed us to win, albeit, parity in 95% of our blind tests. Thirdly, we have continued to step up our execution in the markets, be it investments in the sales teams in emerging markets, or the rollout of Perfect Stores, another 2 million of them added in 2012, which takes the total up to more than 5 million, or another example of improved execution is better on-shelf availability, up an impressive 800 basis points over the past four years.

Let me just turn to the Unilever Sustainable Living Plan. This is becoming increasingly embedded in our business model. Around the business, I see more and more of our brands incorporating sustainability as part of the consumer proposition to drive growth. Lifebuoy's latest campaign in India includes a message, this is just an example printed on roti breads asking people if they have washed their hands with the brand.

Comfort One Rinse sales are rising rapidly in Southeast Asia and this saves scarce water in the clothes wash. In the U.K. closer to home we are encouraging consumers to switch to compressed deodorant sprays and we are doing this with a multi brand campaign.

At the same time, we are making very significant reductions in waste and transport. Over the last four years, our manufacturing echo efficiency program has avoided costs of around EUR300 million in energy, materials, water and importantly, waste disposal.

Over this same period, our transport network in Europe has saved more than EUR50 million. We're also managing risk in our supply chain by sourcing more and more of our agricultural raw materials from sustainable sources, up from 24% two years ago to 36% last year.

Here in the U.K. we've seen recently how sensitive consumers can be to the provenance of what they eat. Increasingly brands, which do not offer sustainability and traceability will be rejected by consumers and this is just another reason why we believe that the USLP, to use the abbreviation, is such an important part of our business model.

So now let's turn to some of the numbers for the first quarter. Underlying sales growth was at 4.9%. Now you will all remember that this is on top of a particularly high 8.4% in the first quarter of last year and that included the extra day from the leap year, enough of that.

As I said last year, this is just another reason why our performance is best judged over a longer period than just a single quarter.

Turnover increased by 0.2%, volume up 2.2% and price up 2.6%. Currency weakness in the first quarter, particularly Brazil, India, South Africa, Indonesia and Argentina reduced turnover by 3.5%. If currencies were to stay as they are, we would expect the drag on turnover for the full year to be around 2.5%.

Turning to M&A, this had a net impact of minus 1% in the quarter and this was mainly from the disposals of Skippy and Frozen Foods in the U.S.

Sales in the emerging markets were up over 10% in the first quarter and half of this was volume and half from price. This makes eight consecutive quarters of double-digit underlying sales growth and it really does continue to demonstrate the strength that Unilever has in many of these exciting countries. Emerging markets are now 57% of our total turnover.

Now, let me talk through some of the highlights of our category performance, starting as usual with the largest, Personal Care. Here again, we grew ahead of the market with underlying sales up 8.3% with a very strong contribution from volume at 5.6%; Deodorants once more led the pack, but all parts grew more than 5% broad-based. Much of this growth comes from our established brands like Dove, AXE, Rexona, Sunsilk and Lifebuoy, just to name a few.

Rexona is another one of those brands with sales approaching EUR2 billion, and Sunsilk, as you may know, joined the EUR1 billion brands last year; both of these brands growing at double-digit rates. Within Dove, our largest Personal Care franchise, Dove Men for Care has already reached EUR300 million in just two years.

Now an increasing part of our growth is coming from wide spaces, but also from acquired brands as we develop them in existing markets and introduce them to new ones. TRESemme, as you know, building well but now is including the recent launches in India as well as Indonesia. Since the acquisition of Alberto Culver, we've now taken the brand to five major new countries and as a result, TRESemme is more than 50% bigger than the brand we acquired and that was only two years ago.

Meanwhile assets like Toni & Guy now on shelf in 15 market so far, with good results as we rollout in places like Australia and Turkey.

Some of the innovation highlights, let me just underline of the quarter being the following. The first one, the introduction of AXE male face care range to the U.S. and a Dove Men for Care range – face care range in both the U.S. and Europe.

The AXE enter space campaign with AXEApollo deodorants and deep space shower gels. This is becoming a truly global event, covering both traditional and digital channels in a fully integrated marketing plan of advertising and innovation. In just three months, 60 countries are on board and as of now, we have over 600,000 applicants to go into space. So, again, for any of you yet to apply, the competition is fierce, but importantly, the business results are impressive. In Brazil, for example, AXE sales are up 70%.

A couple more examples; Lifebuoy's premium mix offering 10 times better germ protection and 10 times better skin care has recently been introduced in Indonesia, Kenya and Ghana. Ponds BB+ skin whiteness creams are now in Southeast Asia. These use a new GenActiv technology with a dual action that lightens dark spots from within as well as giving an instant covering affect.

Finally, Nexxus, as an example, has launched a Youth Renewal line also in the U.S.

So I hope you'll notice one common theme, we are now introducing more innovations that offer clear benefits that command premium prices. For us, that means margin accretion.

Let me now move to Foods. This was a mixed performance, driven on the one hand by disappointing results in spreads, good growth in dressings, solid progress in savoury. In total, underlying sales declined by 0.5%. Again, this was against a high comparator of 5.9% in Q1 2012.

Let me first turn to spreads, which, as you know, is around 7% of our total turnover. Further increases in promotional intensity, but particularly in Europe have impacted volumes and both private label and butter have gained.

To reverse this trend, we need to win on taste, improve the communication of the health credentials of our brands. We have closed taste gaps in most of our products and we are addressing the remainder. At the same time, we will continue to build consumer appreciation of the healthiness of our spreads. We are moving to fewer, more natural ingredients and clean labeling supported by some great communication.

All this is not new for yourselves and ourselves, but we probably underestimated how long it would take to make some of these important changes. We are – however, we are confident that we are on the right track and we do expect to see an improved performance in the remainder of the year and beyond. But I think, importantly, it is a feature of the breadth of our portfolio that while one part may underperform, other parts of the business are doing well and that's what we see in Unilever's continued good performance in this quarter.

Turning to dressings; they grew very well in the quarter; Latin America particularly strong, but also North America and Europe up.

Then turning to savoury growth; solid overall, but there is still room for improvement here. Continued good results from Knorr jelly bouillons, baking bags more than offset areas, which were softer, soups and sauces.

Lets' have a look at some of our food innovations. I mentioned at the start the anniversary for Hellmann's and we will build on that to raise the brand's real mayonnaise profile, but it's also good to know that after 100 years the brand continues to innovate.

In Europe, for example, we have a new squeeze pack offering more control in use. Our successful Knorr jelly bouillons are now in more than 35 countries, baking bags over 40 countries and now have an additional range of flavors in Latin America.

We've also been rolling out buttery variance of our Heart Health spreads as part of the program to close gaps on taste. Our patented cool-blend technology will help us make further improvements, and we've just launched Becel liquid margarine into Turkey.

Moving on to Home Care, underlying sales growth was up over 9% with volumes increasing by 5%. Growth here has been consistently strong for the past eight quarters and for each of the past four quarters most has come from volume. All hard evidence of the competitiveness we now have with better performing products and a more sustained innovation delivery.

In laundry, much of our growth comes from up-trading in emerging markets, be it offering more convenience with liquid detergents or formulations specifically designed to get better performance in washing machines, and developing usage of fabric conditioners. All examples, which are driving market expansion whilst at the same time upgrading the margin structure of the category.

In household care, we saw very good growth in emerging markets; meanwhile, France, our biggest European business also grew strongly behind the continued success of Sun machine dish wash.

Turning to some innovations; our Dirt is Good fabric cleaning brand has just launched in the Philippines for the first time under the brand name Breeze. Meanwhile Comfort super-sensorials now offer exhilarating fragrances across Southeast Asia and with clear sustainability benefits, the brand continues to extend One Rinse fabric conditioners and concentrated formats, including a recent launch in China.

In household care, we've just launched Cif and Domestos simultaneously in Brazil. This is the latest of our white space entries.

Now, finally to Refreshment, which grew 2.2%, with price up by 3.9%, volume down 1.6%. Sales in Ice Cream specifically, was slightly up in total. We saw continued good growth in emerging markets, but Europe was well down.

Last year, as you know, we had an early start to the ice cream season in Europe, particularly good weather in March. This year could not have been more different with poor conditions across the region including the coldest March for 50 years in the U.K. and, boy, did we feel it.

As a result, European Ice Cream sales declined by over 10% in the quarter. That said, we look forward to another exciting year of innovations in the Ice Cream category in all regions across the world.

It's been encouraging to see a real improvement in tea, which is up mid-single-digits in the quarter. Where is this coming from? Better product quality, backed up by better advertising and improved in-market execution. The Lipton brand sales approaching EUR2 billion is confirming its strength, particularly in regions such as the Middle East and Russia. And a new global Lipton digital campaign built around the brightness of the brand is driving awareness and generating fans around the world.

Here are some of our innovations. Our teas now taste even better with patented technology that allows us to improve the flavor profile. We are rolling this out broadly and introduced it to Pakistan, the Middle East in the first quarter. In green tea markets like China, we are encouraging loose tea users to switch to tea bags with long fresh leaves.

Magnum, which continues to grow exceptionally well, has further extended its presence with Magnum Gold, introduced in the U.S., a five kisses line in Europe and the Magnum Pink and Black launched in Mexico and Turkey.

Fruttare, already successful in Latin America is now available in the U.S., and Cornetto now has the new mini format and has been revitalized in Europe, Mexico, and Southeast Asia.

With that, let me now hand over to James, who will give you some more details on our geographical performance.

James Allison - Head of IR & M&A: Yes, it really is me this time. Thank you Jean-Marc, good morning everyone. So let me start the regional review with Asia, (I might rub) that's the biggest part of our business. In a number of countries economic growth has moderated and in parts of our portfolio, which are more linked to discretionary spend, market growth has eased a little. Overall, however, the everyday nature of our products and their broad appeal has supported continued good growth.

Against that background, our positive momentum continues. We've now had 10 consecutive quarters of growth at or above 9%. Growth in the quarter was 9.2%, including over 5% from volume. Hair care, oral care, laundry, household care, and ice cream were particularly strong and most countries grew double-digit.

China, in particular, saw good volume-driven growth across all our major categories, despite increasing competition. Against this, sales were a bit weaker in Japan.

South Africa made strong progress despite a weakening of Personal Care markets, as disposable incomes came under pressure. Meanwhile sales in Central Africa were down as we lap the boost last year from selling ahead of the rollout of our regional SAP platform.

Across the region, we've been investing in go-to-market capabilities. For example, in India, we've expanded our Shakti Program with another 35,000 villages added taking the total up to more than 1,30,000. In Indonesia, we're extending our sales and distribution reach to the outlying islands. At the same time, we're opening up more and more Perfect Stores. In fact, we added around 800,000 over the last 12 months, taking the total up to more than 3 million in this region alone.

The Americas grew by 6.1%, with volumes up 2% in the quarter. North America grew by 0.3% with small positives in both volume and price. As with the other regions, this was against the strong competitor, in this case 5% in quarter one of last year. Our overall market share is up driven by good performance in Personal Care. In Foods, our sales were down in the quarter in declining markets.

In Latin America, we've continued very strong momentum with growth of 12.3%, including 4% from volume. That makes seven consecutive quarters of double-digit growth. Our business in Brazil, in particular, has put in another excellent quarter of broad-based growth despite a subdued economy and increased competition. This has been built on a combination of innovation and in-market execution.

We've strengthened our liquid detergents ranges with new formats and are seeing good results. (Powerful) communication in Hair Care and Deodorants and the successful Knorr innovations are also helping to drive growth.

Finally, let me turn to Europe. Underlying sales were down 3.1% within a very difficult economic environment.

Northern Europe held up better with the U.K. and France both showing some volume growth, but in the south in countries like Spain, Italy and Greece, our markets and our sales were hit hard.

The decline in the quarter came in ice cream and spreads. Jean-Marc has already described both of these, so I won't repeat that now. Despite the weak business environment in the region, we posted growth in both Personal Care and Home Care with good results from our innovations such as of Dove, Maximum Protection deodorants and Surf super-sensorials detergent in France.

Overall, we are taking the right action both to manage the short-term and ensure that we come out stronger when the climate in the region eventually improves. This includes innovating across the price pyramid, sustained investment behind our brands and even more disciplined in cost management. We don't expect much improvement in the economic environment anytime soon, but the comparatives for Europe will get easier in the remainder of the year. So again, to get a good assessment of where we are, it will be necessary to look beyond a single quarter.

So, now let me hand back to Jean-Marc to conclude.

Jean-Marc Huet - CFO: Thank you, James. All in all, it's been a good start to the year with continued strong underlying momentum. Our priorities remain unchanged; profitable volume growth ahead of our markets steady and sustainable core operating margin improvement and strong cash flow.

We are confident that the transformation of Unilever keeps us on track to deliver this in 2013. Today, we've announced a 10.7% increase in our quarterly dividend to EUR0.2690 per share. This reflects both the strong set of results last year and the positive momentum we continue to see in the business.

With that, let's now open the floor to all your questions.

Transcript Call Date 04/25/2013

Operator: Celine Pannuti, JPMorgan.

Celine Pannuti - JPMorgan: My first question is on North America, where you've seen a slowdown versus where you were all of last year. I understand that Q1 was a tough comparative, but even we see deceleration versus last year, and think it's pricing driven. Could you give us a bit of a feel of the moving parts of the performance in this area? With pricing close to zero, shall we expect this to continue for the remainder of the year and therefore, most of the growth is volume-driven in North America (up to) '13? My second question is on raw material. You've spoken about less pressure on the oil and edible oil prices. There are as well moving parts there. Overall do you think there is room for you to maybe slightly see lower inflation that you were seeing at the beginning of the year, and therefore, will that mean that we will continue to see pricing reinvestment in this private category?

Jean-Marc Huet - CFO: Let me actually start off with the raw materials and then come back to your question on North America. On commodity costs, at Q4, we said we would expect low to mid-single-digit increases for 2013. Now, you've seen the crude oil has been more stable. It's recently edged down to sort of the $100 range, but there are others that are more mixed, tea, dairy and the like. So what we will do is we'll just update you in our first half year results in terms of where we stand on commodity costs, but we just stick to what we've said in Q4 of 2012. I would just summarize though that consistent year-on-year gross margin improvement is our priority. Going back to North America, we delivered here a positive growth despite a market declining. We've had some positive share and USG underlying sales growth performance from Personal Care. I would say that our shares in spreads actually have stabilized, but only somewhat and our dressings performs well as we're taking Hellmann's to its 100th anniversary. So if you actually look at our business improvements in Personal Care, market share is up. I would underline hair, deo, skin cleansing, skin care and face, spread shares even slightly up and then where there are some losses are ice cream and tea, which we are working on.

Celine Pannuti - JPMorgan: Next question there was on pricing. You had a good pricing component last year. We're seeing it flat in the quarter. Is that a reflection of the environment in Australasia?

Jean-Marc Huet - CFO: Yes that's right.

Celine Pannuti - JPMorgan: On raw material, my question was as well on spread since you're seeing less raw material pressure or even decline, would that mean that the pricing will be lower for the year than you anticipated a few months back?

Jean-Marc Huet - CFO: Again, my comments on raw materials are just overall for the year. If you were to take spreads specifically, the real drive around pricing is the actual gaps between butter and margarine and that is the real dynamic. Obviously, there is a lot of exposure to oil related within spreads, but the real dynamic where we're closing pricing is between spreads and butter to make sure that we are not only focused on the taste, the naturalness, but also providing a proper consumer value. So, that's the real dynamic for this year. There are some signs of butter price increases, but those are quite recent.

Operator: Javier Escalante, Consumer Edge Research.

Javier Escalante - Consumer Edge Research: I have two questions, one on Personal Care, whether you can comment what kind of plans do you have to keep this strong performance in addition for instance TRESemme in India and Indonesia, do you have plans to roll it out elsewhere and if you can discuss what you are doing with Schick in the blades and razor category. This is question one. Question two has to do with Maxing the Mix strategy. If you can comment whether you are getting more traction in emerging markets versus developed market and/or if you can comment the same through the category access whether this is more in Personal Care versus Home Care or Food if you can give us an update in the Maxing the Mix strategy?

Jean-Marc Huet - CFO: Let me take the second part on Maxing the Mix. This is really a global initiative, so we're not singling out one area or the other. As you know from a gross margin perspective, there are not many differences in our portfolio between developing and emerging markets, but the most important point is that we are driving the mix pricing and savings, because growth and gross margin improvement is a priority for 2013. Likewise from a category perspective, while we have been working harder perhaps around ice cream and Home Care given just the structural components of those portfolio driving mix what we call low cost business models is throughout the portfolio. So that's to your second question. On your first question, which are actually three questions, Schick is small experimental, so nothing to expand there. TRESemme given that we've talked enough about Brazil. We wanted to highlight Indonesia, India and the fact that it's just grown by 50%. So it's a real expression of using the Unilever platform with acquired brands and we will be launching the brand into other markets. On Personal Care, the growth continues and the same goes for Home Care, we are gaining share in many of the areas and what gives us a sense of confidence is that every part of Personal Care has been contributing, deodorants has been absolutely the star within the portfolio for the first quarter, but all parts of that portfolio are up 5% or more. So given our geographic footprint, given just the health of the overall category and it's sub-elements, we just think that this is a very important part of our business and today James is more than 35% of total turnover.

James Allison - Head of IR & M&A: Yes and indeed and just to underpin that, I think what we continue to see in our Personal Care business is particularly strong innovation across the board, some excellent communication. So I think Javier you should expect more of the same in terms of the competitiveness of our Personal Care portfolio going forward and that's despite the fact that we've seen lots of competition in a lot of markets, so we're very confident in our Personal Care business going forward.

Operator: David Hayes, Nomura.

David Hayes - Nomura: Two things from me, just one the Foods side, obviously you talked at the Investor Day back in December about looking back to step up and sort of contribute a little bit more, but obviously still struggling for taking that spreads business, I just wonder whether you got a lot of margin there to play with, should we expect that you go through a year or couple of years of really spending behind more innovation, more communication to your points about what you are talking about in terms of margarine, and I just wonder whether that's what we should be looking for the shape there? The second question is on the dividend actually, 10.7% increase, like going back about two or three years, I think you mentioned the policy on dividend saw some trimming over the medium term, there were payout ratio, is that still the policy? It was just quite a big dividend, (I just wonder whether they were) tied into that policy, what we could expect your thinking about earnings growth for the year being?

Jean-Marc Huet - CFO: On dividends, I can be quite brief. No change in policy. We aim to increase our dividend broadly in line with core earnings over the long-term. If you take the last three years, it's been up 8%. Today we are announcing double-digit, sometimes it will be up, sometimes it will be down, but we are remaining consistent with our dividend policy. But it is an expression of our business performance last year and the confidence that we have in the business today. If I then just look at Foods, so I think, yes, it is an area of focus because yes, we can do better, but the way we characterize the performance of Foods is mixed. Please take into account, firstly, dressings did do well and Hellmann's, as an example, EUR2 billion brand continues to strengthen. We are innovating in Knorr and while savoury can do better in soups, sauces and the like, we are innovating, we're executing and it has a good D&E footprint. So the real issue that we're calling out today is spreads. I think the point is very simple. We have, to a certain extent, underestimated the time it will take to turn that part of the business around. Reminding you, it's 7% of our turnover, but if you take a step back margarine is healthier than butter. The category is a very profitable one and we do have excellent shares in many markets, but those markets are weak and I think we have to take responsibility for that. So this is something where it will take a while to be able to drive the core to the next level.

David Hayes - Nomura: Just following-up on that, just in terms of that margin and growth balance, you wouldn't feel that the movement on Food is more – a little bit less margin to invest to get the growth coming through and so you shall close some of those gaps in terms the perception et cetera. You hit the margin is pretty solid still even within that objective.

James Allison - Head of IR & M&A: David, it's a little bit hard to hear you, but just in case Jean-Marc didn't hear you, I think I'd just picked that up. I think the fact that our spreads business didn't perform particularly well in the first quarter, it's not a reflection of the fact that we didn't support it strongly enough. I think it's just getting the communication right, persuading people who are loyal consumers to continue to buy the brand whilst trying to attract new consumers into the brand, it is not easy. We know that margarines are particularly healthy, but the consumer is not perceiving them to be natural versus butter. Those are things that we need to address, make sure that the type of the communication that we provide is better rather than having to spend more in order to try and drive volume. We will have to correct prices a little bit. We've seen some promotional activity in the Western European business that we need to address where we have been a little bit behind competition and we'll do that, but it'd be wrong to think that we haven't been investing in these businesses. We will continue to do that, but it doesn't need to (stacked) up, it just needs to be directed in a better fashion.

Operator: Jeremy Fialko, Redburn.

Jeremy Fialko - Redburn Partners: Couple of questions, first one, just focusing perhaps more on the developed market. How much of a difference would you characterize between the current market growth of Foods versus HPC over the quarter and obviously excluding any kind like weather related effects in ice cream. And the second question is just on your in-quarter pricing. Could you comment on what that was in Q1 and what you think the likely direction of that will be over the reminder of the year? Thanks.

Jean-Marc Huet - CFO: If you just take last part, I'll ask James to take the first one. The last one on in-quarter pricing was stable essentially in the first quarter. If you actually look at pricing for the year, as you know for Q4, we said that it would up, but in developing markets, given what's been happening with currencies and the like, obviously pricing has been higher much more muted in the developed market.

James Allison - Head of IR & M&A: Jeremy, you are asking about market growth and the difference between Food and Personal Care in the developed market. Well, I think first of all we would say that we see the market growth in the developed market is minus 1% to minus 2% overall. So, always difficult to be absolutely precise about these things, certainly down more in Food than in Home and Personal Care.

Operator: Chris Wickham, Oriel Securities.

Chris Wickham - Oriel Securities: Just David earlier touched on margins, and I was wondering perhaps if you could just give some indication about the gap between margins that you see in your mature markets and in your emerging markets and whether that's sort of widening or narrowing. I suppose Jean just to follow-on, I mean, you were saying sort of minus 1% to 2% market growth in developed markets overall. Just if you look at your own business and you had the unusual sort of volatility in the past two years in Q1, if you strip that out and obviously the extra day last year, what is the underlying growth in your mature markets business?

Jean-Marc Huet - CFO: On the second part, we (allow) to strip things out. I think that again we have given you enough data points, be it ice cream down double digit in Europe, given the markets and the like, most importantly, as we urge you to look at the first six months of the year as a real demonstration of the performance of our European business, but we have been flagging for four years that the macroeconomic conditions for everybody, including ourselves, are difficult and will remain difficult. On the first part of your question in terms of margin between emerging markets and the developed markets, I will repeat firstly the fact that the actual gross margins between the two are not that different. Now, we are not talking about profitability today Q1; we will do that in our first half, but if you look over – the trend over the last couple of years, if anything, the gap actually has been narrowing. Obviously, when it comes to A&P and other types of investments, there are parts in emerging markets; we flagged out China and Russia over the last couple of years, where we are up, be it through the P&L, CapEx or M&A investing huge amounts of money, but from a gross margin and structural perspective, if anything the gap is closing and the gap is not a wide one.

Operator: Iain Simpson, Barclays.

Iain Simpson - Barclays: Just a couple of questions from me if I may. Firstly, when it comes to emerging markets we've had a number of your peers talk about money and slowdown in the first quarter. I think you yourself sort of talked that being mixed, but we haven't seen it rarely in your top line at all. I mean, is there just to the white space fill-in and share gain. If so, should we be thinking that your rate of outperformance in emerging markets has structurally accelerated a little bit or is it just a launch facing issue that we shouldn't get too excited about? Secondly, just on spreads if I may, you've talked a bit about that we sort of need to do more there and how it's taking a little bit longer than you thought. Is there a sort of innovation issue that you're addressing, are you able to give us any sort of sense of pipeline or timing on that stepping up?

Jean-Marc Huet - CFO: On emerging markets, I think that to use your words what we are excited about is the ability to have performed over eight consecutive quarters of double-digit growth. D&E is now 57% of our business and I think that what I would focus on is the resilience within that part of our portfolio, because we are not over reliant on one market. As you heard James say, our South American business has done very well in the first quarter and we mentioned Brazil, and yes, we are very aware of the GDP growth declines in Brazil, but yet be it through innovation, execution, market share gains, we have done double-digit growth in a place like Brazil. But it's not just there. It's also South Africa which again has performed in a very stable, healthy contributing way over the last two years now, and the same goes for places like Vietnam as well as Indonesia and China. So they are all contributing, but make no mistake, there still is a huge amount of volatility in each and every market, and so there are areas which we're pointing out today which have worked perhaps less over a 90-day period of time, but the point is that we have a resilience given the breadth of our portfolio, and yes, we are building be it in terms of execution, innovation under the leadership of Harish Manwani, a real power force in the emerging markets.

James Allison - Head of IR & M&A: To your first question about what are we doing in the area of innovation and spreads. Well, one of the things that we have to do better is to compete better with butter and there are range of buttery variance now which have been rolled out across our European business. So we've only just begun that, but you will be able to find buttery variance of our margarines all across Europe very soon and hopefully, try those and you see that the taste (indiscernible) as good as butter, but of course, they are healthier. Then as we continue to look to the future, we will more and more pursue the direction of naturalness, finding ways to include only a few absolutely natural ingredients into the formulations, and then communicate the naturalness of margarine, which is one of the things perhaps we have been missing at that time.

Operator: Alain Oberhuber, MainFirst.

Alain-Sebastian Oberhuber - MainFirst: Alain Oberhuber, MainFirst. Just two questions; the first is going on, on (about) the emerging market, you gave pretty bullish outlook for the Personal Care, as I assume a lot of the Personal Care business is down in the emerging market. We could assume double-digit growth rate also in the next couple of quarters. Could you highlight couple of which direction we could expect some product innovation in the emerging market in Personal Care? The second question is about spread, just about strategic issue. In the Investor's Day, you clearly said that you want to see growth rates in Food in particular in spread, if the growth is not accelerating this year in the spreads business, could you take or are you thinking to take strategic actions in that category?

Jean-Marc Huet - CFO: So let me just take your point on Personal Care and emerging markets. I would prefer not use the words bullish outlook, but just what we're seeing is a very strong continued performance based on execution, innovation in the right markets. We will also not give you the view in terms of double digit or not for the quarters to come. I think that the performance of Personal Care and, importantly, all the sub segments, be it deodorants, be it hair, be it skin care & cleansing, be it the assets that we've acquired, are all strengthening and that's probably the most important point to make around Personal Care and the like. Yes, we are innovating a lot in emerging markets and we mentioned Lifebuoy Clini-Care in India and Indonesia, but we're also doing it in developed markets, be it Dove Nutrium Moisture in the U.S., but also places like China, Lux which we're spending much more time in terms of new packaging and the like. TRESemme, we talked about it, Brazil, Indonesia, India, these are all examples of white spaces, so there is innovation; yes, there's white spaces, new markets and the like, and we're working all of that at the same time.

James Allison - Head of IR & M&A: I think that's the questions that we've got on the line, so perhaps, Jean-Marc, you just want to sum up with final few words?

Jean-Marc Huet - CFO: Well, thank you very much for everybody your attention and thanks from me, as well as James for your time this morning. Just to sum up, we are pleased with the continued momentum in our business, and despite the tough environment that we've been talking about this morning, we are confident that we are on track to deliver against the priorities that we have set out for 2013. As usual, the IR team will be happy to answer any further questions that you have and please enjoy the rest of the day.

Operator: This conference has been recorded, details of the replay number and access codes can be found on Unilever's website. An audio webcast will also be available on Unilever's website, www.unilever.com under Investor Relations approximately. Thank you.