Unilever PLC (UL) Q1 2014 Earnings Report, Transcript and Summary

We are about to hand over to Unilever to begin the conference call. [Operator Instructions] We will now hand over to Mr. Jean-Marc Huët. Raoul Jean-Marc Sidney Huët: Good morning, everybody, and welcome to Unilever's First Quarter Results Presentation of 2014. I will begin with the context for the set of results, go over our overall performance in the first quarter, as well as the category highlights. James will then review our geographical performance, and I will conclude with some remarks before taking your questions. Let me first draw your attention to the usual disclaimer relating to forward-looking statements and non-GAAP measures. Moving swiftly on. Let's start with the wider context for this set of results, and much of this will be familiar to you because a number of our competitors have already reported this week and last. Our markets, overall that is, have continued to slow, and they are now growing at around 2.5% plus globally. The picture is not uniform. If you take Northern Europe, market conditions remain tough. There are some economies that are picking up. Having said that, unemployment is still very high and not coming down. The retail environment itself is difficult, traditional chains looking to respond to the continuing growth of discounters, this putting pressure on prices. But by contrast, and who would've said this a couple of years ago, in Southern Europe, there has been some recovery from the very poor conditions that we've had over the last 12 months, and this recovery noted in Spain as well as Greece. Turning to the U.S. There are certainly positive signs in the economy itself. But for most ordinary people, it still does feel like a recession, and the gap between the low and high incomes continues to grow. There are some, but they are tentative signs of improvement in our markets, but they're still very, very muted at this point in time. And the cold weather at the start of the year certainly did not help. Turning to emerging markets. The growth rates also here slowed to around an average of 5% for the first quarter. This is above the overall market. Consumer demand in South Asia and Southeast Asia have slowed particularly, whereas Latin America and places like China have actually held up better. After the sharp devaluations that took place during 2013 and specifically the second half, a number of currencies vis-à-vis Argentinian peso, Russian ruble, all slipped further in this Q1. However, more recent developments have been a little bit more encouraging. Over the last couple of months, you've seen the rupee in India edge up a little, the Brazilian real up nearly 10%, the South African rand up 6% and the Indonesian rupee up around 8%. But even so, currencies remain a significant headwind on our reported results, particularly in H1 this year, and I will return to this in a moment. So it is against this background that we are actually satisfied with the continued growth and good momentum in our business. Solid growth of 3.6% was ahead of our markets and showed the benefit of consistent execution of our strategy, even in more difficult market conditions. At the heart of this strategy is sustained investment behind our brands, with strong impactful advertising and bigger innovations. As one of the several Project Half initiatives, as you know we call it, we have been further streamlining our innovation funnel, cutting out smaller projects so that we can focus on those which make a material and bigger difference. And as a result of this, the average size of projects landing in the markets this year is up by 40%. Now 75% of our projects are margin accretive. Three years ago, we would not have been able to even tell you what that number was. We are also investing in our go-to-market capabilities. We're increasing the reach of our already very extensive distribution network. Our products are sold in more than 8 million outlets around the world, and we plan to add another 300,000 to this during the course of 2014. James later will give you some examples of some of the specific initiatives in a moment. We are also investing in the quality of our distribution with the next phases of the Perfect Stores program. As you all eminently know, embedded in our strategy is the Unilever Sustainable Living Plan. On Monday next week, we will be webcasting a full update on the very good progress we are making, so I will not dwell on this today. The details of the event for next Monday are on the website. I know you're all busy, but if you do have 0.5 hours to spare, I would encourage each and every one of you to listen on how the USLP is helping support, drive growth, reduce waste and cost and help us manage risk. And these make it very much an integral part of the virtuous circle of growth that we are trying to drive consistently each and every year. Let's now take a look at the numbers for Q1. Underlying sales growth of 3.6%, of which volume was up by just shy of 2%, at 1.9%, and price at 1.6%. Let me talk about Easter in one go. The impact of a later Easter was around 50 basis points for Unilever as a whole. The effect of Easter on the Foods growth rate was around 170 basis points. And the growth in developed markets was impacted by around 100 basis points. So obviously, all this will reverse in Q2. M&A had a net impact of minus 0.6% in the quarter, and that's mainly from the disposals last year, which you know, Skippy, Wish-Bone in the U.S.; as well as the smaller business but impactful, called Unipro in Turkey. And these will all progressively anniversary out of our numbers through the course of this year. Currency movements took turnover down by around 8.9%. This is largely from the devaluations that took place in the second half of last year, particularly Brazil, Argentina, Indonesia, as well as India. But a significant part, and you should know this, also comes from the strength of the euro, which is up 4.4% against the American dollar. So overall, turnover decreased by 6.3%. If you were to take currencies roughly today as they are, we would expect the drag on turnover between -- to be between anywhere between 5% to 6% basically, as we mentioned at the beginning of this year, and the impact on the bottom line on EPS to be slightly more. I'm often asked, how do we manage through periods of currency volatility? And I think, today, it's worth just repeating a couple of key points. Firstly, we manage our businesses in local currencies. Secondly, we do not cut back on investments to try to protect in-year hard currency earnings. That would just simply sacrifice the longer term for the short term. Third and finally, weaker currencies do push up the cost of raw and packaging materials in the markets where those materials are consumed. This year, we expect the resulting commodity inflation, including FX, to be on the mid-single-digit level. We do aim to recover the on-cost through pricing, which probably means that price growth will be similar to last year's 1.8%, perhaps a bit higher. But we will, of course, be sensitive to the affordability and the competitiveness of our products in each of the markets in which we operate. This approach is well proven over time and ensures that we are well placed to benefit from the longer-term growth opportunity that will come from growing populations and higher disposable incomes over time. Now let me just take you through some of the highlights of our category performance, starting, as usual, with the largest, Personal Care. The business continues to perform strongly, and it's well ahead of our markets, which grew at 3% in the quarter, compared to our own underlying sales growth, which was up 4.5%, and that includes a very good contribution of volume at 2.7%. All subcategories grew at or close to the mid-single-digit rates, and this really does demonstrate the value of sustained investments in brand support and innovation. Taking just a couple of the brands. Dove, Rexona, Vaseline, TRESemmé and Lifebuoy all grew particularly well and all gained share. Just taking Dove. We brought the NutriumMoisture technology from shower gels into deodorants and the new premium line called Dove Advanced Hair Series, which was just launched in the U.S. Rexona now, along with the other deodorant brands, has the new compressed format of aerosols, which is already doing very well here in the U.K. and Ireland but now introduced in France, as well as Germany, and there will be many more. And we've extended to a male range, as you can see here. Rexona has also launched the premium stick range in the U.S. with the MotionSense technology, which, as you work harder, the more you move, it gives you a longer lasting freshness. Turning to Vaseline Spray & Go line. It's been now launched in Europe as well as Australia. And in the U.S., we've extended the range with new male variants. TRESemmé, which continues to do very well, as well as our whole hair care category, in places like the U.S. and others, and I will mention that a little bit later. But TRESemmé 7 Day Smooth, which offers you a salon-smooth hair for up to a week, has been introduced here in the U.K., as well as in the U.S. And this continues the brand's real promise of salon-quality products at affordable prices, which, as we all know, is so important today. So it won't be any surprise to you that I've mentioned all these brands, and all these brands are innovations that are accretive to our margins. Now let me turn to Foods. Mixed performance. If you take underlying sales, they were down at 1.7%, and this is in weak markets. And this represents a stable performance without the Easter timing effects. The actions that we've been taking are getting Foods into better shape to deliver consistent profitable growth. In fact, the majority of our business is now gaining share. If you take Knorr cooking products, they continue to grow well. And the jelly technology that we've talked a lot about in the already successful bouillons is now being extended to seasonings. In spreads, we're implementing the plan that we set out last year. The first step has been to start to win back share from other margarines, and we're now doing that. However, the longer-term task here in spreads is to stabilize the margarine market, and this continues to be a drag on our growth. So we're addressing this by improving the combination of taste, naturalness and health in our products and entering the faster-growing segments of melanges, made from blends of vegetable oils, as well as butter. So it's early days but promising. If I take the new Rama with Butter in Germany, we are also seeing early good signs, as well as from the new advertising taking place in the Nordic countries. But we have been clear. This is going to take some time to get the full spreads business back to growth. We need to be patient. If I then go to dressings, sales were flat overall, and this despite a very difficult prior year comparator in North America, where, as you know, we included the buildup for the Hellmann's 100th year anniversary activities. Now on a more strategic level, we've always said some parts of our Food portfolio outside our global band will perhaps fit better strategically with others than with Unilever. And we have, specifically around North America, made a lot of progress in focusing our business there. And we've now announced also a strategic review of our pasta sauces business in the U.S., as well as the Slim.Fast brand. And this will bring to a conclusion the reshaping that we had planned for North America. Turning to Home Care. Underlying sales were up over 7%; volumes increasing by nearly 5%. This marks 12 quarters of consistently strong growth. And for the past 2 years, most of it driven by volume. The performance is broad-based. Fabric cleaning, fab con, household care, all doing very well. And we're growing in emerging markets and in Europe. We're benefiting from the actions we've taken over the last couple of years to improve our formulations so that our products perform better than competition in blind tests most of the time. In several parts of the world, as you know, competition has increased, and we stepped up our own innovation and investment accordingly. The new concentrated Small & Mighty liquid detergents have been introduced now into 7 markets. We're following this up with the world's first multi-action capsules, and that combines the best of powders and liquids in one dose, and we're just launching this in France. Comfort fabric conditioners continue to raise the bar on fragrance, so important, and an example of this is the Aromatherapy range, which we've just launched in South Africa, as well as Turkey. Our household care brands stand out, and they continue to extend their presence: Domestos coming into 3 new markets in Africa; and Cif, where we've launched the direct application for cleaners -- floor cleaners, excuse me, in Europe. So a very good performance by Home Care. Turning to Refreshments, finally, which had a very strong start to the year, growing just shy of 6%; volume up 3.6%. Here, I do think it's important that you understand that the better weather in March really led to strong ice cream sales in Europe. And as a result, there was no detectable impact from the later Easter in this category. Emerging markets also had a good quarter in Refreshments, and of particular note is Brazil. Magnum is celebrating its 25th anniversary, and we've got special editions in Europe, in Latin America. And we also have a new Carte D'Or Artisanal range. Cornetto is getting a global refresh, strong activation, including endorsements by Taylor Swift, as well as innovations like double topping in China. Meanwhile, U.S. ice cream sales in Q1, still impacted by the actions that we've been taking last year since around Q2 onwards to reshape the business to a more profitable base. This year, in North America, we've got a good strong program of innovations, and that includes Breyers Gelato, a new premium range; Magnum Infinity; as well as the Klondike Kandy Bars, which is a favorite of mine. Tea continues to post solid growth, with a pickup in the U.S. driven by the new K-Cups. And this has really taken us into the -- one of the faster-growing parts of this market. And for those of you in London, we've just opened our first T2 store in Shoreditch. So I really urge and hope that you have a chance to try it out soon. Finishing off just with AdeS, the soy-based drinks business, which we're now rebuilding following last year's recall, and this is being done through the Soy Force relaunch. The new communication around AdeS repositions the brand as a fuel for doers, offering the benefit of long-lasting strength, and it's being quite well received by consumers. Let me now turn over to James, and he'll give some more details on our performance from a geographic perspective.

Thank you, Jean-Marc, and good morning to everyone. Let me start the regional review with Asia/AMET/RUB which, as you know, is the biggest part of our business. Markets in this region are still growing but at significantly slower rates than in the past. We see less up-trading happening in these markets at the moment, but equally, we're not seeing widespread down-trading either. Against that background, underlying sales grew by 5.8%, with most of this coming from volume, which was up by 3.7%. In much of the region, our own businesses continue to do very well: China, now 2 billion in turnover; Indonesia; and Turkey are notable examples. We also saw a return to growth in Japan, with good momentum from Lux in hair and Dove in skin cleansing; and a good performance in Australia, helped by strong ice cream sales. By contrast, in Russia and Thailand, tough economic and competitive conditions led to lower sales. Growth is broad-based, with Personal Care, Home Care, Refreshment and Foods all performing well. Across the region, we have been and continue to invest in go-to-market capabilities. In India, we have continued to expand our Shakti program, taking on an additional 17,000 women entrepreneurs in 2013, bringing the total up to some 65,000. Together with their menfolk who get to the neighboring areas, we now reach more than 167,000 villages in rural areas in India. In Indonesia, we're extending our distribution system in the outer islands, which have been underserved and where income levels are rising. Over 3 years, we're adding 50 new distribution points and increasing our sales force. And in China, we're increasing our reach to more cities and many more modern trade outlets. At the end of the quarter, we completed the acquisition of a majority stake in Qinyuan, taking us into the fast-growing water purification market in China. This more than doubles our existing global business in this area, which, as you know, is under the Pureit brand. The Americas grew by 3.7%, with volumes up 0.5% and price contributing 3.2%. Latin America continues to grow strongly despite volatile macroeconomic conditions. Weaker currencies and inflation have required further price increases. We've been able to take this additional pricing while still growing volumes by just over 2% through market development and value-adding innovations, such as Rexona Clinical Protection, that's our high-end deodorant product; TRESemmé expert selection; and Omo with a touch of Comfort. At the same time, new advertising campaigns, like those for Knorr baking bags, Axe Peace and Rexona Do:More are attracting new consumers and increased usage. And even in a country as well established for us as Brazil, we're extending our distribution to reach about 6,000 more stores in the northeast and central north parts of the country, and these have been previously underserved. North America declined by 2.4% in the quarter, with volumes and pricing both down. The Easter timing and strong comparator for Hellmann's mask a better underlying performance. We're holding market share in total and grew both sales and share in the very competitive Personal Care category. Finally, let me turn to Europe. Our business here continues to strengthen, with market share steadily improving in both volume and value. But as Jean-Marc referred to earlier, there's no sign yet of any improvement in market conditions in our categories. And in aggregate, our markets declined by about 1% in the first quarter. Our underlying sales were flat, with volume up 1.1% despite the impact of the later Easter and pricing down 1%. Encouragingly, we saw a return to growth in a number of Southern European markets, including Spain and Italy. Personal Care and Home Care both grew. The new compressed deodorants and concentrated laundry detergents, now with eco-pack refills, are both showing how the combination of convenience and sustainability benefits can drive growth. Ice cream sales in Europe were strong in the back of good weather in March, but the warmer winter didn't help as much in soups. In spreads, we're seeing some good progress in margarine shares, but the market is still down. And the next step, as we've already said, is to stabilize the market. Finally, a word on the U.K. Having just posted a 26th consecutive quarter of positive growth, Amanda Sourry is now moving to take up leadership of our global hair category. As well as wishing her well in this new endeavor, we also wish her successor and my colleague and compatriot, Graeme Pitkethly, every success in continuing this outstanding run. So let me now hand back to Jean-Marc to conclude. Raoul Jean-Marc Sidney Huët: Thank you, James. So just in conclusion. The first quarter performance again demonstrates that our strategy is delivering consistent and competitive growth, and they're supported by improving gross margins. This is reflected in today's announcement of a 6% increase in our quarterly dividend to EUR 0.285 per share. And this is obviously fully in line with our policy of an attractive, sustainable and growing dividend. At the end of last year, 2013, we set out a program of further simplification in the business to improve agility and speed and, obviously, reduce costs. This will provide the fuel for sustained investment in growth opportunities, be they support for our brands, innovations that up-trade categories, whitespace entries that bring our brands to new users or, finally, investment in our go-to-market capabilities. The simplification program is well on track, and we will deliver the planned EUR 500 million full year savings in 2015. The timing of restructuring costs, savings and advertising investment means that core operating margin is likely to be down a bit in the first half and up in the second half year. To conclude, our priorities remain unchanged: profitable volume growth ahead of our markets; steady and sustainable core operating margin improvement; and strong cash flow. With that, let's open the floor to your questions.

[Operator Instructions] So we're going to start with Iain Simpson.

A couple of questions from me. Firstly, the dividend hike, that will leave you with really a very high payout ratio for this year, just looking at where consensus is. I mean, is that something that you see as sustainable going forwards, that, that sort of payout ratio, is that how we should be thinking about how that will evolve? Because, I mean, I think on my numbers, that will be something sort of approaching 70%. And then just secondly, could you talk a little bit about that sort of water purification, water filter or water cooling as a category and what you see is attractive in it? Because that sort of device setup is really quite different to, I think, anything else in your portfolio, so just be interested to hear how you think about that longer term. Raoul Jean-Marc Sidney Huët: Thank you, Iain, and I'll take the first question on dividends, and James can take the question on water. On dividends, just a couple of reminders, we've been increasing our dividend, I think, over the last 30 years by 8% or 9%. So we really do want to do this on a steady and sustainable basis. We have a single A+ credit rating. That's very much our target. And yes, we're happy at these types of payout ratios, specifically if you take total distribution into account because, at present time, we don't do other forms of distributions. So if you take overall, we're happy with the increase of 6%, and it's just a gesture of the confidence that we have in the business going forward. James, on water?

Yes, thanks, Iain. So providing safe drinking water is a very important part of the Unilever Sustainable Living Plan. You heard Jean-Marc say earlier there will be an update on progress on that next week, Iain, so I suggest you listen in to that, and you will hear a little bit more about that from some of the experts. As far as we are concerned, Pureit is the kind of the focal point for us. Very difficult to establish Pureit in China from scratch. And indeed, if you look at the needs for water purification in China, it's very extreme. So we had a good look at the market, and we came across Qinyuan. We thought it was a great business. We think it's an exciting way of helping us to deliver on our USLP plan. Raoul Jean-Marc Sidney Huët: Okay, the next question is from Eileen Khoo.

Eileen Khoo here from Morgan Stanley. Just 2 quick questions from me. The first one is could you just update us on your thinking on buybacks in light of recent news in the press that you were considering a share buyback of up to GBP 4 billion, and can you -- sorry, EUR 4 billion. And can you also, on a related topic, just update us on your priorities in terms of use of cash and, perhaps, comments on your view on the M&A landscape at this point? And then secondly, on the margin guidance, can you give us a bit more color on this, in particular, restructuring? And also do you remain comfortable with consensus expectations, which is for about 30 bps improvement in the full year? Raoul Jean-Marc Sidney Huët: Okay. So just starting off with margin guidance. We did think it was important to just let you know that margins would be slightly down in the first half, up in the second half. It's being driven by investments. It's driven by the timing of savings and, obviously, the restructuring. Most important for you is that restructuring is within core operating margin. It's part of our business. And as a result, when we're talking about steady and sustainable core operating margin, it includes the restructuring. So you will see that come through the year. The savings of EUR 500 million on an annualized basis will start from 2015 onwards. On your question about M&A activity, we are obviously pursuing bolt-on M&A. No change there as long as they are not distracting. We have a strong balance sheet, and we would like to add to our current categories as it stands today to strengthen and to be able to complement our existing strategies. So we're always on the lookout for assets like those of Alberto Culver, like Kalina, like Inmarko, like the one in China, and we continue to be very focused on that. And that's actually related to your first question around buybacks. And here again, as we've said before, we do not have any current plans for share buybacks, but we would consider returning any surplus cash to yourselves, to shareholders, at some point in the future if the disposals that we're planning to do would significantly exceed the acquisition prospects. But that's not the case at this point in time.

Thank you, Eileen. I think we've got Warren.

It's Warren Ackerman here with SocGen. Two questions. The first one is just on Latin America. I think Jean-Marc, he kindly gave us the volumes in the first quarter in LatAm -- or might have been James, actually, 2% up in Q1. Just wondering whether you can tell us what the pricing element in LatAm was in Q1 and whether you can give us some examples of where you have taken pricing. And then just secondly, on North America, still down in volume and the value. I take your points about the comps on Hellmann's. But just wondering whether you could update us on where you think U.S. Foods market growth is and also the same thing on Personal Care in the U.S. and whether on Personal Care, can you update us on the competitive intensity that you're seeing in the U.S. I think Paul described it in Q3 last year as being slightly irrational. I think you said you've taken market share in Personal Care, but if you've got any examples of where and how much, that would be fantastic. Raoul Jean-Marc Sidney Huët: Sure, Warren. On your first question, Latin America, indeed, volume at around 2%, 2% plus; pricing is around 7% thereabout. So it's high-single digit. And it is predominantly pricing, and that's, obviously, driven by actions taken in countries like Argentina. For us, just so that you are aware, Venezuela is not material unlike for some of our competitors, but we are enthused about this 2% volume growth. And it reflects the fact that we have done well not only in Argentina but in -- also in places like Brazil. Now if you take Brazil, you know that the GDP growth outlook remains weak. You know that markets have slowed down, but we have a pretty good growth rate, and it's got a very nice balance between volume and price. And a lot of that is being driven by laundry, but also, as I mentioned, ice cream. So that's the picture in Latin America. The overall number has been helped by pricing in Argentina, but that's not the full story. If I just take North America and your questions -- and if I don't answer all the questions, then just let me know and I can add on to that. I'll take Personal Care, and James can talk about Foods. On Personal Care in North America, we're doing well. If I look at our hair care category, specifically, where the competitive intensity, as you mentioned, has been very high, we've actually done very well versus all competitors. Our shares are, I think, at a higher level today than they've been. And as you know, we commanded leadership a couple of years ago, but -- ranging from Suave to TRESemmé to Dove to even T&G, and even Clear is starting to do well. That -- all that portfolio is really strong today, and it's grown in terms of share and continues to do so. So that's really the good part of our North American business. Secondly, before getting into Foods, let me just talk briefly about Tea, where we've actually spent quite a lot of CapEx over the last couple of years. We're starting to see some encouraging performance. It's not just K-cups, but Lipton, as a brand, is doing quite well in North America. Let me turn to Foods, which is the more difficult part to the question. Over to you, James.

So Warren, first of all, you asked about the market overall in North America. It's slightly up, but probably, we'd characterize the whole of the market as being broadly flat within that Personal Care and Home Care, better than Foods. So Foods market, certainly, are not in great shape. Actually, our own performance, despite what you may see or try and read in the numbers, is good in share terms. So we're seeing market share growth in our Dressings business and our margarine business there and in our Tea business. Of course, the issue that we have with margarine is that even though we're getting share, as Jean-Marc said earlier on, in margarine, margarine is still losing somewhat to butter, and so that's also contributing to the negative growth that we see in North America. Martin, Martin Deboo? Martin John Deboo - Investec Securities (UK), Research Division: Just 2 quick questions from me. I mean, I hear what you're saying explicitly on margin, but just one of the things that occurs to me is your 2 fastest growing categories in the quarter, it's your Home Care and Refreshment are your 2 lowest margin categories. And I'd just value some commentary on whether you think that is imposing any sort of margin mix challenge on the business in FY '14. And in Europe, I guess on one hand, I think it's a great performance in the quarter, but I'm sort of struggling to get a read on where the trend is given, though, I would imagine the Easter effect in Europe was at least 100 bps that you reported as developing markets, but also, we've got some sort of ice cream effect. So just sort of what's driving volume in Europe? And where do you think the trend is going is the second question. Raoul Jean-Marc Sidney Huët: Okeydoke. On margin, we are very focused on gross margin improvement. And to really drive the virtuous circle of growth, as we call it, it's all about consistency of performance and driving high-quality performance through gross margin, and so that's why I very briefly talked about gross margin. It's so important to us. Now as you drive that, as we call, Maxing the Mix, it's not just about the mix between categories. It's actually a very granular SKU-by-SKU analysis in terms of our products. But be it through premiumization, be it through cost savings, be it through mix within categories as well as between categories, we don't see that as an impediment whatsoever. I don't want to get into more detail than that, but just be satisfied that we're all focused on that gross margin improvement throughout the year, and we're confident, like we have been over the last 12 to 18 months, that our Maxing the Mix efforts is really bearing fruit. On Europe, the trend is stable. We've seen some improvement in Southern Europe, but I would not want you to get carried away. Economies remain very difficult on a macro basis. The same goes for consumers. We're really focused on cost. There is price deflation. You saw that in our Q1 numbers, and so in terms of a trend, I really wouldn't get carried away. It has been a good quarter, but the real contribution that developed markets, over a long time, should make is just a stable, steady, consistent contribution. And that's what we're expecting from Europe. One comment from James.

Just to say that our -- the thing that's encouraging for us, Martin, in Europe is that our competitiveness seems to have continued to improve, and that's represented by the share gains that we're making. I think our business has become more efficient and more competitive. So depending on what's happening in the markets, I think Unilever is now stronger as a competitive force in Europe. Martin John Deboo - Investec Securities (UK), Research Division: And James, quickly, Easter effect in Europe, can you touch on that?

You were right. Your assessment was correct, so broadly over 100 basis points, okay. We're going to move on now, I think, to Alain Oberhuber.

I have just a question again on the margarine business. Could you tell us how much the decline of the category was in North America, as well as in Europe? And secondly, also, what do you expect when we -- Unilever could see really a bottoming out of the decline of its margarine business? Raoul Jean-Marc Sidney Huët: Okay. So Alain, just quickly on spreads, overall, spreads is down mid-single digit, more impacted than others by Easter. So on an underlying basis, I would say minus 2, minus 3, which is an improvement from the same period last year, but we will always say once bitten, twice shy. These are early days in terms of the progress. We're gaining share, but the market itself is not increasing in growth, and this is going to, perhaps, be a bigger challenge than just increasing the share within margarine. And so I'm not going to call when it actually bottoms out, but it receives all the focus. And as we've told you at the Investor Conference, we're putting our best marketing people on the case. There are signs to be encouraged, but they're very early.

Okay, thank you, Alain. Jeremy? Jeremy Fialko.

Just a second question on Europe for you. Clearly, you've seen a bit of an improvement in Southern Europe but certainly when we look at -- you said, Northern European market, I guess particularly the U.K. and what we see in U.K. retailer, certainly in terms of the U.K. retailer, it's just that the amount of pressure from them in terms of the need for price reductions to match the discounters has increased. So can you perhaps talk about that? Would you say that conditions in Northern Europe are perhaps getting worse and, therefore, offsetting any improvements from Southern Europe? And then in relation to that, do you think that the pricing effect view [ph] of that minus 1% pricing in Q1, do you think that stays stable? Do you think there are risks that, that gets worse over the balance of the year? Raoul Jean-Marc Sidney Huët: So very quickly going through these, Jeremy, I think that the pricing will remain negative, difficult to say which direction, but let's assume for now it's stable. In terms of offsetting, in actual fact, if you take our European business, Southern Europe is a much smaller part of our business. Really, the bastion of Europe is the U.K., Netherlands, and what we called DACH, which is Germany, Austria and Switzerland. So you can't really talk about an offsetting because Northern Europe is so important. So Southern Europe is improving, but over the years, Spain and Greece have become smaller businesses, and the same goes for Italy, either through disposals or through performance. But to get to your question, yes, there is pricing pressure here in the U.K. It will not be easy for our colleague Graham [ph] in the next 9 to 12 months because the market, overall, is a difficult one. We both read the same newspapers and know the same consumers. But it's not the same story, overall, because in actual fact, I think a highlight of our results for the first 3 months is actually our performance in Germany. So again, there's not an overall trend within Northern Europe. They all remain difficult markets, but as we talk a lot about pricing pressure, that, yes, is the case everywhere, but Germany, counter to perhaps the U.K., has actually done very well.

Thank you, Jeremy. Okay, Marco?

I've got 2 small questions. The first is on the innovations' phasing throughout the year. Would you say that you started the year stronger and then it will fade a little bit throughout the year? Or haven't [ph] we seen anything yet, so to speak? The second question is on the market growth, overall. You commented that you see the market decelerating in the first quarter from about the 3%, 4% to about 2.5%. Could you update us a bit more in detail? Is that a volume slowdown of pricing? What particular region? Any color on that would be greatly appreciated. And then the final question is on -- you've commented on Ragu and on Slim.Fast. Could you highlight at what stage you are actually in now in terms of these disposals' potential? Raoul Jean-Marc Sidney Huët: Okay. So I can be very quick on the last one. No further comment except for that we are undergoing the strategic review and started that in Q1. Hence, we're talking about it now. And we'll come back to you once that review is finished, but these things don't take years. But it -- more importantly, it does round off the review that we've done for the portfolio, which has included the sale of Wish-Bone, as well as Skippy. In terms of market growth, so the -- when we're talking about 2.5%, that's value. The volume is basically flat. And if you were to go back to our Q4 results, the value was around 3%, and the volume was flat. So the decrease, if anything, is on the value rather than on the volume side. Just to recap, we see emerging markets growing at around 5%, some slowing down in South Asia, as well as Southeast Asia. That is, obviously, different to where we were 12 to 24 months ago. So this is not a recent decline, but it's a continued one. As James said, Europe is at around minus 1%. We don't expect much of a pickup. Northern Europe remains tough, although, as I mentioned, there are different stories within Europe. And while South Europe is slightly improving, it's not that important overall. Tiny pickup in the U.S., but it's from 0 to 1%. The recovery there remains very uneven. So that's where the growth rates are, value versus volume and from a regional perspective.

Innovation phasing? Raoul Jean-Marc Sidney Huët: Innovation phasing, thank you for reminding me. It's pretty even, actually, through the year. We're investing more than the same period last year. That's what we expect for the first half of the year. So if anything, there won't be a slowdown in the second half.

Thank you. Okay, it's -- Harold Thompson, I think, is on the line now.

Just 2 small follow-up questions. During your speech, Jean-Marc, you mentioned that clearly, the disposal in the U.S. kind of brought that review to an end. Was that a specific comment to the U.S. business? Or is that a comment, kind of, in a wider group perspective? I think 2 years ago, also, you mentioned that you had about EUR 500 million of turnover, which you would review. I think we've done a bit more than that. So is this comment on the disposal program in the U.S. just a U.S. focus or just a general group comment? Secondly, on your gross margins, clearly, turning that round has been very good in the last 18 months or so, and you're mentioning that 75% of your innovations are now gross-margin-enhancing. Do you think that's the right level we should be expecting going forward? Or do you think that number will remain volatile over time? Raoul Jean-Marc Sidney Huët: Thank you, Harold. So I can be very quick on the first one. Yes, it's specific to North America. On your second question, around 3 quarters feels right. Sometimes, we'll be below. Sometimes, we'll be higher. You don't want to, actually in FMCG, be too much higher. You always want to have a little bit of bandwidth to be creative, be innovative. So to be too financially disciplined is also not a good thing. The point made today is that 3 years ago, we just didn't know, but you should see, going forward, the level of around 75% to be in the ballpark.

Thank you, Harold. Richard, Richard Whitaken [ph]?

Two questions from me. First of all, on Brazil, could you talk a bit, perhaps, about what's happening in the market nowadays, what you expect -- and also especially with regards to competition in home and Personal Care categories. And the second question is, could you tell us what you're doing to offset the higher soft commodity cost especially in the developed markets? I guess, and you've alluded to, pricing is difficult, but what else are you doing? Raoul Jean-Marc Sidney Huët: Sure. Well, why don't I take Brazil? Do want to take the commodity costs, James? A couple of points. With Brazil, I think the standouts in Q1 are actually laundry and ice cream. If I take ice cream, very good growth, a lot of activation but also helped by favorable weather. If I take laundry, which, as you know, is really a spectacular business within Brazil, we continue to hold very strong leadership here. We're increasing our positions in liquids, and the dilutes are working very well alongside the concentrates; so again, despite the competitive intensity, continuing well. The same goes for household. Domestos, there called Vim, and Cif are building very well. So we're very actually pleased with the performance in Brazil of our household and Home Care business. Turning to more Personal Care, which was another part of your question; on the cleansing side, things also going well. We relaunched Lux, and that's had a good start. In oral care, if I'm not mistaken, we've launched Closeup, the Diamond Attraction - White, and that's competing well. So things are going well. And I guess the last one, we don't want to talk too much about it because we did last year, is TRESemmé continues to do well. And that's good because Seda, which is the Brazilian equivalent of Sunsilk, remains under pressure, and that's really being supported by continued growth in TRESemmé. So those are the highlights of our Brazilian business. And I think I talked about Ades in the opening remarks, so no need to add there. James?

So turning to your question on commodity cost inflation and what we're doing in the developed markets. So I just remind everybody the -- as Jean-Marc said in his speech, we're expecting commodity costs, as a whole, to be up around mid-single digits for the year as a whole, but you should keep in mind that, that has largely to do with the depreciation of currencies. In hard currencies, commodities are relatively benign. Therefore, the pressure that we're seeing in commodity costs in the developed markets is a lot less significant than it is in the developed world. So we see -- you see edible oils trending up a little bit, and dairy is trending up a bit, but it's nothing really that is so significant. And of course, offsetting all of that, we have our ongoing savings programs, which we do year in, year out under Pier Luigi Sigismondi's leadership, and that gives us the capacity, therefore, to be able to deal with the fact that the pricing pressure is so difficult in the developed markets. So hopefully, that answers your question, Richard [ph]. Okay, good. We're going to move on to Chris Wickham now.

Just 2 questions. One is just on the same sort of question we had earlier on European pricing in Germany. I was wondering if you could comment a bit more on North American pricing going forward. And the second one is just in terms of margarine and share in the category. I mean, how much is there for you to go for outside your own contribution to the category? Raoul Jean-Marc Sidney Huët: Okay. So let me just, Chris, take the first part on pricing. I think that, as we mentioned, Europe pricing, minus 1%, that trend will most likely continue through the year. In North America, we will receive some improvements through the year. There will be some pricing on the back of premiumizations and innovations, but it won't move that much from where we are today. On spreads, James?

So let me take -- it's an interesting question, how much is there to go for outside of margarines within spreads. So the answer is that the spreads market is considerably bigger than just the margarine market, so by definition, a loss. Interestingly enough, if you have a look at what we are calling mélange, which is this kind of combination of butter and margarine, the so-called spreadable butters, now you see the growth in the mélange market in the U.S. is huge. And the market is already very substantial in Europe, and we're not really playing there to any extent apart from Rama with Butter in Germany. So you're going to see from us a lot of activity in the area of mélanges particularly in Europe this year. You see that now starting to hit the market in a number of places, and we will do similar in the U.S. So it's a little bit more difficult there because the definition of a mélange in North America is different. It has to have considerably more butter in it than a mélange does in Europe, and that's a little bit more difficult for us to do from a processing point of view. So what we think, there's lots to go for, but fundamentally, as you've heard us say many times, the most important thing for us to do is to try and convince consumers that margarine isn't just great-tasting and healthy but, also, that it's a natural product. And that's something which is taking us longer to do, but that's the goal that we have set for ourselves. Is that okay, Chris?

Yes, that's great.

Okay, thank you. We've got Graham Jones on the line now. Graham? Graham Jones - Panmure Gordon & Co. plc, Research Division: It's Graham Jones from Panmure Gordon here. Just a couple of questions. Firstly, in terms of the 7.6% pricing that you reported in Latin America, how does that -- how is the sort of the competition moves on pricing? Are you comfortable that they -- your competitors have taken the same pricing action because I've seen in the past with that instance where you've taken price rises and then had to pull those back as some of your competitors have dragged their heels on price rises. And I guess that's a general question for emerging markets as a whole, where you've had to take sort of price increases to offset steep currency devaluations. That's the first question. And then the second question was just -- I wanted to go back to your comments on Russia and Thailand, where I think you said that sales were lower in Q1. I didn't know whether they were lower or slower in Q1, and whether that reflected purely a declining market, so whether you were losing market shares in Russia and Thailand as well. Raoul Jean-Marc Sidney Huët: Okay. Well, let me start with the second one. Russia and Thailand are actually declines -- they are slight declines rather than slowing down. Specifically, some more color on Russia, the good news is we've just now -- we've got the scale, and a lot of that is through the acquisitions of Kalina, Inmarko, and, to a much lesser extent, Baltimor, but we now have a good, scalable business, first point. Secondly, profitability through that scale is increasing; but as it stands right now, third point, the tough markets are really there. The currencies have depreciated by around 8% or so since January. We are gaining share in this difficult market. If you look over the last 12 weeks, it's driven by Personal Care, household cleaners. We remain very happy with our Kalina business. But there are also categories where we've had a difficult first quarter, and Tea is an example of that. And there, we have actually had a pretty intense competitive fight there. So Personal Care, household cleaners doing well; Tea, under some pressure; and ice cream has also declined somewhat. So put together, slight decline in Russia. Thailand is a smaller business, but given the political unrest, that really has reverberated back into the consumer, and so they're a decline as well. On your first question, we are comfortable with the pricing that we are taking. I think that, just given our systems, our operational intensity, we are much closer to the marketplace today than we were 3 to 5 years ago. We had learnings in terms of pricing in places like India laundry and the like. So we're careful. We understand the state of the health of the consumer. We look very closely to where the competition is, but obviously, where you have leadership positions, you are often going to be the first to take the pricing, but we are very comfortable, but we are not complacent, if you understand what I mean.

Okay. Just 2 more on the line. We've got Rosie.

Just one question from me. Could you give an update on laundry and oral care in EMs, these categories have seen an elevated competitive intensity for some time and, more recently, some relatively high-profile launches from peers? I'm just wondering how you think your business has been sort of standing up to that. Raoul Jean-Marc Sidney Huët: Sure, Rosie. Just on laundry, and then I'll let James take oral care. Absolutely, there is increased competition. We're seeing that and feeling it in South Africa, as well as Brazil, and that continues to be the case. We also see continued competition in India, as well as Vietnam. We also see new innovations by competitors in places like France and the like. So the competitive intensity remains high, has been high for a while, and it's all from the same usual suspects. So in that context, we've got good momentum in Europe, and we continue to drive the market development in liquids, capsules, conditioners. So we're happy with our performance, but the competitive intensity and, as a result, the investments required remain high. Oral care on emerging markets, James?

So our oral care business is largely a developing markets business and, of course, we were up against some very determined competitors. And I think our performance in the first quarter is very satisfactory. We see, for example, in Brazil, some of the new innovation that we brought to the market seems to be doing very well. That's the Diamond White Closeup product. In other markets, like Nigeria, we now see Procter & Gamble entering also in India, Procter & Gamble and Colgate up against us. Now I would think we're not daunted by that. Jean-Marc and I had the opportunity to have a look at the innovation plan for our oral care business earlier on in the first quarter, and it's very exciting. We're very confident that we're going to continue to make that business more and more robust. It's a category that we really like. So I'm going to move on to the last caller now. I think that's Javier Escalante, and then we're going to finish. So Javier, the last question is yours.

Jean-Marc, I think that I understand -- I mean, if I understood correctly your comment on pricing -- and I know that it's a very complicated issue because it depends on the categories, the geographies, whether it's promotions or not. But it seems that I understood that pricing would be the same as last year, right. And I would like to understand 2 places, prices in 2 places. In the U.S., you've mentioned that pricing is going to continue to be negative. What is driving that negativity, because I don't think that is the margarine issue, right? And I wonder whether this has to do with promotional activity support -- to support innovation. That is number one. The other place that I would like to understand pricing is in the Asian region. It seems like it's a little bit softer than I thought it would be. It had been much higher before, and you mentioned that there was commodity-driven inflation in those places. So what is holding back pricing there? So pricing in these 2 places. And my last -- my second question has to do with China. Could you tell us what was the actual growth in China, because L'Oreal and Procter has complained about a slowdown and it has, I believe some of them, negative growth? And is it because of the distribution push? Or is it because you are gaining share? And if you are gaining share, in which business are you gaining share? Raoul Jean-Marc Sidney Huët: Okay. Javier, thank you very much. Let me try and be succinct on these points. I'll take China first. You know that GDP has slowed from 10 plus to a new norm of around 7%. We see a stabilization at this point in time. The good news is our turnover is now probably EUR 2 billion on an annualized basis, so a huge improvement from where we were 3 to 5 years ago; gross margins doing well; investing a lot. Our performance in Q1, I would characterize as competitive. We're just shy of double digit, having been, as you know, Q4 double digit. So we see, firstly, ample opportunity. It's a huge market. Many, many consumers. Per cap consumptions remain very low. And yes, GDP is lower, but there really is a lot of opportunity, and we're happy with the performance. We have a new general manager there who's very focused on continuing the good growth levels that we've had. If you take hair, skin cleansing, laundry, they all continued to grow at double-digit levels. So we are pleased with our China performance. We read a lot on what competition has to say. We're just happy about the scale, the margin and the competitive performance there. If I just take the whole area of pricing, indeed, I said that our underlying price growth for 2014 would be at or slightly higher than last year. We will be relying less on carryover on pricing, specifically in emerging markets. We will be taking more pricing in emerging markets. We already have in some areas. Examples are skin cleansing in India, 4 to 5 categories in Indonesia. And you usually take prices increases once or twice a year. So we'll just follow the same rhythm as we already do. In terms of North America and Europe, I'll try and answer the same question in a different way. Pricing remains negative. There's still a lot of intensity from competitors, consumers that are in weak places either in North America or Europe. You're right to say it's not just spreads. There's intensity in our Personal Care business, and you know where that's coming from, Javier. So the whole pressure on pricing in North America and Europe, we just expect it to continue in most of the categories, but the answer is going to be innovation and premiumization. With that, let me sum up. Many thanks from me, as well as from James, for your time today. And let me just summarize. We are pleased this morning with the continued momentum in our business. And despite the tough environment that we've just been talking about, we are confident that we are on track to deliver against the priorities that we have set out for ourselves in 2014. As usual, the IR team will be happy to answer any further questions. And from me and the team, enjoy the rest of the day. Thank you very, very much.

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, and on the Investor Relations app.