聯合利華 (UL) 2007 Q1 法說會逐字稿

Good morning and welcome to Unilever's first quarter results 2007 conference call hosted by Rudy Markham, Chief Financial Officer, John Rothenberg, Senior Vice President of Investor Relations, and Charles Nichols of Investor Relations, followed by a question and answer session. [OPERATOR INSTRUCTIONS]. This conference is being recorded and will be available for a period of two weeks. Details for the replay numbers and access codes can be found on the Unilever's website. A webcast and podcast of the teleconference will also be available on the Unilever's website, www.unilever.com. We'll now hand the conference over to you, Mr. John Rothenberg.

Good morning everybody. I'm joined on this call by Rudy Markham, our CFO and Charles Nichols from IR. We'll be taking your questions in a few minutes. But, before that, I will run through some of the key features of our first quarter results that we published this morning. I draw your attention to the usual disclaimer relating to forward-looking statements and non-GAAP measures. This will also be posted with the text of this presentation on Unilever's website.

We have had a good start to the year, both in terms of sales and margin development. Our underlying sales growth, at 5.7%, was broad-based across all regions and categories. It was underpinned by a substantial innovation program, including some significant product launches in the quarter.

We saw further improvement in Europe, aided in part by a strong start in Ice Cream and sales ahead of price increases in several key markets. We saw an underlying improvement in operating margin of around 40 basis points, accompanied by a sustained level of advertising behind our brands and innovations, and despite continued commodity cost pressures.

We continued to see structural improvements flowing through into our earnings from joint ventures, from lower financing costs and from tax. Most importantly, we can clearly see improvements in our operational performance as a direct consequence of our growth strategy and new ways of working.

Over recent quarters, we have seen a marked improvement in growth across regions and categories, driven by a continued focus on our growth priorities, by fewer, bigger innovations and faster roll-out, and by better execution in the marketplace. And we have kept up the pace of our change program throughout, with further progress on One Unilever and other change initiatives. It is the quality of our underlying performance as much as a good first quarter, which leaves us confident of achieving our financial objectives in 2007.

Turning now to the specifics of our top-line performance, our sales in the quarter were in line with last year at EUR9.5b. This was after a 1% reduction due to business disposals and an adverse currency effect of 4.5%. The latter reflects the strengthening of the euro against a wide range of currencies, most notably the U.S. dollar, the Turkish lira and the South African rand. As many of these movements date back through 2006, the full year currency impact, if exchange rates were to stay where they are, would be more moderate, at around minus 2%.

The underlying sales growth of 5.7% in the quarter comprises volume up 4.8% and pricing contributing 0.8%. Our growth momentum has been building over the past few years, from an annualized growth rate of zero at the end of 2004, to comfortably over 4% today. Of course, there are a number of factors that can impact on sales growth in any given quarter. These include major product launches, price increases, trade de-stocking, and major systems implementations. I will comment on some of these as they affect our first quarter numbers when I come on to the regions. But in simple terms, Europe and Asia/Africa are probably slightly flattered by such effects, and the Americas look slightly understated. But overall, the picture remains of a strong quarter of growth.

Looking now at our growth performance by region, improving our growth in Europe remains a key business priority for us in 2007. Against a background of slightly stronger consumer markets, we got off to an encouraging start, with underlying sales growth in the quarter of 3.6%. All five of our largest markets grew in the quarter, the U.K., Germany, France, Italy and the Netherlands.

Germany in particular had a strong quarter, aided in part by trade demand in advance of price increases which took effect from the end of March. Our business in France was up slightly in the quarter. However, this was against a soft prior year comparator, and we continue to see our shares down year-on-year in flat markets. The new management team in France is still grappling with some operational issues but we expect to see a gradual improvement over the coming quarters. Meanwhile, we continued to see good growth in Central and Eastern Europe, including around 10% growth in Russia. And across the region, we had a strong start in Ice Cream, boosted by innovations and a successful sell-in coinciding with buoyant early season demand.

These highlights aside, the picture is very much of solid, innovation-driven growth across the region. Before leaving Europe, a word on pricing. Prices declined by 0.7% in the quarter, an apparent reverse of the return to positive pricing seen in Q4 2006. This is influenced by two factors. First, a significant fall in the cost of olive oil that passes straight through to pricing in this category. Second, higher listing fees and other trade expenditure in the quarter in support of a strong Personal Care innovation plan. Furthermore, we have a number of price increases taking effect from Q2 onwards which we expect to lead to an increased contribution from pricing in Europe over the coming quarters.

The Americas grew by 3.2% in the quarter. Within this, U.S. growth was 3.7% with most categories off to a strong start to the year. Personal Care in particular grew in double digits, partly helped by the de-stocking that hit the first quarter last year, but also driven by a strong innovation program and share gains. Ice Cream had a weak quarter after what had been a weak end to 2006. We saw a continuation of trade de-stocking as the market moves away from the heavy promotions of recent years, but also some share loss. We are adjusting our marketing plans to leverage our global Ice Cream innovation pipeline and expect to see the business return to its usual profitable growth in the second half.

Latin America grew by 2.1% in the quarter. We have seen an improvement in the underlying performance of our business in Mexico over the past couple of quarters. However, sales this quarter were down sharply against a prior year comparator which included heavy trade buying in advance of our SAP implementation. This effect reduced Latin American sales by over 200 basis points in the first quarter, and will reverse in Q2. Elsewhere in Latin America, we saw good growth. Brazil was slower than of late but other markets grew strongly across all categories.

Our large emerging market presence across Asia and Africa has been a consistent growth driver for Unilever, and Q1 was no exception. For the region as a whole, underlying sales growth was 11.8%, with double digit growth in both Foods and HPC. This included price growth of 2.9% as we moved to recover commodity and exchange rate related cost increases in several markets, most notably Turkey and India. The growth in the quarter included some pipeline filling behind two major launches, Clear in China and Axe in Japan. Nonetheless, overall the picture looks very positive. All the major markets that drove our growth in 2006, India, China, Indonesia, Turkey and Arabia, continued to grow strongly in the quarter. In addition, several key businesses that disappointed last year showed significant improvement in the quarter, as a result of actions taken during 2006. These included Thailand, South Africa and Nigeria. Our businesses in the developed markets in the region, Australia and Japan, also grew.

That gives you a brief overview of how we are doing in our various geographies around the world. But a key driver of our improved growth performance over recent quarters has been the global leadership of our category teams. They are tasked with developing outstanding innovations and consumer communication, and ensuring that these are rolled out quickly and successfully across our business.

I want to spend just a few minutes reviewing some of the more important category initiatives that underpin our strong start to 2007. Personal Care grew by 8.4% in the quarter. In almost every sub-category, we have examples of globally important innovation activities which have kicked off in early 2007.

In Hair, we are active in the important anti-dandruff segment, with significant launches of our Clear brand in China, Brazil, Russia and Arabia and updated product ranges where the brand was already present, as in Thailand and Turkey. We have also completely refreshed the Mods hair brand in Japan, complementing the steps we have taken to secure the brand leadership of Lux Super Rich in the highly competitive Japanese market.

In Deodorants, we have re-launched Axe body spray globally, with a revolutionary can design, improved fragrances and new advertising, together with a new variant, Axe Vice. And in Skin, we have Pond's Age Miracle across Asia, new Vaseline Intensive Rescue in the U.S. and Dove glow lotions across North America and Europe. And, of course, we have the multi-category, multi-country launch of Dove Pro-age.

Home Care grew by 5.8% in the quarter. All regions contributed, including North America and Western Europe. Our drive to converge on a global Dirt is Good platform in fabric cleaning is leading to sustained growth and provides the ideal platform for faster roll-out of global innovation. Thus, the 2006 launch of all Small and Mighty concentrated fabric liquid has proved to be an industry moving event in the U.S., and we have followed this up with launches of the Small and Mighty format under Persil in the U.K. and Skip in France. And we have a strong innovation program for Dirt is Good in many of our developing and emerging markets later in the year.

Underlying sales growth in Savory, Dressings and Spreads was 3.8%. This included a strong performance from both Knorr and Hellmann's, each growing around 6%. We continue to extend our Heart Health franchise with new Flora/Becel products fortified with Omega-3 across Europe and the announced launch of Promise Activ mini-drinks in the United States. But we have also been innovating in our core family margarines, with the launch at the end of 2006 of Rama or Blue Band Idea! across several countries. These products contain nutrients that are linked with healthy brain development in children.

In another example of Vitality innovation, we have launched a new Hellman's Light in the U.K., France and Russia during Q1. This product incorporates citrus fiber technology that delivers superior texture and flavor with very low fat content. And building on another Vitality initiative, we have launched Knorr Vie into the important German market, bringing to over a dozen the number of countries where the product is now present.

Growth in Ice Cream and Beverages of 4.9% came despite the weak ice cream performance in the U.S. to which I referred earlier. The innovation we are taking into the European market this year is the strongest we have had for some time. This includes new impulse products such as three new Magnum premium variants, Dark Ecuador, Java Milk Chocolate, and Colombia Aroma, as well as Solero Smoothies, rich fruit ice creams with only 99 calories. We also have new products under the Vitality theme, such as Frusi, a healthy yoghurt and fruit snack which is now in six countries across Europe and a Milk Time product range which follow the Moo concept of calcium for kids that has been successful across Asia.

In Tea, we have seen activity in the quarter to strengthen some of our important local brands, such as PG Tips in the U.K. and Brooke Bond in India and to continue to develop our global Lipton brand with variant innovations in black tea, ready-to-drink and the emerging milk tea segment.

Let me now talk about our margin development. Our operating margin in the first quarter of 13.7% is 1.1 percentage points below last year. This reduction is more than explained by the combined impact of restructuring and disposals. In Q1 2006, we had disposal gains of EUR119m, compared with only EUR35m this quarter. At the same time, we have kept up the pace of our restructuring activity, with a charge in the quarter of EUR121m, compared with EUR61m in 2006, mainly associated with the One Unilever program. The net effect is 150 basis points adverse swing in restructuring disposals and impairments. Excluding these items, there was an improvement of 40 basis points.

During the quarter, we continued to spend competitively behind our brands, resulting in advertising and promotions as a percentage of sales at a similar level to last year. This means that the combined benefit of positive pricing, cost savings and positive mix and volume were more than sufficient to offset cost increases in the quarter.

Commodity related cost increases amounted to around EUR115m in the quarter, or 120 basis points. This is a slightly lower run rate than we saw at the back-end of 2006. However, there are two things to bear in mind. First, this is after a sharp reduction in olive oil prices which knocked around EUR15m off material costs in the quarter, mainly in Europe. More importantly, we have seen a continuing rise in the price of many agricultural commodities over recent months, but not all of this is yet reflected in our costs. For this reason we expect to see continued cost pressures over the coming quarters, especially in Foods and this may require us to look for additional price increases.

Meanwhile, our savings programs continue to deliver at a consistently high rate. Savings in the quarter were nearly EUR180m, half from buying savings, and half from One Unilever and other initiatives.

Turning now to other aspects of our financial performance in the first quarter, earnings per share on continuing operations were up 6%, while total earnings per share increased by 2%. Total earnings include a lower net profit from discontinued operations which, in 2006, included a contribution from the Frozen Foods businesses which we subsequently sold in Q4 2006.

Operating profit was down 8%. Within this, the adverse swing in restructuring, disposal gains and impairments reduced operating profit by 11%, while the impact of exchange rates and the loss of contribution from disposals was around minus 6%. Below operating profit, we continue to deliver structural improvements in a number of areas which are feeding through into earnings.

Financing costs were EUR51m lower in the quarter, reflecting our lower net debt and the better funding position of our pension schemes. Net profit in joint ventures increased from EUR18m to EUR27m in the quarter, mainly due to the continued success of our Pepsi Lipton operations, but also now including a contribution from the newly formed Portuguese joint venture.

Our share of net profit in associates was also sharply up. This was more one-off in nature, being almost entirely driven by a gain in one of our venture capital funds. There was also a one-off profit on a non-current investment in Indonesia. We had a low tax charge in the quarter of only 22%, largely due to a favorable country mix.

Looking forward, we expect a particularly low tax rate in Q2, due to favorable completion of tax audits, but a higher rate in the second half to leave the full year in line with our guidance of around 24%. As far as the balance sheet and cash flow are concerned, there is little of note to report.

The first quarter is traditionally a light cash-flow quarter given the seasonal variations in our working capital. Against this background, cash-flow from operating activities was broadly flat compared with last year and included a slightly higher outflow from cash restructuring in the quarter. Net debt, at EUR7.7b, was little changed compared with the EUR7.5b as at the end of 2006.

Finally, as many of you know, we started our EUR1.5b buyback program for 2007 on March 12. As at the end of April, we had bought back EUR265m worth of shares in the market. That completes my run-through of the numbers. I'd now like to hand over to Rudy to sum up.

Thank you John. So, a good quarter for us, and one that leaves us confident about the development of the business through the rest of the year. It is true that we face a stronger headwind from rising agricultural commodity costs, rising more than we planned. As John mentioned earlier, we may need to be more aggressive on pricing in order to recover some of these additional costs.

But we also have a strong innovation program, supported by much improved go-to-market execution. And our change program is helping us to build on this momentum, while delivering the efficiency savings we need to invest behind our brands and to deliver the margin improvement we seek.

Thus, we remain confident of achieving our guidance for the year of growth in the 3% to 5% range, and a reported operating margin in excess of 13.6%, after restructuring charges of between 50 to 100 basis points. We expect this to result in an underlying improvement in our operating margin during 2007. But we still have a lot to do.

As we presented to you at our recent IR seminar, we are establishing some real momentum in the business, both organizationally and operationally. And we want to build on this, by continuing to reap the benefits of the changes that we have already made, while seeking opportunities to speed up the transformation of our business and to raise our performance still further. With that, John, Charles and I will be very happy to take your questions.

Thank you Mr. Rothenberg. [OPERATOR INSTRUCTIONS]. Okay, we have our first question on the audio line and it comes from Mr. Julian Hardwick.

Good morning.

Morning Julian.

A couple of questions for you. One, I was slightly surprised, given all the innovation activity that you've highlighted in this quarter, to see the A&P spend essentially flat. Could you talk around that apparent disconnect and say something about how you see A&P spend evolving over the balance, please, of the year?

And secondly, you highlighted the impact for us of Mexico on the negative front in this quarter. I wondered if you could also just give us a sense of the impact on your sales performance of the three factors you identified on the positive tack which are one-off in nature, i.e. the Ice Cream buy-in in Europe, buy-in in Germany and the pipeline fill in Asia?

Those were the questions, Julian? Thanks very much. Firstly, A&P, we are flat in -- or slightly ahead, actually in -- we've spent slightly more in the quarter than the same quarter last year in absolute money. We have significantly higher sales, as you've seen. We're comfortable that we are advertising at the right level, because we're seeing the success of the innovations and we see where we're targeting our share gains, that progressively unfolding.

You will also recognize that in a number of cases in our innovation, they're phased through the quarter, and therefore the advertising momentum steps up towards the end of the quarter, and of course, going forward.

But the other point I'd just draw your attention to, you will remember that at the end of last year we talked about some increase in spend in our research -- CMI research money, in anticipation of a strong start to our innovation program. Well, you're seeing some of the benefits of that now.

On the point of the Mexico Ice Cream, Europe pipeline increases, the way I'd look at it is, if you add it all together, then about half a point of our sales growth in the quarter is attributable to these effects. Order of magnitude, Julian.

Okay, thanks a lot.

Your next question comes from the line of Marco Gulpers. Please go ahead.

Yes, good morning all. I've got three questions. The first one is on the upcoming AGM. On the back slides of your report, you're mentioning that you've now agreed the new performance conditions for '07 to '09, and in that I am surprisingly seeing that the average underlying sales growth is 3.5 to 5.5 per annum. Is that an increase in your targeted guidance for the Group? That's question number one.

Question number two is related to the CFO, which is also there, your successor, Rudy. You've mentioned there that you will be maintaining your position, but still are going to step down. How does the update on the approval process work? Maybe you can highlight for that?

And the final question I have is on Europe, the negative 0.7% pricing. Maybe you can give a little bit more of an update on in which particular country or countries that was happening, and also a little bit more on the categories. You mentioned one already on olive oil, but maybe there is more to say? Thanks.

Right, thanks for those. I'll take the first two, and I'll make a general comment about Europe pricing and then John will pick up the detail. Now, first on the global share incentive plan, no, these proposals are for a specific three year incentive scheme, and they shouldn't be confused or seen as any guidance on the business's long-term financial objectives. They still obviously have to be approved at the AGM. They replace the existing TSR and global performance share plan. And they are intended to maintain or to deliver a greater alignment with shareholders' interests, whilst reflecting stretching targets for business performance.

Secondly, on the CFO, as is stated in the announcement, we made good progress with the process. This is driven, of course, by the nomination committee, and we'll respond to the CEO's recommendation. Thereafter, it goes to the board, who would then approve the recommendation, and we would then take it from there with an announcement. And we're following that process, and indeed the incoming chairman is also involved in that process.

And the third on Europe and the pricing, the negative pricing, let me just say that about half that negative number is a straight pass-through of the olive oil decline in commodity pricing that John commented on earlier. John, do you want to pick up the rest?

Yes, I think the rest is really not significant in any category. I would just note that with the sell-in of the Ice Cream, there is some promotional spend that's accompanied that. And one other area that I would highlight where there's been some price pressure, or, if you like, some additional promotional sell-in support, was in Ice Cream.

Thanks.

Our next question comes from the line of Mark Lynch from Goldman Sachs.

Good morning.

Good morning to you.

A couple of quick questions, one on the commodity costs. You've kindly highlighted the impact in the first quarter, and basis points. Could you hazard a guess as to what the full year impact would be? Could you give us any guidance on that?

This is always one of the hardest questions we face, because it's predicting commodity prices, exchange rates, and then relativities across the world. I think the overall sense is that we've continued to be surprised now for a number of quarters by the rise in agricultural commodity costs, and that feeds both into Foods and selectively, into HPC. And I don't see any reason to change the expectation that these will continue to be challenging.

With regard to mineral oil prices, they seem to go up and down somewhat. They dipped in the quarter, as you no doubt saw, but seem to have gone up again towards the end of the quarter, so it's very hard to speculate on quite how that will go.

Okay, and you mentioned in the press release, in the U.S. your aggregate market shares were stable. I was just wondering what would be the comment for Europe?

The share position in Europe is we have some losses in Laundry, in Hair and we have some gains in Foods, in Savory. And broadly, I think, our position is not materially changed.

Okay, thank you very much.

Thank you.

Thank you. Our next question comes from the line of Robert [Foss] from Fortis. Please go ahead.

Yes, hello, good morning gentlemen.

Hello, Robert, good morning.

Good morning. I saw on page two of the press release in the CEO's comments some comments on acquisitions and disposals. Do they refer to the add-on acquisitions and smaller disposals that you referred to earlier, or can we expect something bigger going forward?

There's no change in our basic position, which we've talked about on a number of occasions, and I think reinforced at the Investor Seminar. And they are that we continue to seek to refresh and strengthen our portfolio with bolt-on acquisitions, and we've talked about the areas of Personal Care, of D&E, particularly Foods in Asia and Vitality, and we continue to look for those opportunities. Equally -- and therefore, that's our priority.

We said also that should there be any significant acquisition change or consolidation in our industry, we clearly would also look at those opportunities as and when they occurred, but our prime objective is, as I said, to strengthen the portfolio through the bolt-on acquisitions I talked about.

Okay, thank you.

Thank you very much. Our next question comes from Xavier Croquez from Exane BNP Paribas.

Good morning John, good morning Rudy. Just one --

Bonjour, Xavier.

One question of clarification regarding A&P. My understanding was that A&P was basically down 10bps, and you said that A&P was strongly up in absolute money. So I imply from this that the A&P was flat in rate on an organic base, or otherwise I can't have all these figures sticking?

I think strongly is a word, Xavier, which perhaps you have inserted. What we have said is that in absolute terms, it's up, but we've had an increase in sales, and in percentage terms, you're right. I think it's pretty close to 10 basis points down as a percentage of turnover which is, as you will see, pretty well flat.

Yes, but the reported sales is basically flat, so the increased sales you're referring to is organic?

Yes.

Okay, thank you.

Thank you very much. Our next question comes from the line of John McMillin from Prudential. Please go ahead.

Good morning John.

These numbers were worth getting up for.

Thank you John.

The ones that surprised me the most for Europe, particularly if you think market share, it does like the overall trends in Europe have improved. Hard discounters maybe have moderated. Could you make some general discussions on that?

Sure. Firstly, it's true to say that we are seeing a little bit more market growth in Europe. That's point one. Second, you've seen -- and that market growth is general. The second is, in terms of discounters, we are having a little more success also in the discount chain. That also lies in our sales numbers. And thirdly, you've seen we've had some good momentum in a number of categories, in part though, ahead of price increases we've planned to introduce in the second quarter. We've also had a pretty good momentum start into the first -- at the end of the first quarter in Ice Cream.

So some of it is specific to our portfolio, some of it is to do with the general market sentiment. And as I've indicated, there are also one or two areas where we've not performed as strongly as we would like, and that's Laundry, in a couple of markets, and also Hair, I should add.

Did you contemplate altering your full year goals, which now look a little conservative?

Obviously this is just the first quarter, John, and we still have another nine months to go. We want to deliver what we promise. We've set out our plans for the year, which is a strong innovation led growth, supported by margin improvement, and you'll remember it's very important that Patrick emphasized that, that having seen the levels of top-line growth that we're now achieving, that we also work on improving the margin. That remains our focus. When we come to the half year, we, as normal, give an outlook for the full year, and clearly the position will be reviewed at that time.

Congratulations, thank you.

Thank you John.

Thank you very much. The next question comes from the line of Chris Wickham from MainFirst Bank AG. Please go ahead.

Yes, again, congratulations on a great quarter.

Thank you Chris.

Two things. One is when you're talking about mitigating the effects of higher costs, and import costs later on in the year, would we be right to assume that you have relatively low hanging fruit, that you have some projects out there which will mitigate those kinds of cost increases more than perhaps your peer group?

And then second, just following on from John's point, I know it's only one quarter, but this kind of sales growth implies that you only have to do around 3.5% for the rest of the year, underlying, to match the mid-point of your target range. Doesn't that now look a little bit conservative?

The commodity cost mitigating measures are, of course, twofold. They are further cost savings, and yes, of course, we continue to work at both productivity improvement, and depending on the level of commodity prices, new opportunities to mitigate the impact of price increases -- of cost increases. Secondly, as John commented, we are also looking for -- selectively for further increases in price to ultimately the consumer in order to offset that. I can't comment on what our competitors are doing, but I have no doubt they're all wrestling with the same issue.

In terms of the target for the year, we continue to work at delivering our plan for this year, which is a combination of market competitive growth, and we've outlined where our guidance lies for that, and an improvement in our operating margin, and that's the plan we're working on at the moment.

Chris, Charles here. Just one comment about mitigating the impact of commodity costs. You're quite right, there are things -- there are other things we can do other than just pricing. And I was looking earlier at, for example, the increases that we've seen in rapeseed oil over the past year, which I think is something like 24%. And one of the things we've been doing is to actually reduce our exposure to the rapeseed oil through reformulations, etc. And by playing games with formulation, by bringing in new innovations which, for example, have lower oil content, which is the case with some of these new products we've been bringing out under Blue Band and Rama, we can, to some extent, mitigate against some of these significant commodity cost movements.

And that can be done without any loss in quality of product and taste?

Absolutely, and there's real technology behind that of course.

Okay, thank you very much.

Thank you.

Thank you, we'll go to the next question. It comes from Celine Pannuti from JP Morgan. Please go ahead.

Yes, good morning. The first question on Latin America, you mentioned that the impact of Mexico was 200 basis points, so Latin America run-rate would be around 4%. I was wondering whether -- or that's below, it seems, the growth of the market in that region. And I was wondering whether you would expect Brazil to continue to weigh on your performance in the next coming quarters, or whether you have already seen some pick-up in that region?

And my second question relates on the comment you made overall on the impact of the [exceptional] -- the filling in the pipeline. Overall, you said net net impact was 0.5% of sales. Would you, however, expect for the forthcoming quarter that the pricing increase that you have already planned, or that you will plan -- that you will implement further could have some negative impact on your volume? Thank you.

Okay, let me just address that pricing question you raised at the end, and then John will comment on the specifics of Brazil. Clearly we have committed, and have delivered on the principle of our products being competitive with -- in terms of pricing also in the market. And when we raise our pricing -- when we raise our prices, obviously we take that into account as well. Therefore, we may see some volume effect, but it will be a competitive impact that that has, and we've allowed for that.

Coming to Latin America, as you say, we've quantified the Mexican effect to somewhat over 200 basis points, and this will reverse in Q2. Most of our businesses in Latin America are going well. We highlighted the low growth of -- the lower growth in Brazil, and that was as much price as volume. Our volume growth continued pretty well where it had been on HPC, but there were some price competitive moves against some local competitors. And Brazil has the relatively strong currency, which has been something which we've observed over the last 12 months. So actually the growth in pricing in Brazil has been less than it has been in some of the other Latin American markets.

Our shares in Laundry are up, but we're somewhat down on shares in Foods, spreads and tomatoes particularly, and our plan is clearly to shore that up. And I think, if I look elsewhere, I particularly would like to highlight Argentina, which has had another excellent quarter.

Just to add one other comment on pricing, which is our price increases are often linked to new innovations that we put in the market. And it's that value increase which is particularly important to the success of the launch and the perception, therefore, of our consumers of it.

Thank you. One follow-up, if I may. Well, Procter & Gamble have talked about moving all of its laundry detergent in the U.S. to a concentrated formula. You've mentioned that you've been at the forefront of this innovation. What could that mean in terms of competitive environment, the new move by Procter & Gamble?

Well, I think it's fair to say that this market is characterized by continuous innovation. And the concentrate that we introduced -- which is a three times concentrate, very novel, which we introduced in the U.S. and achieved some good success and which we're now rolling out to Europe -- has not only the benefit of being a very consumer-friendly formulation. It also responds very well to the wider interest and concern about the use of packaging, the transport of materials and the carbon footprint. It also is a much more efficient use of shelf space. So it's a very attractive innovation, so it's no surprise that others are trying to move into that same space.

But are you fully -- is all your laundry detergent in the U.S. on a concentrate basis?

No, it isn't. And, as you've seen played out, there's competitive tensions in this market. Let's just say that our position's very clear. We've led the move. I think we've a very clear plan and I don't think it would be appropriate to talk about the steps in any plan and how fast the individuals are going.

Thank you.

Thank you very much. Your next question comes from the line of Ian Kellett from Blue Oak Capital.

Morning, gentlemen.

Morning, Ian.

Couple of things. Firstly, Shampoo, looking around a couple of places in the world, and how did things go in the U.S.? Did you get growth in Suave and how have the new launches performed in the quarter? And also in Japan, could you talk about whether or not sales grew in Japanese Shampoo for you?

And secondly, the U.S. Ice Cream share loss, could you talk a little bit more about that? How significant is it? And I'm interested about -- in the point you made about taking the global innovation platforms into North America, because I guess, historically, it's been somewhat independent of your global Ice Cream infrastructure. So maybe you could talk a little bit more about the degree to which they're perhaps integrating [over time]?

Right. Let me deal with the Hair, and then John will say a word on Ice Cream. Hair in the U.S., we continue to make progress with Sunsilk and Suave and Dove. A little bit of share loss on ThermaSilk, but we're very satisfied with the development of our position there. And bear in mind this is going to be a long term battle.

As far as Japan's concerned, we had a good re-launch of -- in the -- towards the end of the quarter of Lux Super Rich and also we just relaunched our Mod's Hair brand. Too early to say quite what impact that has had, but we have had growth in the quarter in Japan. John, if you want to pick up the Ice Cream point?

Yes. I think the first thing is that it's quite unusual and I'm not sure I should be talking a lot about Ice Cream in the first quarter, even though here in the U.K. we've had lovely weather. But basically, for our European business, clearly the ice cream season gets going now, but globally we've had a good start on Ice Cream, with the one exception of North America, which we've mentioned, where it's been a tough battle. It's been a tough battle for a number of months, as the market goes through a change. We have lost a little bit of share.

We have some excellent innovations that are working around the world and, as I think you heard at the Investor Seminar from the Ice Cream category, we are looking at the world as one globe and we're looking at our innovation opportunities around the world. We have a lot of innovation and we have a lot of technology and we're applying that where we think it fits and as quickly as we can according to the market conditions. So I think you'll continue to see innovations moving around the world. And southern hemisphere, northern hemisphere, things are out of kilter in seasons, so which one comes first will depend on where the opportunities lie.

Does that mean that we'll see some of the bigger European brands launched into the U.S. market in due course?

We would not like to talk about which brands we launch where. You will see some of the opportunities that we have in Europe or indeed in Asia coming across to the States. But we've also seen some American innovations coming across the other way.

Ben & Jerry's would be the best example of that. We made good progress with Ben & Jerry's.

Okay, thank you.

Thanks, Ian.

Thank you very much. The next question comes from the line of John Parker from Deutsche Bank.

Good morning.

Morning, John.

A couple of questions, maybe. Restructuring charges, a little bit higher than your 100 basis points ceiling for the year. Obviously, you broke through that last year. I notice also the Chief Executive's statement talks about looking for opportunities to accelerate margin improvement. Do you think it's possible that you will again, this year, exceed the guidance on restructuring costs?

We've got the guidance that we've given you. I think we've said that we continue -- and we made this point at the -- and Patrick made this point specifically at the Innovation Seminar -- continue to look at ways for further strengthening and improving the margin performance of this business. Now, that is not only, of course, about restructuring. That's about the portfolio, that's about the value of invocation and all of those things. And that is the way I think you should take the comments. If and when we have anything to talk about in terms of restructuring, then we'll come to the market and talk to it.

Okay. And I've got a question on A&P. Obviously, we've seen that rising as a percentage of turnover as you've had the program of restoring competitiveness. We've got relative stability in this quarter. Obviously, it's going to go, in a normal course of events, up and down over the future. But would it be right to take from the stability in this quarter that the big jumps in A&P as a percentage of turnover are probably behind you now and reflecting your restored competitiveness?

I think, John, it's fair to say that the significant increases that we've put through, together of course with stepped-up aggression in trade management and pricing, have contributed to the level of sales growth and the momentum of sales growth that we're now seeing. That said -- and that we appear to be, certainly, at a competitive level.

The competitive dynamics, of course, going forward, are harder to predict. I think you need to take the reassurance that we will do -- continue to support our brands aggressively. And invest in, disproportionately, behind those areas which we see for our target strategic priorities, which are Personal Care, D&E positions and our Vitality brands and innovations.

Okay, thank you. And just one final quick one. There was a question on the reference to, in the Chief Executive's statement, to development of the portfolio through acquisitions and disposals. And you reiterated that there'd been no change on your thinking regarding acquisitions and outlined that, talking about bolt-ons. Are you able to say anything about disposals? There is clear reference there to possible disposals. Would you be contemplating anything of the size of the European Frozen Foods, or are you looking at disposals which are smaller than that?

Well, I think, John, as you know, we never comment on specific disposals. But I think, to help, you'll remember that Patrick said during the Investor Seminar that we keep the performance of the portfolio on an ongoing basis under continuous and strict review. You've seen in the past examples of where we've restructured parts of the portfolio to achieve a better performance and some times where we've sold parts of the portfolio. Those decisions are taken on a sort of rolling basis as and when we see the need to take action. And you should draw, I think, confidence from the track record, which shows we don't hesitate to do it when we believe that is the thing to do.

I'd also stress that those businesses that are not global in some of our portfolios still contribute an important part to our performance. But they are also subject to the same performance review as the rest of the portfolio.

Thank you.

Thank you, John.

Thank you very much. The next question comes from the line of Polly Barclay from Cazenove.

Morning. It's Polly Barclay here, from Cazenove.

Morning, Polly.

A question, if I may, around your potential successor, Rudy. We heard at the Investor Seminar that Patrick was looking for an agent for change in his new CFO, and many of us came away assuming the implication was an external candidate. It would appear that it's taking some time to fill this appointment, perhaps indicating that an external candidate is going to be quite difficult. Could you just give us a little bit of color around the internal versus external views?

I can't, Polly, as you would expect, add anything to the statement we've already made, which is we'll take -- Patrick has said he wants the best candidate for the job and he is looking externally and internally.

Thanks.

Thank you, Polly.

Thank you. The next question comes from the line of [Michael Stipe].

Good morning. I have two questions.

Hello, Michael.

Morning. One is what do you think the underlying market growth was in the quarter across all the categories that Unilever operates in? And then, secondly, could you give us an update on the One Unilever program? Cost savings amounted to 190 basis points, I think, in the quarter, much of which probably from One Unilever. Could you tell us how much longer this program is now running, how far you are through the implementation stage, please?

Yes, sure. Let me take the market growth and then John will give you the detail on the progress with One Unilever and where we stand currently. You'll remember, where we've talked about the long term growth of our markets in the areas in which we compete, we talked of a volume of around 2 to 4 and a price impact of anywhere between 0 and 1. We think at the moment the market growth appears to be, in the last quarter, certainly as we look at it, somewhere towards the upper end of that range, in the sort of 4, perhaps even to 5. So in that range.

But I would just draw your attention to the longer term growth rate of these categories, as we've seen over a long period, is in the 2 to 4 range in volume and then you add something for the impact of pricing.

Okay, thank you.

Thank you.

Michael, Charles here. Your question about progress on One Unilever, you'll remember at the end of 2006, I think, we said that One Unilever had generated savings slightly below the EUR700m per annum run rate and we also said that we expected to hit a run rate of around EUR1b sometime during 2008. In the quarter, as you mentioned, about half of the savings that we generated of EUR180m was coming from One Unilever and other initiatives. So that just gives you a rough flavor of how we're going forward on it.

So there's no change, also, for 2008.

No, no change.

Thanks.

The next question on the line is from Jeff Stent from Citigroup.

Good morning.

Good morning, Jeff.

Just a quick question on Laundry. Looking at some of the results from your competitors, I've seen 9% numbers, I've seen numbers at 12%. You have a respectable number in Home Care as well. Has the world suddenly decided to wash more or what's happening? I'm just struggling to square this dirty circle, so to speak.

Yes, it's a good question, Jeff. We've noted the numbers as well, as you would expect. I think it's not a sign of a significant change in the size of the market. I think you're seeing some market share changes behind those numbers in this period. We'll see what happens as we go beyond them.

As I've indicated, we've lost a little share in Europe. In D&E markets generally, we've held or actually slightly gained share. And in North America, our position is broadly stable. So you're seeing movements in share, I think, behind those growth numbers that you've cited. I don't think people are using a lot more washing powder or liquid, for that matter.

So where is this -- given your share position would seem to be broadly stable, where is this share coming from? It would seem that it is only coming from private label, given your two principal competitors have, must have been increasing share.

I can't comment on how the competitors' positions have moved, nor of course their sales growth versus the back year. That's the other thing one would always instinctively want to look at.

Well, one of them had [a 7%], and that was perplexing us even more, because it was a tough comp.

Yes, as I said, I don't know. I just say those are the things, instinctively, one looks at. And then you go and look at D&E markets.

Yes. Okay, thank you very much.

Thanks, Jeff.

Your next question comes from the line of Charlie Mills from Credit Suisse.

Yes, morning, team. I wonder if you could give us a bit more detail on Europe. I think that's probably the number that caught most of us by surprise. Can you maybe give an indication how eastern Europe did against western Europe, maybe quantify the trade buy-in items that you mentioned for Europe alone and also maybe quantify the Ice Cream effect in Europe, insofar as you can?

Yes, well, I said earlier on the call, when I was asked what is the impact of all of these positive factors, if you like, on the sales, I said it was about half a point of growth. Most of that's in Europe, so I think that gives you, I hope, the feel that you want.

In terms of CEE, I think we had growth above the European average in CEE. You'll note that we had a 10% growth in Russia, so the growth is still solid in Europe, but it's obviously -- in western Europe, but lower than that headline number for the Europe as a total region.

So the 0.5% we should apply pretty much entirely to Europe?

Largely to Europe, yes.

Okay. Alright, thanks.

Thank you, Charlie.

I think we've probably got time for one more question.

The last question comes from the line of Simon Marshall-Lockyer from Bear Stearns.

Yes, good morning.

Good morning.

And congratulations from me as well. Just a couple of questions, maybe, as a follow-up. Could you maybe give us an indication -- There was quite a lot of talk following the presentations on the execution platform rollout in Europe and the completion of that. Could you say, as far as you can see in these numbers, how much that integrated execution platform might have improved your scale-up of innovation rollouts and maybe has contributed to this surprising 3.6 number in Europe?

Well, it's obviously not a one to one correlation, but just noting that -- and John, I think, commented earlier in the speech -- we've had a rapid rollout of the innovation of our margarine, of our spreads, with the addition that stimulates brain activity in younger people. We've had a very rapid rollout of Frusi. We've had a strong launch of Dove Pro-age across a number of geographies and we've increased the rollout of [12E]. All of these are examples of the way that the organizational change is enabling simultaneous or rapidly sequential launches in many countries.

Second, in terms of the progressive integration of companies in our go to market organizations, we continued to make strong strides with that. We have obviously detailed phased plans. You'll know that almost all of the program in Europe now has been announced and a significant chunk of it has now been implemented. There are still some important countries to complete. Italy and the U.K. would be examples of that, Spain would be a third. So we're making very good progress. We're well on the way and you're seeing the impact of that in the momentum of the business.

Could I just add on one small question? And that is just regarding you, Rudy, and your retirement on May 15. In the event that a new CFO isn't announced, can we expect you to continue in a consultancy capacity or some capacity until the void is filled?

I have agreed, at the request of the Board, to continue as acting CFO until such time as my successor is announced and able to take his place.

Thank you.

Thank you.

Thank you. That was the last caller. We'll now pass back to Mr. John Rothenberg for closing comments.

Very good. Thank you, everybody. And, as always, if there are any further questions or details that you'd like to ask us, then we stand ready for your calls. Thank you. Goodbye.

Thank you.

Thank you very much. This conference will -- has been recorded. The details for the replay number and access codes can be found on the Unilever website. The audio archive webcast and podcast will be available on the Unilever website, www.unilever.com. Thank you for joining, ladies and gentlemen. That now concludes the call. You may now disconnect. Thank you very much.