Unilever plc (UL)
Q1 2010 Earnings Call Transcript
April 29, 2010 3:00 a.m. ET

Executives

Paul Polman – Chief Executive Officer
Jean-Marc Huet – Chief Financial Officer

Analysts

Warren Ackerman – Evolution Securities
Sara Welford – Citigroup
Celine Pannuti – J.P. Morgan
Martin Deboo – Investec Securities
Jeffrey Stent – Exane BNP Paribas
Jeremy Fialko – Redburn Partners
Harold Thompson – Deutsche Bank

Paul Polman

Good morning, everybody and thanks for joining us in this first quarter call for the Unilever results. As was mentioned before, I''m actually joined by Jean-Marc Huet, our new Chief Financial Officer and James Allison, our Head of Investor Relations. Before I really dive into the results, let me just briefly mention that is a pleasure to have Jean-Marc in the company.

Jean-Marc has been here now about two months, but I have to say hit the ground running. He obviously comes in with a tremendous track record from his previous experience. And I''m already convinced that he will also make an enormous difference to the company as we move forward on our strategy that we''ve all set out together. Before Jean-Marc actually takes us through the details in a minute and looks at the performance in the quarter and the different elements, let me share with you a little bit my own reflections. And certainly we''ll keep the talk small, short and allow for ample Q&As at the end of it.

Before we dive in, let me remind you again once more of the priorities that we have for 2010 and these are very simply, to drive profitable volume growth ahead of our markets. No different from what we successfully did in 2009. To increase again the underlying operating margin steadily and sustainably, very important. And then last but not least, again in line with what we did last year, to generate a strong cash flow and obviously to lower the average working capital that comes with that.

Now, the most important thing obviously is to be able to do all this whilst at the same time putting things in place to ensure the long-term health of this wonderful company. Against these priorities, I think we have made solid progress and again, a solid start this year, as you''ve seen by the numbers we just published, in an environment that continues to be challenging.

We are certainly well on track to implement our strategy and well on track actually with the results we''re getting but the environment, as you read again yesterday and this morning in the papers, especially here in Europe and some of the places, is not that easy. So before I give you my perspectives on the results, let me just hand over to Jean-Marc for a second who will take you through some of the details on the quarter one performance. Jean-Marc.

Jean-Marc Huet

Thank you very much, Paul and good morning to everybody. I''m delighted to be participating in this, my first results call with Unilever. I have met a number of you already and I look forward to meeting many more of you in the months to come. First, let me draw your attention to the disclaimer relating to forward-looking statements and non-GAAP measures.

Now, let me begin by looking at our sales performance. Underlying volume growth for the quarter accelerated to 7.6%. With underlying price growth of minus 3.3%, this resulted in underlying sales growth of 4.1%. With the euro weakening against a number of key currencies, the ForEx effect was positive at plus 2.3%. Turnover at 10.1 billion euros, 6.7% up on the same quarter last year.

Quarter one marks an important turning point in the evolution of our underlying sales growth, the first sequential improvement in our growth rate since Q3, 2008, when pricing peaked. Let me take a moment to look at the recent trends in pricing. I will then look at volume growth in a bit more detail and at the innovation that is underpinning our performance.

In-quarter price growth was flat for the Group overall. We see an improving trend in the Americas despite high levels of price competition, specifically in Brazil. In Western Europe, the overall position was stable, with improvements in some markets but substantial price competition remaining in others.

In Asia, Africa, CEE, we have adjusted prices where necessary to respond to intense price competition in markets such as India, China, Indonesia and Turkey. In fact, in these markets volume growth is more than compensating for the additional price investment, a testimony to the strength of our brands. Overall, we now expect underlying price growth to turn positive towards the end of 2010, rather than around the middle of the year as previously indicated.

Now, turning to volume. Volume growth in quarter one was the highest we have seen in many years. Even though the prior year comparator was weak, we are encouraged by the consistent upward trend in volume performance across both regions and categories. In the Americas and Asia, Africa, CEE, volume growth has been increasing since the start of 2009. In Western Europe, the trend is similar, but at a lower level.

Central to this strong growth momentum is innovation. We are bringing to market bigger and better innovations and rolling them out faster. The scale of this has struck me as I''ve started to visit our business. For example, in Jakarta, recently I learned about the 67 new launches we will bring to the Indonesian market this year.

Let me build on this theme with some more examples. In HPC, we are continuing to drive powerful innovation through the Dove brand. In hair, for example, the Damage Expert range of shampoos and conditioners will build a position based on better hair therapy solutions. It is also a good example of innovative use of new packaging design techniques. We will push this range into more than 50 markets by the end of the year, much faster than we''ve done before. We have continued to roll out Dove Men Plus Care throughout Western Europe and North America, with encouraging early results.