Good morning, ladies and gentlemen. I will shortly be handing over to the Unilever team to begin the conference call. [Operator Instructions] To ensure that all participants receive a high quality audio experience, please call from a landline rather than a mobile and avoid using a speaker phone to ask your question. Instead, please use your telephone handset to minimize any background noise. If you do experience bad quality audio, then please try redialing. I'm now delighted to hand over to Richard Williams at Unilever. Please begin your presentation.

Good morning and welcome to Unilever's Half Year Results Update. We expect prepared remarks to be around 30 minutes, followed by Q&A of around 30 minutes or a little longer. All of today's webcast is available live transcribed on the screen as part of our accessibility program. First, I draw your attention to the disclaimer to forward-looking statements and non-GAAP measures. And with that, let me hand over to Alan.

Thanks, Richard, and good morning everyone. Well, we've delivered strong first half of the year, it's a result of our continued focus on operational excellence, which is behind our step-up in competitiveness and the associated good financial performance. We've continued to progress our growth agenda by developing our portfolio into high growth spaces and by focusing on differentiated innovation on our purposeful brands, we're pleased that this has translated into underlying sales growth of 5.4% in the first half, with volume growth of 4% and price growth of 1.3%. In the second quarter, our underlying sales growth was 5%, 3.3% volume and 1.6% price. Our pricing is accelerating as we take action to offset the impact of rising cost inflation, and it crossed the 2% level in June. At our quarter one trading statement, we said we expected a decline in underlying operating margin in the first half of the year. And we indeed saw that with a drop in underlying operating margin of 100 basis points to 18.8% as we lapped the period last year when we were conserving brand and marketing investment during the onset of COVID-19. We also confirmed with our quarter one trading statement that we expected to deliver a slight improvement in underlying operating margin. Since then, over the last quarter we've seen further significant cost inflation emerge, cost volatility and the timing of landing price actions do create a higher than normal range of lately year and margin outcomes. We're managing this dynamically and expect to maintain underlying operating margin for 2021 around flat and Graeme's going to give more background to that in a moment. Earnings per share in constant currency were up 4%. But the impact of translation to Euros at current exchange rates means that the headline EPS was down 2%,…

Thanks, Alan. Our focus on operational excellence and our five sharp strategic choices continue to drive competitive growth. After posting growth of 5.7% in the first quarter, we grew by 5% in the second quarter, leaving the half at 5.4% USG. Of this volume growth was 4% for the half, and price growth was 1.3%. We're stepping up pricing in response to rising commodity inflation, which is driving a sequential increase in UPG as Alan said from 1% in the first quarter to 1.6% in the second and price growth in the month of June was 2.2%. We expect this acceleration to continue into the second half as our pricing actions land in many markets. Growth was led by emerging markets with China in full recovery and strong growth across South Asia and Latin America. However the environment remains volatiles infection rates and restrictions continue around the world. Our local market teams are very well placed to handle this volatility, and are taking all necessary actions, pricing up and driving our mix and savings programs heart. The Asia, AMET, RUB region is a really good illustration of the volatile environment. China is largely back to normal with continued strong consumer demand. In fact, demand in most categories is back to or above pre-COVID levels. Although homecare has been a bit slower to come back. While growth in China continues to be driven by online channels, it has slowed a little versus a year ago with online market growth they're slowing from 40% to 30% on an MET basis. Underlying sales growth in the quarter was again double-digit led by FINRA freshman. On the other hand, the second quarter in India saw a severe second wave. While regional lock downs were not as disruptive as last year, they still increase the…

Well, thanks, Graeme. Let me summarize. We delivered strong first-half underpinned by our focus on operational excellence, which flowed through to good competitiveness and improved growth of 5.4%. We've taken decisive action on pricing, and we'll continue to do so as we face accelerating cost inflation in the second-half. Our portfolio evolution continues to progress well, through the recent acquisition of Paula's Choice through the separation of the tea business, and also the separation of a number of smaller beauty brands and personal care brands with a dedicated management team under the name Elida Beauty. And we're seeing very strong performance of our higher growth segments, Prestige Beauty and Functional Nutrition. For the full-year, we expect underlying sales growth well within our multi-year framework of 3.5%. And while we will also continue to aim for a slight improvement in underlying operating margin. At this stage, we expect margins to be around flat and we will give an update on our latest fuel margin along with our Q3 trading update. Our vision remains unchanged to be the global leader in sustainable business. And we hold this ambition with certainty, the certainty that it is driving us towards the sustained delivery of superior financial performance. Nearly 18 months on the COVID situation remains very volatile and many countries are facing severe new waves from the Delta variant. As I've said before, the view from Delhi or Jakarta is not the same as from London or New York. And this continues to be the case. But our improved level of performance is rooted in matching less volatility with Unilever's growing agility, speed, and resilience. And with that, let me hand back to Richard to kick off the Q&A. Richard?

Thank you, Alan. [Operator Instructions]. So I see our first question is from Martin Deboo at Jefferies. Go ahead with your question, Martin.

Good morning Richard and Alan and Graeme. Can you hear me okay, first of all?

Yes, we can hear you.

Okay. So two brief questions. Clearly the conversation this morning is going to be around the margin guidance. You've been as clear as you can be on commodities. I think on pricing, the question I would like to ask is, what is the flow of gross cost savings into the business coming both into the cogs line and the SG&A line? How big was that in H1? And how big you're expected to be in H2? Second question is on the cash flow, CapEx 1.4% of sales in H1 down on an easy comp in the prior year? Is that just a reaction? Do you can't get projects away under COVID? It's just a low number, guys, is what lies behind the question? So those are the two.

Okay. Thanks very much, Martin and good morning. Graeme, I think I'll ask you to answer both those questions.

Okay, thank you, Alan. Good morning, Martin. Just to talk about the flow of the margin costs going into the margin. Let me emphasize first of all, that this is really all about timing, we have the ability to manage through our brands and the strong local themes. The pricing to cost balance, and we will continue to manage that. It's really the eternal triangle of competitiveness, of inflation and pricing. And the timing of landing price to offset inflation means that the point of time at the year-end is harder to predict. We are pulling all of the levers and managing them all well within our control. So everything that is in our control, and all of the savings programs and mix management and pricing, we're pleased with how that's going in. But there are some things as we described in the presentation that are a little bit that have moved since Q1 into Q2. If we look in aggregate, what looked like low to mid-teens aggregate market inflation at Q1, now looks like high teens. That's the market. We offset that, of course, we see lower than market inflation due to our buying scale and procurement due to our covers, which wind off of course, due to the inventories that we carry, and due to our savings. And as I said earlier, our savings programs are very much on track. That's our supply chain savings, and things like product logic, which is part of 5S. So everything in our control is going as planned, and are actually delivering high levels of impact. When we add all that together though, what looked to be a slight increase in UOM for the year. Our best balance view now is that the UOM will be around flat. And that's therefore what we're guiding to, although, of course, our ambition remains to have a slight increase in our margin. Now, to your question on CapEx. Levels of CapEx where you're right, about the same as they were in the first half of last year, and that was at a depressed level. Going forward, we think that the right level of CapEx for the business is the sort of long-term run rate of about 2.7%. On the - that's a healthy level of CapEx for the business, recognizing that quite a bit of our production now is done through third-parties, not within our own network. And the reason why it's slightly depressed in the first half is because a number of projects that would have been underway. There has been some delay in project teams being able to get on with CapEx, and there's been some challenges of supply of equipment, et cetera. So short-term impact very much related to the conditions that we're managing under. And we think that our CapEx levels will normalize back to the sort of longer run 2.7% Martin.

Okay, thank you. Thanks for the question, Martin. Let's go straight to Tom Sykes at DB. You're on Tom.

Yes, thanks. Good morning, everybody. So firstly, just on the competitiveness, the figure that you've given the 52% is obviously a bit lower than it's been for the last couple of quarters. So maybe you could give a view there. I know you don't like giving the in-quarter number that maybe just if there's some confirmation that you're still above or where are you versus the 50% on that level, and how you expect that to progress. And then maybe related to that. Again, as the - maybe dissecting the BMI expense, what's perhaps happening to rates and your volume of expenditure. And do we still expect an increase in rates to come through in the second half of the year and how do you balance that versus your promotions and the volume of advertising please?

Okay, thanks very much, Tom. I'll take the first one. Graeme, perhaps you can address the second one. So Tom, we're - what we're trying to do is make sure that we do keep looking at competitiveness on an MAT basis. It is quite volatile 12 weeks to 12 weeks, we do see cells moving between gaining and slight losses. And I think the simplest way to answer your question is that it's been a long time, since we've had an L12 - at least a 12 week period, that's below 50%. And that continues to this day. So the L12 is healthy above 50%. And we also, just to give you a sense, we have to bring the shutter down at a certain date that gives us an aligned date for reporting the MAT. But of course, not all markets report on the same date. And as a result of that, since we closed the MAT, we have seen one or two important markets sharing an insight into what their next period will look like, particularly U.S. and India, and those both look very healthy. So we're confident on staying above 50% on competitiveness, and the immediate forward look looks fairly good. Graeme.

Hi Tom. Just if I could just use the opportunity to zoom out a little bit on brand and marketing investment. As we said in the speech, our spend was up on a like-for-like basis €400 million, this half compared to the last half, when we were conserving. If you go back on a multi-year basis, our BMI spend as a percent of turnover has been pretty consistently around 14% for the last few years, but there's a lot happening within that and quite a lot of change in mix. For example, 40% of our media spend is on digital, that's not a very relevant figure in the aggregate. Obviously, it's very different in the market. China much higher, India much lower, for example. But that's just a broad sizing. Within step up in BMI. The lion's share has gone in media, not advertising production. So we're showing more of our wonderful creative to consumers, which is what really matters at the end of the day. In terms of your question on rates versus volume. The outlook and media rates across markets, it depends very much on each local country. We are seeing very stark differences, some deflation in some parts of the world, no deflation, normal levels of inflation in other parts of the world. It's very much linked to the status of the pandemic. And of course, media very much determined by market forces. But we don't expect to see a large deflationary market in media rates for this year. And we're not in fact seeing that. So it's mostly a volume question that we are seeing. So that gives you a little bit of color on that.

Just a footnote Graeme, a couple of important points. Our share spend to share market as a major - one measure of competitiveness is a multi-year high. And it's in the public domain that we're doing a full media review of our buying. We think we buy very competitively, but these reviews of our media buying, which we do every three years or so. Test that assertion by putting a competitive element into our media buying operation. Richard, back to you.

Thanks for that, Tom. Next question is from Alicia Forry at Investec. Go ahead, Alicia.

Hi, can you hear me okay.

Yes, we can hear you.

Okay, great. Thanks. My question is on price. It seems like perhaps putting it all together that a price has been a bit harder to take in some markets than…

I lost Alicia.

We've lost you Alicia. Okay, let's jump to the straight question. If Alicia gets back in later on, then we can try again. So let's go to Guillaume Delmas at UBS. You want to go ahead with your question, Guillaume.

Thanks, Richard. Good morning, Alan and Graeme. A couple of questions for me. First one is on Functional Nutrition. Still a strong performance in Q2, but it's still a marked slowdown relative to what we've seen in the past 12 months where gross was more around 40%. So appreciate liquid IV other recent acquisitions will help your underlying sales growth there going forward. But could you shed more light on why we've seen such a slowdown in that second quarter? And maybe if you can also provide a quick update on where you are from a revenue synergy standpoint for Horlicks? And then my second question, it's on Ben & Jerry's. I mean, it was making the headlines a couple of days ago, your decision to stop selling the brand in Israeli settlements. And so here, I'm wondering, are these the type of decisions that you're going to be taking going forward? Because it's kind of the natural next step for brand with purpose or is it very much specific to Ben & Jerry's DNA? And I guess the bigger picture here would be, where do you draw the line between purpose and an active political agenda? Thank you.

Why don't I take both of those and give you a break Graeme? The Functional Nutrition, Guillaume, is very simple to answer, which is that, up until now, we've only been reporting the smaller, a couple of the smaller VMS brands based in North America. And the reason for that is that those are the only ones that have been in our base for more than a year. In Q2, we started to add in Horlicks, which grew mid to high single-digits in the half. But obviously, not at the rate of some of the indie brands, which are growing, as you have correctly pointed out in the high double-digit range. So it's all about the first quarter of reporting Horlicks in our Functional Nutrition base. We're delighted with the progress on Horlicks top and bottom lane, ahead of our business case, revenue synergies coming through clearly both from stronger innovation and better reach. Hindustan Unilever have done their usual masterful job of integrating that ran that business and making sure that we really deliver on the top and bottom line synergies that were in the business case. So let me pause there. Hopefully that gives you a clear answer on Functional Nutrition. On Ben & Jerry's. Look, this was a decision that was taken by Ben & Jerry's on its independent board, in line with an acquisition agreement that we signed 20 years ago. We've always recognized the importance of that agreement. Obviously, it's a complex and a sensitive matter that elicits very strong feelings. I think, if there's one message I want to underscore in this call, it's that Unilever remains fully committed to our business in Israel. We have four factories, including a recent €35 million investment in a new razor factory for Dollar Shave Club. We've got 2,000 employees in our head office and distribution centers. And in the factories, we've put a billion shekels of investment into the country in the last 10 years. That's just the capital investment. And we're very active on the startup community and with social programs in Israel. I can assure you it is not our intent to regularly visit matters of this level of sensitivity. It's been a long standing issue for Ben & Jerry's. And we were aware of this decision by the brand and its independent Board, but certainly not our intention that every quarter we'll have one quite as fiery as this one.

Okay, thank you. And thank you Guillaume for the questions. Okay, let's try again with Alicia Forry at Investec. Alicia, do you want to try again and see if we can hear you properly.

Yes. Can you hear me?

We were can now. Yes.

Okay, great. Sorry about that, I lost service. And so it sounds like maybe price has been a little bit harder to take in some developed markets. Is that a fair characterization? And what are the competitive dynamics in your developed markets across the Unilever Group?

Graeme, you want to crack at that? I'll augment.

Yes, sure. Hi, Alicia. So as we said, we're definitely, we're seeing our pricing step up 1% in Q1, 1.6% Q2, 2.2% in June. And we expect that trend to continue for sure, H2 pricing will be ahead of H1. And the whole business has been very, very focused on this. And where we're taking price for example in the U.S., we've taken less price increases across the portfolio, that's going to increase, you'll see that in the second half, LATAM's done very strong pricing, particularly in Brazil, and India has been lending pricing in areas like skin cleansing. As a broad generalization in the developing markets, we tend to take pricing in a more stepped basis, that's the best way to land it. And to your question about developed markets. And yes, it is a little bit more difficult, let me characterize that the nature of the organized trade in Europe and in the U.S. is that you've got more structured things now. What that means of course, when I'd say price, we're not talking list price, list price is really at the end of the stack and the levers that we seek to pull, first of all, we deliver our Savings Programs, then we use that revenue management, driving mix, driving pack architecture, looking at promotional efficiencies, looking at our trade spend et cetera as ways of covering the cost inflation. So pricing is just one lever of that margin. But in Europe for example, I mean all countries in Europe are different, of course, but in markets like France, and in Germany, we're on much more structured, annual or biannual pricing agreements. So the windows are a little bit more difficult. It's a little bit less structured in markets like the Netherlands, and in the U.K. And the U.S. is sort of a hybrid of that. But as I said, in the U.S., we've taken pricing actions. And we'll start to see those coming through in the second half. So yes, to sum up really, there is a difference between the developed markets and the developing markets, quite different pricing. But I have to say, our teams on the ground, very experienced, and as I said in response to Martin's question, it is that eternal triangle of the competitiveness of our growth, which is our priority, of course landing the pricing, and managing the cost of inflation delivering our Savings Programs. So, we're managing all those things in a very fine balance.

Let me complement your answer, Graeme, with just a couple of extra points. So Alicia, I definitely would not characterize it that we're somewhat struggling to take price. The nature of taking price is different between D and D&E markets. Unilever's enjoyed positive pricing movement in 39, out of the last 40 quarters. And I think the most important characterization is that, when inflation is accelerating as it is right now, there is an inevitable lag between the cost signal and landing price increases. And it's different between D and D&E markets. But the real issue is the continued acceleration of cost input signals through the second quarter versus where we were at the end of the first quarter, okay?

Okay, thank you, Alicia. Let's go to Warren Ackerman next at Barclays. Go ahead, Warren.

Good morning, guys. It's Warren here at Barclays. I've also got one on pricing. I was struck by the difference in pricing between LATAM plus 7 and Asia plus 1, I imagine in Asia, you've got commodity inflation, and FX devaluations. It does look like in Asia pricing is quite benign. Is it partly a function that you're up against locally or vertically integrated players that have palm oil plantations who have a benefit on commodities that you don't, it's harder to take pricing in Asia and you're seeing trading down, I'm just struck by the difference in pricing between those two big EMs? If you could maybe comment on that, that would be helpful. And then maybe specifically, what kind of pricing do you need in the second half to hit flat margins? I mean, I imagine you're looking to maybe double it in H2 versus Q2, is that the right kind of quantum that you're thinking about on pricing? And then secondly, just going back to Tom's question on market share, I'm a little bit confused, if you're saying that the 12 months, MAT was 57%, in Q1, and that was 53% for the half year, it must have been in the 40s in the second quarter, but I also heard you say, it's above 50% in the last 12 weeks, and that you're confident, it will remain above 50%. But I guess if pricing needs to move up meaningfully in the second half, wouldn't that impact MAT share even more, maybe you can discuss your sort of philosophy around kind of market share momentum versus the need to get pricing? Thank you.

Okay, great. Thanks, Warren. And Graeme, why don't you carry on with the pricing point, and I'll come back on market shares.

Yes, hi, Warren. So I've talked a fair bit about Latin America, but for sure, Latin American businesses very skilled and very practice that leading on price and you are seeing, yes, we were above 7% price growth in Latin America in the quarter, it's probably worth splitting Asia down into a couple of halves, let's maybe South Asia, and Southeast Asia, but there's quite a difference there between the two, as I said earlier, our business in South Asia is taking pricing. Pricing there was sort of mid-single digits. But it's been stepped in a very measured way. And Southeast Asian pricing is much more muted. It's pretty much flat in the quarter. And you're seeing there quite an impact from our business for example, in Indonesia, and Indonesia is quite a challenging market for us at the moment, we've got a lot of competition from which is very focused on value propositions for the consumers, particularly the case in our fabric cleaning business and in our dish wash business. One or two of those players, yes, they're vertically integrated. And that means that there's perhaps a benefit from that vertical integration in Palm oil pricing. But it does mean that from a competitive perspective, pricing in the market doesn't move up. Actually, from a consumer perspective, that's probably a good thing, because the economic situation in Indonesia, and the pandemic situation in Indonesia would mean that we really do want to keep our business or products affordable for value conscious consumers. So I think, a combination of competitive dynamics, certainly that's some but from a consumer perspective, we would want to be in the same place, so I think we will see more muted pricing in one or two of the geographies of Southeast Asia, that's largely the driver that you see between the Asian pricing performance in aggregate, and the Latin American pricing performance.

Thanks, Graeme. Warren on pricing, you should be aware that the MAT is done on a monthly, it's a month-by-month calculation and that does give different mathematical outcomes from simply averaging quarters. Let me focus on and I can assure you that latest 12 and as we try and get a glimpse around the corner, remains firmly above 50%. Let me try and give you a philosophy on how we see that eternal triangle that Graeme is talking about cost, price and competitiveness. We had talked previously about in some periods, business winning share going above 60%. We don't think that's sustainable. We'd like to be in the 55% to 60% zone, that really would be a meaningful stimulus to our overall top line. The pricing actions that are being taken remember are not unilateral are in the context of very significant inflation that all of our competitors category by category are seeing one way or another. But we would be happy to see competitiveness dip into the low 50s if that's what it took to maintain the integrity of the P&L by leading with price where we need to. So we take responsibility, when we're market leaders that we are - we tend to move first on price and will tolerate competition following for a while, even if that means competitiveness dipping a little bit. So we're comfortable to 50% to 55%, 55% to 60% is a sweet spot, over 60% is great but probably not sustainable. Hopefully that gives you a feel.

Thanks for the question, Warren. So we've hit the hour, but we'll run on for a little bit longer. A little few people still wanted to ask questions. If I could ask everybody to make sure they stick to just two questions. So the next question is from Celine Pannuti at JPMorgan. Go ahead, Celine.

Thank you. Good morning, everyone. My first question is really about the guide. I say look at the share price performance today on what is admittedly slight H1, that's what's slightly ahead of consensus, your top line guide is rated, your margin guide is only slightly changed and yet the shares are down five, I think there seem to be a crisis of confidence. And effectively as late as June, you were quite confident about your margin. So what - and clearly, when the cost base was already accelerating. So given that you said there's a wide range of outcome, I think it would be interesting to understand what kind of visibility you have on your pricing and your margin, as you said the triangle, effectively to see you landing around flat for the year. And my second question is on raw mat and I'm sorry, it's something that if you could clarify, when you talk about your high teens run mat inflation in H2, am I right to say that this as you said is the start? So is there a delay of about six months, so will that be for next year H1? And could you give us for H1 this year, what was the gross margin impact of raw mat before pricing and before any savings? Thank you.

Okay. On the business on day-to-day movements of the share price, but we feel these are strong first half delivery numbers, as you say slightly up on market consensus or top and bottom line, confirming revenue for the year, revenue growth for the year. And I think being realistic on margin based on sequential, we've continued to see over the last two, three months even since May and June. So we're being as transparent as we can be on the lightly place that we think we'll land in the year and I can certainly tell you that the management of Unilever doesn't have any crisis of confidence, we'll be continuing to work on our operational and strategic agenda. I'll hand over to Graeme to talk about the raw and packaging material inflation that we're seeing and maybe to help explain the difference between market moves and what we're able to do for our business, Graeme?

Thanks, Alan. Hi, Celine. And we came into the year, Celine expecting inflation, potentially at levels last seen a decade or so ago in 2011, or indeed back in 2008. So we have been focused on our pricing actions and these are landing well. As Alan said, we're very comfortable that all the levers that we should be pulling, we're pulling. Now inflation has ended up being even higher than we anticipated over the course of the last few weeks and months, we've had further incremental input costs. And that's really what drives the change in our guided margin. We're trying to be balanced, we're trying to give you the transparency and our best signal in this. Just to reiterate some of the examples, crude oil is up 10%, just in the quarter wasn't foreseeing, soybean oil was up 20% just in the quarter, wasn't foreseen in U.S. freight costs are up 4% just in the quarter. So that takes us from what was sort of low to mid-teens aggregate market outlook to our high teens market outlook. Now we obviously see lower than market inflation in our own business. And I'm not going to give you the detail on what that net number is. That comes from buying scale and procurement from our covers, which wind off of course from our inventories and from our savings. In terms of the timing of the delay, I don't think we're taking pricing in relation to what we see in front of us or competitiveness and consumer demand. That's the most important thing. It's a timing equation, not an absolute equation. And that's the reason for a little bit more width around what we see as the margin landing point at the end of the year, which is only a point in time of course. And that's why we've guided now to around flat versus the slight increase that we saw back in the first quarter. As we said in the presentation, our ambition, which is our guidance, but our ambition is still to deliver a slight increase in UOM for the year. But on balance with all of those moving parts, we see it as being around flat for the year, much of the pricing that we take in the second half will benefit us into the first half of next year. But there will we think be some residual pricing increases, or sorry, commodity cost increases that will flow into the first half of next year. So I think this is going to be something that we'll be talking about for the next three or four quarters.

Thanks, Celine. Let's go straight to John Ennis, next at Goldman Sachs. Go ahead, John.

Yes, hello everyone. I'll stick to one. And it's on competitive movements around pricing, which I guess relates to Warren's question earlier. But are you suggesting that multinational players are moving pricing faster than local players in Southeast Asia? And therefore your price premiums will widen for a period? I guess if so for how long do you think that will last before others follow and elsewhere outside of Southeast Asia, how should we think about your price premiums to the market? Is it going to be largely unchanged, are people elsewhere generally moving pricing in the same sort of magnitude around the same time? Thank you.

Let me give a careful answer to that, John. It is very important that we don't overstep the mark on some of our ascending price signals in these types of meetings. So I'll be a little bit circumspect. But suffice to say that where we have market leading positions, we expect that we'll lead on price and we do think that at the end of the day, when the dust settles, our relative pricing will not have changed. It is not our expectation or our intent, that we will shift our relative pricing. And it'll be very interesting to watch all the published pricing that we see in the upcoming reporting period. Hopefully, that's a straight answer to your straight question.

Thanks, John. Let's go straight next to Jeff Stent of Exane. Go ahead with your question, Jeff.

Good morning, everyone. Apologies for coming back to this topic, but I just can't understand some of the mathematics here. So on MAT basis to Q1 competitiveness was 57%. But on an MAT basis to Q2, it was down to 52%. And you drop out a period where our Q2 last year competitiveness was 49%. You gave that number last year. I just can't see now, it can be above 50% in Q2, it has to be materially below. And can you just clarify what are we missing here on this simple math? Thanks.

Yes, Jeff it is based on the fact that the MAT is done month-by-month, not quarter-by-quarter. And if you look at Q3 2020, you'll see that the math there when you simply average quarters, also is a bit confounding. So all I can do is once again assure you that the MAT is where we've reported it, 52% and L12 is above 50% and we anticipate the next L12 to be healthy as well.

Can I just add, Alan, on that point, we use present business winning because we think it's the best measure of a relative competitiveness on a long-term basis. I mean, it's very difficult right now to get a good read of aggregate market growth for example, and compare our growth rate against aggregate market growth. And we do believe it's an impeccable measure of performance, but it works better on that MAT basis versus an L12 basis, but rest assured the mathematics are signed behind it. I just wanted to make a point though, in the short-term that as Alan said, 50 to 55 is good 55 to 60 is excellent and above 60 is probably not sustainable, but in the - in a couple of key markets for us in particular, the U.S. we are seeing continued improvement in our competitiveness. That's important because Unilever is currently sitting and its most competitive position for over three years, and we've been sustaining that now for four quarters. Our focus on the U.S. is really important. And we are seeing a step up in the short-term competitiveness in the U.S. So, we're pointing in the right direction here.

Thanks, Graeme. Next question is from Bruno Monteyne at Bernstein. Go ahead, Bruno.

Hi, good morning, I'll keep it to one as well. So you sort of reconfirm that the COVID impacted the business about 90, I think you've added an extra 10 basis points this time 90 to 100. You've also explained that the margin impact on pricing and cost price inflation is largely a timing problem. So you have some margin pressure because of that. So am I right, therefore to conclude that once COVID is out of the system, once you've had time to pass on prices, you should see at least a 100 basis points plus margin recovery in the business once the timing issue is resolved and COVID is out of the system? Would that be correct?

Graeme, I mean, it's a pretty straight answers, very simple answer. Do you want to go ahead with that?

I think it's correct, Bruno we've been consistently seeing that just to break it down, we've got about 50 basis points of on cost within our gross margin still from the costs of operating our factories and manufacturing in a safe way. In fact, the majority of our manufacturing sites over 70% are still operating at our highest level of safety protocols, which we call Tier 4. And we're dealing with a number of employees who are isolating, et cetera. And we have to replace that capacity with temporary labor, which is more expensive. So that's these are all components of the 50 basis points impact. The 40 basis points impact is due to mix. Because our hygiene products and our in-home foods products are at lower gross margin, and the rest of our personal care portfolio, and are away from home foods portfolio. So that's the 40 basis points, we're still seeing that carry on as is, we don't anticipate that that's going to change much for the balance of the year. But we'll keep reporting that to you. And that will come back into margin as we start to unwind and operate back to normalcy. And as our mix normalizes. I should say that our mix normalization, if we end up with increased levels of in-home consumption and people eating in-home versus away from home, we may have a different mix to our business going forward. But fundamentally, the impact of that we will keep you appraised off and keep updating you with what the costs are.

Yes, thanks Graeme. It's pretty straightforward. We are - we have committed that that cost of 90 basis points will unwind Bruno, but we're not committing when and as - I think Graeme made the key point, which is that 70% of our manufacturing is still under operating under almost severe COVID protocols. So perceptive question, thank you.

Okay, we have a hard stop at quarter past. So I think we can just fit in one more. And that question will be from Jeremy Fialko at HSBC. Go ahead, Jeremy.

Hi, good morning. Thanks for squeezing me in. So two ones, hopefully, fairly quick. One other elements of the whole pricing debate is a question around volumes. So can you talk a little bit about the sort of elasticity is that you're seeing and whether based on your outlook of kind of tougher comps and more price, you could see volumes of around flattish, or very slightly positive by the end of the year. And the second question is, do you think that commodity prices are now peaking based on your outlook and some of those graphs that you presented? Thanks.

Graeme, why do I take volumes and you're becoming rapidly a commodity cost expert, you can comment on that good luck predicting the market. Hi, Jeremy, nice to speak to you look. The elasticity is that we've modeled on a ceteris paribus business as usual basis, go out the window. When you enter this type of inflationary environment. What I can tell you is we look back at 2008 and 2011. When our price growth was very material 5% for the year 7% for the year, and those were years where we still grew volume. So we do see the opportunity for stepped up price on top of more moderate, but continued volume growth. Graeme.

Yes. Hey, Jeremy. Thanks for the question, because I have been steeping in details of commodity markets, as you might imagine with our procurement, and buying teams around the world over the last few weeks and months. So let me just - let me give you it's as good a read as we have. And as Alan said, we don't have a crystal ball here. But we believe that the inflation that we're seeing is a combination of structural and cyclical. Crude is perhaps the most cyclical, I would say, along with the bulk transportation rates, because there more down to supply factors. For example, global freight container capacity is quite irrationally distributed around the world at the moment. So crude and bulk transportation probably more cyclical. Now others such as LAB linear alcohol benzene, which is a surfactant used in our laundry portfolio is a little bit more structural, there's been a lack of capacity investment on the supply side. So it takes a little bit longer to adjust. Another example, perhaps of more structural adjustment would be packaging, wood-based packaging, because of the spike in e-commerce, and we expect that the e-commerce trend is locked in and won't wind back, but that is an impact on packaging costs. Similarly on palm oil, there really hasn't been an increase in the global crop acreage in palm oil. And therefore, it's perhaps a little bit more structural. Similarly in soybean oil, we're seeing new demand from a new renewable diesel. So that's a little bit of a run around the key commodities that we put on the chart in the presentation. One thing that's different is it doesn't often happen, that all that three of our big commodities such as palm oil, crude, and soybean oil, all in fleets in unison, you go up and one goes down, or one stays flat, et cetera. So it's a bit of a rare event. That's why I think we're seeing as I'm sure everybody else's, decade highs, but as I said, what's important is we've got the tools and the agility and the ability on the ground to manage it. And it's a function of timing as much as anything else as we said few times.

Okay. Thank you, Jeremy. Thanks Graeme. And we'll have to bring the call to a close there. We've got too many questions. We haven't quite got through everybody. So if there are further questions, please just e-mail the IR team, and we'll set a time up to speak to you today. So with that, enjoy the rest of the day, stay well, and thank you for dialing in.

This now concludes today's call. A recording will be available for replay on unilever.com. Thank you very much for joining. You may now disconnect your lines.