聯合利華 (UL) 2007 Q2 法說會逐字稿

A very good day to you, ladies and gentlemen, and welcome to Unilever's second quarter results 2007 conference call. This conference will begin with a presentation by Mr. Patrick Cescau, Chief Executive Officer, concluding with a question and answer session hosted by Mr. John Rothenberg, Senior Vice President Investor Relations. (OPERATOR INSTRUCTIONS).

This conference is being recorded and will be available for a period of two weeks. Details of the replay numbers and access codes can be found on Unilever's website. A video webcast and podcast of the telephone conference will also be available on Unilever's website, www.unilever.com. We will now hand you over to Mr. Cescau.

Well, good morning to everyone joining us here today for Unilever's first half-year 2007 results presentation. I am here this morning with John Rothenberg, Head of Investor Relations, and in a moment he will take you through our Q2 results and, of course, our half-year results.

You will also have seen from our announcement that, from September, we will be joined by a new Chief Financial Officer, James or Jim Lawrence. And I'm really absolutely delighted by this appointment. We said that we would take our time in order to land the best, and that is just what we've done. Jim comes to us from General Mills, where he is currently Vice Chairman and CFO, and I'm sure you will have all the opportunity to meet him in due course.

When we met with many of you at our investor seminar in London earlier in the year, I explained why I believed our strategy was delivering a sustained improvement in performance. At the same event, I made clear that we were constantly alert to opportunities to move faster. And in particular, I highlighted then, as I have on other occasions, that we wanted to do more to increase the quality and quantity of innovation, to drive further the shaping or the reshaping of our portfolio, and to accelerate margin improvement.

Today, we are ready to share with you details of how we plan to build on an improving performance and on the strong foundations laid over the past two years. It is an improvement, I am pleased to say, that has continued into the second quarter of 2007, and John will now explain as he takes you through the results.

Thank you, Patrick, and good morning, everybody. As usual, I draw your attention to the disclaimer relating to forward-looking statements and non-GAAP measures. This disclaimer is included here and will be posted with the text of this presentation on the Unilever website.

Our first half-year performance keeps Unilever firmly on track to deliver our 2007 objectives. Most importantly, we have both growth momentum and an underlying improvement in operating margin. Underlying sales growth of 5.8% was broad-based across all regions and categories. Our global categories delivered a high-quality innovation program, with some significant product launches focused on our strategic priority areas of Vitality, Personal Care and D&E markets. Meanwhile, One Unilever ensured better in-market execution in each of our regions.

There was an underlying improvement in operating margin of 30 basis points. Gross margins have been maintained despite commodity cost pressures, and we have increased advertising investments behind our priority brands in line with sales growth. We also see improvements flowing through into our earnings from joint ventures and associates, from reduced financing costs and from lower tax rates.

Let me now turn to the specifics of our top line performance. In the first half-year, our sales were EUR20.1b, which is 1.3% ahead of last year. This was after 0.8% net impact of acquisitions and disposals and an adverse currency effect of 3.4%. The latter reflects the strengthening of our reporting currency, the euro, against a wide range of currencies, including the U.S. dollar, the Japanese yen, the South African rand and the Mexican peso. Many of these currency movements date back through 2006. If exchange rates were to stay where they are today, the full-year currency impact would be more modest, around 2%.

Underlying sales growth in the first half-year was 5.8%. This includes 0.4% of growth due to advanced sales ahead of an IT systems implementation in the United States. This will reverse in the second half. Our underlying sales growth includes just over 1% from pricing, and this reflects the pricing actions that we've taken to compensate for rising commodity input costs.

We've seen a steady increase in the growth momentum of our business over the past few years. From a starting point of no growth at the end of 2004, we have reached 4.9% underlying sales growth over the last 12 months.

Let's now look at our performance by region. Europe achieved 2.6% underlying sales growth in the first half of 2007. The annualized growth trend in Europe is now 2%, a notable improvement from minus 1% a year ago. We saw good growth from the Netherlands, Italy, Russia and Poland as well as a number of smaller markets in the region. Russia in particular continues to grow strongly, 15% in Q2, reflecting its priority status and a strong innovation program, including the launch of Clear shampoo. Performance in France and Germany has significantly improved, both delivering modest growth in the first half.

The U.K., our largest European business, declined slightly in the first half, with a positive Q1 followed by a decline in Q2, in part due to a weaker ice cream performance. The weaker Q2 performance, combined with the timing of price increases in Germany, were the main factors behind the lower sales growth in Q2.

A strong innovation program was a key driver for growth in Europe. This included the launch of healthy offerings across Knorr dry and wet soups, the rollout of Knorr Vie in Germany, the re-launch of PG Tips in the U.K., and the introduction of Lipton Linea in France. Overall, ice-cream showed good growth in the first half, despite a weak end to quarter two due to the wet weather in northern Europe. Innovations continued to perform well.

The Americas region grew by 4.9%. This includes around EUR70m of sales ahead of the IT implementation. The U.S. business, excluding these advanced sales, performed steadily in the first half, growing some 3%, with market shares stable in both Foods and Home & Personal Care. Personal Care had a particularly good performance, driven by a strong execution of the innovation program, notably for Vaseline, Degree, Sunsilk and Suave. U.S. ice cream is improving steadily. Ben & Jerry's is growing well, but there is still some weakness in Breyer's. After a weak start to the year, there was a marginal decline in the second quarter. We expect better performance in the second half.

Latin America grew about -- grew by 5% in the first half-year. In Mexico, we returned to growth in the first half. In Brazil, sales grew only modestly. There has been increased competition in tomato products and spreads. In June, we announced the sale of our local spreads brands to Perdigao and the creation of a joint venture to strengthen the local distribution of our global Becel Heart Health brand. In Laundry, volumes are growing well and brand shares are strong, following price reductions as we repositioned our brands against local competitors. Elsewhere, there were strong performances, especially in Argentina, Andina and Central America.

We expect higher growth in Latin America in the second half of the year, due to a stronger contribution from both Brazil and Mexico.

Asia/Africa remains a major driver for Unilever growth. The region grew by over 11% in the first half. All our large categories -- laundry, skin, hair, tea, ice cream and savory -- grew strongly across the region. The growth was driven by a strong innovation program, including the launches of Clear in China and Axe in Japan. There was strong sales and profit growth in ice cream across the region, particularly in Turkey. Overall, developing and emerging markets around the world now represent 43% of our total sales, growing at nearly 10%.

That gives you a brief overview of how we are doing in our various geographies around the world. Let's look now at the way that innovation is driving growth in our categories.

Our strong innovation program in 2007 is directed to our growth priorities, leverages our global brands and technology with more rapid rollouts across markets, and targets Vitality opportunities in both the developed and the developing world. Its impact can be seen in the growth of our brands and categories in the first half.

Underlying sales growth in Savory, Dressings and Spreads was nearly 4%. This was driven by consistent investment in Vitality-focused innovations and priority brands, including Knorr and Hellmann's, which continued to grow strongly. Knorr seasonings with premium ingredients, already successful in Europe, were launched throughout Asia and Africa. Hellmann's was boosted by the launch of Extra Light mayonnaise, with citrus fiber technology. And we followed last year's repositioning in the United States of Promise, as our heart health platform, with the introduction of new cholesterol-lowering mini-drinks, already successful in Europe, under the Promise Activ brand.

Our growth in Ice Cream and Beverages was nearly 6%. In Europe, we launched Frusi, a low-calorie frozen yogurt, Solero Smoothies and Milk-Time, a children's snack containing the same amount of calcium as a glass of milk. There has been an excellent response to the launch in Europe and Americas of new Magnum variants, Colombia Aroma and Ecuador Dark. In Turkey, we launched Amaze snacks containing nutrients that support the mental development of school-aged children. Our successful milk tea powders are being extended to other parts of Asia and Africa. In Europe, pyramid bags continue to drive growth in tea, and we've introduced Lipton Linea functional slimming teas in France.

Home Care grew by nearly 6% in the first half. In Laundry, our global 'Dirt is Good' position continues to drive sustained growth in fabric cleaning by providing a platform for faster rollout of global innovation and communication. The Small and Mighty concentrated fabric cleaning liquids, which led the move to more efficient and environmentally friendly detergents in the United States, has now been rolled out in six countries in Europe and two countries in Latin America. The rollout of Cif Oven Spray and Domestos Zero-limescale across Europe is helping to drive category growth in household cleaners.

Underlying sales growth in Personal Care was nearly 8%. Here too, we had a very strong program of globally relevant innovations, rolled out faster and more consistently around the world. Clear anti-dandruff shampoo was launched in China, Russia, Brazil, the Philippines, Egypt and Arabia, and added a new male product range to the Clear brand in India and Thailand. Axe's launch in Japan is off to a good start, supported by a strong 360-degree communication plan. And Axe body spray has been re-launched globally, with a new revolutionary can, improved fragrances, a new variant called Vice and a new Boom-Chicka-Wah-Wah advertising campaign, which I can really recommend to you all.

In skin care, we rolled out Pond's Miracle anti-aging cream across Asia, and built on the success of Dove Glow lotions with launches in Latin America and new variants in North America and Europe. Another key activity this year is Dove Pro.Age, a cross-category range of anti-aging skin care, hair care and deodorant products, launched in both Europe and North America, and showing strong consumer response to a compelling advertising campaign.

Let me now talk about our margin development. Our first half operating margin was 13.7%, 0.7% lower than 2006, due to higher restructuring costs and lower proceeds from disposals. Before these items, there was an underlying improvement in operating margin of 0.3%.

We have continued to spend competitively behind our brands and increased our investments in advertising and promotion in line with sales growth. This means that the combined benefits of volume, positive pricing and mix and cost savings were more than sufficient to offset rising commodity cost prices and other cost increases.

Our savings programs continue to deliver consistently. In the first half, total savings were again EUR400m, with roughly half from buying savings and half from One Unilever and other initiatives.

Our operating margin for the second quarter shows a similar picture to the first half. The operating margin, at 13.7%, was 0.3% lower than last year, but with higher restructuring costs and lower disposal proceeds shows an underlying improvement of 0.2%. Our advertising spend grew slightly ahead of sales.

As you may recall, we indicated at Q1 that we expected a significant headwind from increased agricultural commodity costs this year, and this is happening. There have been some reductions, for example in olive oil and more recently tea, but these are small in comparison to the increases elsewhere, most notably for edible oils and fats and for dairy products. The price of mineral oil has also moved back above $75 a barrel. In total, the net impact of increased commodity-related costs was EUR285m in the first half, or 140 basis points.

There was an acceleration in the second quarter, reflecting both the impact of olive oil in the first quarter and the recent increases in agricultural commodity costs starting to come through. For the full year, we anticipate that the impact will be at least as high as we have seen in 2006, or 160 basis points. We are mitigating this impact through a combination of pricing actions, buying strategies and other efficiencies and product reformulation.

Turning now to the other aspects of our financial performance. Earnings per share from continuing operations were up 10% in the first half of 2007. Operating profit was down 3%, as the benefits of sales growth and margin enhancement were offset by increased restructuring charges, lower proceeds from disposals and adverse currency movements.

Below operating profit, we see structural improvements in a number of areas having a substantial positive impact on our EPS growth. Financing costs were 19% lower in the first half, through a reduced level of net debt. The credit on pensions financing improved to EUR67m for the half-year, as a result of the better funding position of our schemes and higher expected equity returns.

Our share in net profit from joint ventures has nearly doubled to EUR57m for the half-year, mainly driven by the strong growth in the partnerships between Lipton and Pepsi for ready-to-drink tea. The first half net profit of EUR82m for associates and non-current investments mainly reflects a gain in the first quarter in one of our venture capital funds.

The tax rates of 19% in the second quarter and 20% in the half-year were lower than a year ago, reflecting favorable settlement of tax audits and a better country mix. Our tax rate guidance remains unchanged at 24% for the full year and 26% longer term.

Discontinued operations for last year include frozen foods, sold in the fourth quarter of 2006, and in 2007 include the one-off recognition in the second quarter of profit from future performance-based contributions from the sale of UCI in 2005.

Net debt at the end of June was EUR8.8b, down EUR1.5b from the same period last year but up EUR1.3b over year-end 2006. This reflects the payment of final 2006 dividends in the second quarter and EUR700m of share purchases, as part of our EUR1.5b share buyback program for this year. Our pension deficit reduced to EUR1.2b.

Cash flow from operating activities was EUR1.7b in the first half-year. This compares with EUR1.9b in the same period last year. This reflects seasonal outflow of working capital and includes increased debtors related to the IT systems implementation in the United States.

Let's now turn to our financial outlook for the full year 2007. Following our strong first half-year results, we now expect underlying sales growth for the full year at the upper end of the 3% to 5% range. We remain confident that we will achieve an underlying improvement in our operating margin in this year. A combination of phasing and prior-year comparators means that this will be biased towards the fourth quarter.

We now expect significantly higher restructuring charges this year, in the region of EUR700m to EUR1b, reflecting the acceleration of our change program that we have announced today. We also expect some profits on disposals this year. At this stage, I cannot be more definitive about our reported operating margin for the full year, as this will depend on the exact timing of restructurings and disposals.

And with that, I'll hand you back to Patrick.

So these results confirm our belief that the measures taken since the beginning of 2005 have restored Unilever's competitive position. Since then, we have grown consistently in line with our markets. We have stabilized our market share, with share gains in some priority areas. We've seen the benefits of growth come through during 2007 in operating margins. We've continued to generate strong cash flows, with about EUR10b of cumulative free cash flow since the beginning of 2005. And, less tangibly but just as importantly, we have released fresh energy and more passion for growth within the business.

The measures leading to this improvement will continue to drive performance well into the future. So One Unilever, for example, now in place in most key markets, is leading to better alignment, simplification and speedier decisions. And we expect to deliver the EUR1b per annum savings by 2008 and further benefits of a leaner, more agile, go-to-market organization, and that will continue to accrue for some time to come. Improved organizational productivity is also arising from significant outsourcing initiatives, some of which won't be complete until 2009.

In addition, our global buying efforts continue to deliver savings - around EUR400m last year, EUR200m again in the first half of 2007. Further, our program to strengthen critical capabilities -- R&D, marketing and customer management - will continue to roll out across Unilever throughout 2007 and into 2008.

In aggregate, these initiatives, supported by a normal level of restructuring, are already sufficient, we believe, to achieve our medium-term goals with respect to growth and operating margins.

But now we have an opportunity to build on what has been achieved. Growth - I want to be very clear - growth remains our overriding priority. It is still our number one objective. And growth which is competitive, and that means ahead of our markets, growth which is profitable, so with better margin development, and growth which is consistent, and that means greater resilience to changes in the business and competitive environment.

The steps we are announcing today both complement and reinforce our growth agenda. There are three key elements to this announcement. One, raising the bar for innovation. Second, a more aggressive stance towards the shaping of our portfolio. And three, further margin-enhancing cost and asset reduction.

We can do this now because we have created, I believe, all the right conditions for accelerated progress. We have a clear and effective portfolio strategy based on sharper choices and targeted resources. We're a simpler, better-aligned and more productive organization. We have an increasingly more global business model and that allows for convergence of systems and processes, but also a much better, a much greater leveraging of scale.

Let me give you two examples of how this is working in practice. First, our global category organization is enabling us to leverage categories, brands and technology across key markets, and that provides quicker innovation, better innovation, quicker rollouts and improved returns on marketing investment. It is also leading to a more harmonized product portfolio, elimination of non- value-added complexity and thereby unlocking opportunities to further simplify our supply chain.

Second, our One Unilever program is forcing systems and processes to converge across operations and management is focused on improving execution and organizational effectiveness. And together, these provide further opportunities to simplify the organization and reduce overheads.

So, in short, we can do things today to, one, raise our game in innovation, to shape our portfolio and to access margin-enhancing cost and asset reduction that we could not do two years ago. Let me take each of these in turn and show how we intend to accelerate our performance.

I will start with innovation, which, by continuing to add value to our brands and products, drives, really, growth and margin development. And it is absolutely central to our efforts to drive sustainable top and bottom line performance. In 2007, we have, I believe, one of our strongest innovation programs ever, as John has highlighted in his presentation.

But also, there is a basis to raise our game further through increasingly global platforms. And these are driving global innovation and communication and also, very importantly, lift the productivity of our marketing and R&D spend. We have also a simpler interface between the categories, whose job is to innovate and produce world-class brand mixes, and the operations, whose job is really to focus on outstanding and flawless execution in the marketplace.

We have also better technology support and a remodeled R&D organization, and that is also contributing to category growth. And I believe that the recent appointment of Unilever's first Chief Technology Officer, Neal Matheson, is a mark of our determination to direct Unilever's significant R&D capabilities towards an even greater role for innovation.

We spent a lot of time during the investor seminar to talk about this, including a series of examples from our major categories, so this won't be news to you. At its simplest, it is about applying global concepts to local markets, as we have done with great success in the past with, of course, brands like Dove, Axe and Sunsilk in Personal Care.

But we now start seeing the results in other parts of our portfolio - Knorr and Hellmann's both growing by 6% so far this year, a revitalized Ice Cream category with innovation-driven growth of some 5%, household care business, with brands like Cif and Domestos, growing at over 8%. And for many of these brands and categories, I believe that we have yet to see the full benefits of our increased focus and more global approach to innovation. But we will.

The second area where we want to be more aggressive is in the shaping of the portfolio. Portfolio strategy, portfolio management, for me, means directing resources clearly and consistently to leadership positions and high-growth spaces. And this drives the center of gravity of our brand portfolio towards higher growth opportunities, and thereby increases its growth potential over time. Acquisitions clearly have a role to play in accelerating this process and, though there have been no significant ones to date, we continue actively to explore options.

But the most immediate opportunity to be more aggressive in shaping of our portfolio is through disposals. And going forward, we will even go further to dispose of businesses where growth and profit potential is limited, even those in categories where we have global or regional ambitions. And we will consider for disposal brands that don't fit our strategic objectives and are not essential to our local go-to-market operation.

Already, as you will know, we have made many disposals of non-strategic assets, equivalent over the last two years to EUR2.3b or 6% of Unilever's 2004 turnover. And these include whole businesses, such as European Frozen Foods, mostly, and Prestige Fragrances. They also include a number of non-strategic brands like Finesse and Aquanet in the U.S.

However, and thanks to the changes that we have made to the business, not least through the One Unilever program, we are now able to be even more aggressive in realizing value from these non-strategic parts of the portfolio. We are therefore considering businesses with a combined turnover of over EUR2b for disposal, and that includes our North American Laundry business.

Most, but not necessarily all, will entail outright disposal. However, we are open to consider JV-type structures, earn-outs and licensing deals and any other arrangement that will allow us to capture and release value and focus our resources more effectively.

Take the recent example of our Becel and Becel pro.activ spreads in Brazil that John referred to. Here, we found ourselves number three in a market dominated by competitors with dedicated chilled distribution. The setting up of a joint venture, giving us ongoing access to extensive chilled distribution for our Heart Health brand, combined with the disposal of other brands, has helped us to realize value by turning a declining business into an attractive growth opportunity.

Those disposals will be accretive to growth by about 0.4%, but will have a broadly neutral impact on operating margin after restructuring of 'sheddable' costs. Any associated restructuring costs will be, of course, more than compensated by profits on disposals. We are not giving an estimate at this stage of either sales proceeds or profits on disposals. But let me be clear, these are not forced sales and, as always, we'll manage the timing and execution of this program to maximize value creation for Unilever. However, as mentioned by John in our 2007 outlook, we do expect at least some disposal profits in the second half of 2007.

Now, let me explain why we are also looking at options for our Laundry business in the United States and Canada. There are a number of factors at work here. Our business is profitable, but has not been growing in recent years. Recent developments in the U.S. market, and notably the Unilever-led move to concentrates, open the way for industry consolidation and make our business a potentially attractive asset.

Also, One Unilever makes it possible for us to carve out the business without compromising the scale of our go-to-market operation in North America. Equally, our global ambitions in Laundry will not be compromised, thanks to the recent reorganization of our Laundry R&D and innovation capabilities, twinned with the fact we continue to enjoy strong positions across many European and D&E markets.

The third area where we intend to drive harder is margin development and I talked earlier of the important role that innovation plays in improving margins. I also mentioned that we are already generating considerable savings from One Unilever and from our procurement programs, and will continue to do so. But now we see the opportunity to go further. We have done a lot of work to identify precisely where these opportunities lie, including extensive benchmarking.

We are targeting three areas. One, greater simplification through the clustering of country organizations and a streamlining of regional structures. Two, more savings in overheads through common systems and processes and One Unilever management. And three, greater supply chain efficiency, boosting asset utilization, lowering conversion costs and improving supply chain flexibility and service levels.

Let me take each of these in turn, starting with the clustering of countries into what we are calling Multi-Country Organizations or MCOs. And of course, this model is not entirely new. We have already the clustering of smaller countries in places like Central America and Nordic region, and it has worked well. But we now have the chance to go further, perhaps consolidating to as few as 25 MCOs across Unilever.

You may have seen our recently-announced plan to combine operations in the Netherlands and Belgium. The combined business will have a turnover of EUR1.6b and will operate under a single management team. In time, we expect around EUR50m reduction in overheads.

Also, the reduction in touch points across the whole business will mean we also need less regional management infrastructure. And also, fewer interfaces between the categories and the operations means faster innovation rollout. In short, from a matrix of over 100 countries times 20 categories pre-One Unilever, we are moving towards a 25 by 10 matrix.

At the same time, the groundwork laid by the One Unilever is unlocking opportunities to go further, faster and deeper in reducing overheads and eliminating non-added-value activities. You may have seen the announcement of additional streamlining in the U.K., halving the number of top management, an overall reduction in staff of about 350, and overhead savings of around EUR70m per annum. Another example is Italy, prior to One Unilever a business with around 1,500 people in sales and administration. By 2008, we expect to be around 900, and that's a reduction of 40%.

I am not suggesting that this scope for productivity improvement will be the same across the whole Company, but these examples do show how the One Unilever philosophy, as it penetrates deeper into the business, is revealing even greater opportunities for simpler, more effective operations.

Let me now turn to the supply chain. First, I think it's important to realize that, over the recent years, we have done a tremendous amount to streamline our supply chain. Since 2000, we closed or sold over 100 manufacturing sites. Our fixed assets as a percentage of turnover have reduced from 21% in 1999 to a little bit over 15% in 2006. And our capital expenditure has been held at between 2% and 2.5% of turnover over recent years. But today, a simpler organization, converged IT systems, a more focused and increasingly harmonized portfolio of global brands and products gives even greater scope for streamlining and more flexible manufacturing.

Across Unilever, and after, of course, the Bestfoods acquisition, we have 300 manufacturing sites left and many more warehouses and distribution centers. Our current plans allow for the closure or substantial streamlining of between 50 to 60 manufacturing sites across the world, as well as significant rationalization of distribution networks. This will reduce costs and assets employed. But it will also entail investment in a more flexible, customer-responsive supply chain, capable of supporting faster rollout of innovation and better on-shelf availability.

And to give you one example, last year we established a new supply chain organization for Europe, based in Switzerland. The benefits of restructuring mean they are able to raise their target for on-shelf availability from 92% to over 95% across Europe. And that, potentially, is a lot of additional sales.

The benefits of multi-country clusters, of further overhead simplification and supply chain efficiency are, in my view, not simply restricted to cost reduction. Nevertheless, these initiatives will have a substantial impact on Unilever's productivity and cost structure.

In aggregate, with existing programs and those that we have announced today, we expect to eliminate costs of around EUR1.5b per annum by exit 2010, compared with our 2006 cost base. Some of these savings will be certainly reinvested behind our brands and in support of innovation, but a proportion will flow through to operating margin. We expect the total program, including disposals, to reduce headcount by around 20,000 over the next four years.

These initiatives will require an accelerated investment in restructuring. As I have said before, how much we spend on restructuring will be governed by the opportunities we identify for attractive returns, and not by a fixed budget. The projects that we are currently looking at typically have a two to three years payback and a DCF yield in excess of 40%. To fund these, we expect to lift restructuring to around 250 basis points per annum over the next three years, compared with the 50 to 100 basis points that we had previously indicated.

This doesn't include restructuring that may be required to remove costs that are left uncovered by disposals. They will be, in any case, more than offset by disposal profits. The majority of restructuring falls in Europe, where structural costs are highest and where regional supply chain management offers the greatest opportunity. We expect one-third of our restructuring to be supply chain related and two-thirds overheads. About 80% -- over 80% will be cash restructuring.

So the program that I have shared today with you, as I have highlighted throughout the presentation, is about improving performance. And we are approaching this task from a much stronger position than before. Our strategy has already delivered a sustained improvement in performance - 12 quarters of good quality, broad-based growth. And this, I believe, provides us with a very solid foundation on which to move forward.

To recap, we will do this by a continued focus on innovation as a key driver of sustainable growth and margin enhancement, adopting a more aggressive stance towards shaping our portfolio and thereby driving up growth potential, accelerating simplification and supply chain efficiency and with it, therefore, margin development. This will result in a higher level of sustainable performance overall.

We do expect to strengthen the growth potential of our portfolio as we continue to shape it, and this will become apparent in our growth performance over time. We will also look to beat our margin target of 15% plus by 2010, as well as laying the ground for further margin improvement thereafter. The whole focus of today's announcement is on sustained growth and improved business performance, and that is where we will keep very focused.

So, thank you very much. I will now hand back to John to explain how we will take your questions.

Okay. We'd now be happy to take questions. (OPERATOR INSTRUCTIONS). Thanks very much. Shall we start with Simon?

(Inaudible - microphone inaccessible). Simon Marshall-Lockyer from Bear Stearns. I just wanted to look at the growth prospects (technical difficulty) the disposals that you're proposing [to people] in Europe next year. You're suggesting that the residual business will be growing approximately 48% faster than (technical difficulty). Should we assume that if we simply add 40 basis points to your guidance (technical difficulty)? That's my first question.

And if I may, for the second question, you've highlighted one area of the business which you're looking to divest. This is the Laundry business in the United States, which could be approximately [EUR0.5b or] (technical difficulty). Would it be fair to say that the rest of the divestments are likely to be in the beverage area, where you've often highlighted the (technical difficulty), if you would look at that (technical difficulty)?

First question, just to confirm what I've said. These disposals will be growth accretive. Just -- I would like to remind you we've not started to make any of them, and this is why we've not made any comment as regard to changing guidance or [help]. And that's where I would like to leave it. As time goes by and we dispose of this business, we'll certainly come back to you to ascertain what's the impact. At this stage, we have not started and you see we want to be very flexible in terms of timing and where to dispose. So growth accretive, but let's wait until we have realized these disposals to just, as you suggest, lock in the benefit.

Again, we've given you a big number. We've said about EUR2b disposals, EUR800m is Laundry. And on purpose we've not given any specifics, not even if it's more Foods or more HPC. And the reason's very simple. This is a process which we're going to lead efficiently [for that]. We need to do it properly and without just too much information going out there on what exactly it is. And hence I will not give you any more specifics.

I suppose, perhaps, because I know you will want to factor in some [bets] what we are doing, I would refer you to the past speech. We've given some pointers at the structure, the framework which is guiding us in this sort of decision, so the competitiveness, the growth prospects of the assorted categories, relative market share. That is all things you would be looking at. And we also said that, more than that, no. These are brands, but they're not necessarily critical to support our go-to-market operation. And honestly, that's all what I will say about these disposals. Okay?

Xavier? Come back to you in a second.

(Inaudible question - microphone inaccessible). The first one is the (technical difficulty) rate and the underlying sales trend of the 5% of sales that was (technical difficulty). I was pushing, but not hard enough. Sorry. Again. So Xavier Croquez, Exane BNP Paribas. Just to calibrate the underlying sales trend of the 5% of sales you are disposing of or planning to, a quick calculation suggests that these businesses were growing probably -- were declining probably around 8%. Could you please validate, broadly, this figure?

And the second question, more important, is getting a sense of market share trends, because markets overall are buoyant. The 6% top line growth you delivered in H1, where are the areas where you have significant share gains and are remaining bits of your business where you are not yet gaining share and possibly even losing some? Thank you.

Look, first question, I will not validate anything, frankly. That's 40% growth accretive. You can do the math. I think the number you really should be after is the 40% accretive, because that's the result of the calculations we are making. That's the number, longer term, of interest to you.

As to the market share, globally, with 5.4% growth in each one, eliminating the 40 basis points we've mentioned about advanced sales. It's not by all means a performance which is, in the aggregate, suggesting that -- we are not in a share decline, that overall we maintain our share position.

Areas of strengths and weaknesses, our large area of strength is where we invest money, because we make very conscious decisions to invest money behind a couple of key strategic priorities, and that is where we grow share. With a bit more granularity, we have our traditional area of strength in hair and body, in deodorants, personal cleansing, good personal care. A lot in the foods categories, including ice cream. Areas of weakness, a bit in Europe, hair and laundry would be two areas I would signal.

But by and large, I hope you can look at the overall picture and just see the sense of momentum which is there and helps us produce this sort of result. And I'm sure that you will have very quickly just tried to calibrate some of this growth with the growth that you see with some of our competitors. And I'm sure you have been very comforted to see a growth in household cleaning, 8%, which is rewarding considering that it was a business three years ago on a so-called red list. Laundry, close to 6% across the board, good performance. Our Personal Care, 8%. You will have seen the comments made in the speech and by John about the strength of Knorr and the strength of Hellmann's with close to 6%. So a good sense of momentum driven by innovation, precisely that's where we are.

Yes, hi. Chris Wickham from MainFirst. Just a couple of quickies. One, going on from that in terms of growth, I was wondering perhaps -- you've clearly identified, in terms of the U.S., where you've had growth being accelerated unusually in the second quarter. I was wondering perhaps if you could give us any sense of how much growth, perhaps, was decelerated in the second quarter by any special effects, things like U.K. weather on U.K. ice-cream, that sort of thing. So in other words, whether there's anything that we can add back.

The second point is, just going back to the presentation you made to investors in March, you talked quite comprehensively on the Foods side then about the importance of Vitality. And I understand that you've audited your Food product portfolio quite carefully as to the portion of that portfolio which you can actually say genuinely enhances vitality. And I think the conclusions of that are that it's superior to leading European competition. And I was wondering perhaps if you could give us any more details on that audit, just to let me know where we are, say, relative to competition or relative to where Unilever's been in the recent past.

First, apart from these 40 basis points, I wouldn't see any significant items I would like to draw your attention in terms of impacts on the second quarter. Yes, we suffered a bit in the U.K., especially in the second quarter, though the first quarter was good. And overall, I think John said earlier ice cream was not a factor in our results. As a matter of fact, the performance was pretty good.

So I'm not blaming anything on the weather, just to be clear, for the record. A bit weaker performance in the U.K., that's -- from a European perspective, it's more -- the balance is in the first quarter, which was good, I believe it was 3.6%. The second quarter, 1.6%. If you look at the two, we -- about, what, 2.5% and the trend, a 12 months rolling average for Europe, around 2%. That's the sort of performance where we are, so nothing significant.

About the Vitality, I will be very careful in just stating that our portfolio has more vitality than some of our competitors. I would not go there. What I would say, though, is that Vitality drives very much our Foods performance and our Foods innovation program. We have also found ways to express innovation and Ralph Kugler, he's here and I'm going to ask him in a second to, heading the HP category, to just say a few words about Vitality and Home & Personal Care.

It's driving a lot of things in the Company, from research to marketing to platform, but I would not venture to compare with some of the other guys and positions. In striving forward, that's absolutely clear, it's a consumer trend which is very relevant for us and on which we capitalize. And I don't know whether you looked at some of these innovations. If I had a Frusi here in my hand, I would show it to you. I'll tell you how excited I am about it - it's cereals, it's yoghurts, it's light and it's running like a train. So is, by the way, Magnum, our new Magnum, which suggests that the consumer is very balanced in its choices and it's not all about Vitality.

But perhaps, Ralph, a few words about Vitality in HPC. Ralph Kugler is the President of our Home & Personal Care business.

Thank you, Patrick. Good morning. Vitality also plays a central role in our innovation in Home & Personal Care. In a simple sense, we see Home & Personal Care as being about health, hygiene and well-being. And let me just give you three examples, one which I've talked about before, which is Lifebuoy, which is an important brand in developing and emerging markets and which plays a critical role in helping people to raise their levels of hygiene. And for instance, an important program in India, Swasthya Chetna, is playing a critical part in educating people and especially educating children to wash their hands more, which is a contribution to reduced incidence of diarrhea. And that's an important vitality expression.

I won't speak about Dove, but Dove Self Esteem, you know all about it. But making people feel confident about who they are rather than aspiring towards images which are artificial is as big an expression of vitality as anything. And very much linked to that is our policy agreement not to use unreasonably thin models in any of our communication which, again, because we don't wish to present images which aren't vital.

And thirdly, in home care, a critical issue is usage of water in many parts of the world. And a number of our innovations are based on the platform of less water usage. Within India, for example, all our fabric conditioners in a number of parts of the world where we've used technology to have formulations which require less use of water, which is another expression of vitality.

Thank you. Before we continue, I think John wants to select somebody on the line.

Yes. I think we've got -- we'll take a couple of names from the line. If we could take the first caller from outside the room, please.

Thanks. And the first caller is Marco Gulpers from ING. Go ahead.

Yes. Good morning, all. I've got three questions, if I may. First is a clarification one. You're mentioning that the reduction in the annual cost base by 2010 is EUR1.5b. Looking at the EBIT margin in '06, this is 5.4%. Are you now suggesting EUR6.9b, then, in reported EBIT, let's say, after you're spending up to 2.5% by 2010?

The second question is the step-up in A&P which we've seen in the second quarter, but it is still flat for the first half-year. What are your expectations for the remainder of the year?

And looking at the EUR2b in sales disposal, this could fetch around EUR3.5b to EUR4.5b in possible disposal proceeds. Could you already make a comment on how you're expecting this to come back to potential shareholders in the form of M&A or in increased share buybacks? How are you looking at this at this point in time? Thanks.

Let me take those three questions, the first one on EBIT margin. My focus in raising the performance of the Company, you will see that explicitly we have not raised our operating margin guidance. There is no number that I've shared with you. I've shared an ambition. I've shared, I think, with some granularity the plans we have. But we've not made comments on the way and how much some of that money will flow to the bottom line. So I think you should just reflect on that and not add to the EBIT margin.

The second's on A&P, the answer is competitive. We have, I believe, over the past two quarters demonstrated that we are supporting a 5% type of growth, with an equivalent increase, all things being equal, in our marketing spend. I hasten to add that we have made a lot of progress in return and productivity of our marketing investment, mainly because we can leverage scale better. We have more and more global platforms when it comes to communication. And that, of course, allows for us to reduce costs, production costs, but also to leverage more effectively our communication investments across the world.

So we'll continue to invest disproportionately in the areas of focus, of strategic focus where we want to grow and grow market share, and stabilize or reduce the investment where we believe that there is less opportunity for greater return. So, no numbers. But one thing that you can be reassured, there will be continuous support to our brand. A&P is not a balancing item in my P&L, but an investment item.

As to the disposals, I can make the same comment that I made on the 40 basis point growth. We have not yet made any of the disposals. I don't have any of the money at this stage to return or otherwise dispose of.

Just I'm going to repeat the same two or three key messages which have been really part of our balancing financial strategy over the past couple of years. One, we got after an efficient balance sheet and a competitive cost of capital, to keep account (inaudible) we are, whether with the risk, the balance, [VDME], all the rest of it. And we want to make the money, the surplus money, work for us through the tools that we have, from reinvestment in the business, dividends, share buybacks and acquisitions. And I'm certainly going to use one or two or all of these levers in the future to generate value out of the money. But coming to one specific or timing or quantity, at this stage, I'm simply not going to do that. Okay?

We'll take another one from the air, if we may.

Thank you very much. The next question now comes from the line of Alex Molloy, Credit Suisse. Go ahead, please.

Good morning. A quick question on disposals. If we look at the disposal of an individual business unit that you might make going forward, how do you look at the relationship between the disposal of that unit and value creation for your shareholders?

The disposal -- for each of these businesses that we have, we have retention value. And these retention values are based on our best current thinking as to the plan, the cash flow, the terminal value. We value the businesses just as an independent business. And we put a value -- retention value. We look at tax consideration, full Monty.

And against that, we have opportunities for disposal with a value. And hence it is shareholder value that drives the whole profit in many ways, as I've explained, in the way we define the value. But also underlying, because the areas that we earmark or we consider for disposal, are areas where we believe that our competitive position and the relative attractiveness -- relative competitive position and the relative attractiveness of the market are less worthy of our future investment than other areas.

So this is, from a strategic perspective and a process perspective, this is what we're doing. Let me close this question answer by another part. You will remember the discussion that we had about household care, and we discussed it with the market. There was a view that it's a category we should very urgently dispose of because it was a dog of a business, basically. And every investor meeting we had this discussion. Every info meeting, what are you doing with home care?

And we say look, our disposal, our retention values are way ahead of disposal. We have an opportunity. Over the past two and a half years, we have grown in excess of 6%, in this quarter 8%, and that's competitive. So we're very, very disciplined in this process. And I can assure you that the new CFO is maybe as disciplined as we are on this. So I hope I will have reassured you on that.

Thank you very much.

Martin? The button.

Yes. Is that on? Okay. Yes. Martin Dolan from Execution. Just working through the converse of what John said about emerging markets seems to imply that developed market growth rate was only 2% revenue growth in the first half. Surely your categories are growing stronger than that in developed markets. So is it a loss of market share across the board or is it one area specifically in developed markets where revenues are down?

Well, if you do the calculations a bit more, then too many of you would ask the question. So I think the calculation is - I can be wrong - at 2.5.

First of all, if you step back for a second and see where is it that I'm investing resources and where is it I'm not investing resources, where is it in terms of category, you will see that it's about developing in emerging markets, it's about personal care, and you see that also in some of the margin development. You see more investing, and this is where my share performance is good.

In Europe, it's a mixed bag. I've had good performance in food, and I mentioned two categories which have been stellar in market share, which are laundry in Europe and healthcare in Europe. Spread has been also a bit weakish because of the price increases we're pushing.

But just step back for a second and we can dissect the number today. What I would like you to do is just stay and look at 5.4% and just the overall performance, and certainly one which doesn't simply reflect what you call the growth of the market.

Just to intervene, I think we make a number of close to 3, actually, here. And just one other number, Xavier, notice that we said EUR2b plus for the disposals. Thanks.

So, John?

(Inaudible question - microphone inaccessible).

We'll take it up. Let's not do the maths in here, Martin. I'm sure we're --

I'm sure you guys could have a nice discussion about that. But from our perspective, we don't have the sort of meltdown in share that perhaps was implied in your question.

John?

Yes. Thank you. John Parker from Deutsche Bank. On the savings program going forward, you've laid out the new savings program which, I guess, is going to run at about EUR500m savings per annum.

EUR1.5b in 2010.

That in itself is lower than the quantum of savings you've been achieving in the past few years. Even in the quarter you've just reported you've had savings from buying, as well as savings from cost saving programs.

Buying savings are not included in this EUR1.5b, just to be clear. Buying savings are not included in this EUR1.5b. They are not attracting restructuring money.

Right. Okay. Well, that was sort of my question. Can you give us an idea of the total quantity of savings you would expect annually over the period up to 2010, or are you just going to give us this (multiple speakers)?

Yes. I would simply just say a couple of things. EUR1.5b over the period. I see no reason why our savings in buying should diminish. They've been pretty consistent. If we reflect on the past two quarters, we use to be around EUR600m; we've been very steady at EUR400m. This is not included. I would expect this sort of trend to continue. I wouldn't want to break the EUR1.5b specifically. What I can reassure you about is that in terms of fiscal investment and payback, we're in the same zone.

It is true that the savings over the past two years have slightly risen for two reasons. Why? We've a bit more disposal costs that we need to get rid of going forward, or structural costs as a result of the disposals. And over the past two years, we have got a lot of savings at the top of the Unilever pyramid. And hence the return, indeed, over the past few years have been somewhat better. But, at the end, we're still in a two to three-year payback, which I believe are all stellar, going to be good returns.

Mark Lynch from Goldman Sachs. If you look at the pricing figure for the first half it's 1.1%, which sounds or seems modest compared to what we're seeing from some of the other quoted food companies. And I'm just wondering, is it your -- is it the case that actually you're continuing to use pricing as a weapon to drive growth, i.e. you're pricing less than your competitors? Or do you think it's just the fact that you're in different categories?

And secondly, looking forward, do you see that pricing figure getting to the 2% level?

And the second question on costs. Unilever directors have been quite vociferous about the outlook for commodity costs over the medium term. And I'm just wondering if the accelerated cost saving program and the lack of change in the margin target are a reflection of that dynamic of higher agricultural commodity costs.

First, on pricing. We have three different situations when it comes to pricing, which you would recognize. We're developing in emerging markets where we are, in many categories, leaders and price leaders. And if you go there, you have price increases around 3%. We have the U.S. and Americas, where the price increase is at the 1% to 1.2% mark. We believe this is a competitive zone. And then there's Europe. Europe was negative for the quarter, 50 basis points, of which half of it, by the way, is olive oil, we had about, what, give or take EUR150m olive oil and price -- commodity price went down by 20%. So half of it is just irrelevant this discussion.

We're not using price as a weapon to gain volume. If you -- these aggregates are overall volume performance. You are talking for Asia. In a second perhaps I will ask Harish Manwani, who is leading this region, to comment on that. But our volume growth to deliver the Asia Pacific growth in excess of 10% is a very good 7% odd.

So Europe, and Europe is not about using pricing, it's just the reality of our competitive situation, nature of the portfolio, the strength of our brands. We are making progress. We really are. We've put some good serious price increases and expect that to pay. But it is not yet one region where we really are able to play the full price piano. Keep in mind, though, the comment I am making that we're not using price to buy volume. Europe is a lot of foods business, as you know, which is probably more affected than the others by commodity price increases.

I'm going to come back to Harish in a second. I would like to take your comment and I know I'm going to be attracting some comment on that. I think my job is about delivering performance and improving the performance. And yes, implicitly I've talked about beating the target 2010, money flowing to operating margin, I've shied away from guidance. We've been burnt there in the past. I'm sure you will remind. And what I want to deliver is increased performance not increased guidance. And the share price should reflect the clarity of the strategy, the choices we're making, the Company prospects, not the level of guidance.

So you may see that as being cautious, prudent, but you will also see or remember that in the speech I said clearly that it was my belief that the plan that we have in place will deliver the 15% we promised to the market.

So cautious, yes. Prudent, certainly. Lack of ambition, certainly not. And focused on performance. And it's not an elegant way to assume more money to do the same target, as you know. But I will keep the flexibility which we have done in the past to run this business in a way it has to be run.

So, before I just said I would pass on to Harish to comment on the price volume in his part of the world.

If you look at our performance in the first half, we've actually delivered 11% underlying sales growth in the region Asia/Africa. Out of it, 8% is volume and 3% is pricing, below 3% run rate. And, essentially, I think this gives us confidence on both ends. We believe 8% volume growth is really quite good in the environment in which we operate. And the fact that we were able to take a 3% price increase versus a about just over 1% last year, gives us the confidence that we have the portfolio which is now strong enough to do that.

And the only other point I'd like to make is that one of our big strengths in the developing and emerging markets is that in all the lead categories we've got actually brands that are positioned to straddle the pyramid. So our ability to be able to play the portfolio game is far superior than any of our competitors in our leading markets.

The reason I wanted Harish to be here, by the way, is that I wanted to make sure that everybody remembers that our agenda is a growth agenda, and it is about leveraging our strength and is not a restructuring agenda (inaudible).

By the way, I forgot something which I'm sure my colleagues from IR will want me to mention, is that in the U.S. there's quite an impact on U.S. ice cream, I'm sure, in terms of the pricing. But they will articulate better with you apart from this discussion, so.

It's Julian Hardwick from ABN Amro. Can I ask two simple questions? One, can you just give us some sort of sense as to how the innovation program is phased in 2007? Is it reasonably evenly weighted across first half and second half or have we seen a bigger impact from the first half?

And secondly, you touched on the issue of unrecovered overhead as a result of disposals. This, historically, has been quite a significant issue. I think, from memory, frozen food does about 600 or 700 basis points of sales. In terms of unrecovered overhead, you had to manage down. Is that a reasonable kind of figure to be thinking of for the program that you're now embarking on? And can you give us any sort of sense as to -- I think you mentioned there would be additional costs associated with dealing with that, and what sort of scale they're likely to run at.

We have earmarked money to deal with the so-called sheddable costs. The reason why I separated that in the speech is that against that we're going to get a profit on disposal. I just wanted to separate the two so that the analysis is clear.

I'm very confident that we'll get the sort of costs that we need to take out of this organization to compensate perhaps not immediately directly in a similar -- I take an example, U.S. laundry, with fabulous go-to-market capability. And I just don't want this capability to be touched, and I'm going to be very protective of it. Even so, I will have to take more money from my friend, Kees van der Graaf, who is running Europe, because I see there the opportunity. So it's not going to be a one on one. But in terms of the costs, I'm very confident I'm going to take these costs out of the equation.

I think, Julian, you should also recognize that, depending on how we dispose a business, you have a different situation. So I wouldn't necessarily read straight over from frozen foods onto another disposal. It would depend on how we actually went about the process.

And what was the first question?

Innovation.

Yes. We had a very strong program in the first quarter -- in the first half-year, as we have a strong program in the second, with perhaps a [tick] less aggressive, strong program. There were some major activities in the first. But I'm very comfortable, to put it this way, with the program that we have in the second part of the year.

Your new CFO, James Lawrence, if he reaches the view that Unilever could support a similar balance sheet structure to General Mills, I'm thinking about over two times net debt EBITDA as opposed to one, would you stand in his way?

It is not even there. It's just like the disposal and those kind of things. Look, Jim's here, or James, James but we call him Jim, it's confusing, so Jim. Jim is going to be here as an engine of change. So I don't mind him challenging that what we have been doing with very solid arguments, solid debate. I don't have a sacred cow. But we have very clear policies and we need very good reasons and convincing reasons without dogma to change.

So are we going to close the door to discussion? No. Are we going to have robust debate and decide together what's right for the business? Certainly. And this is why -- if I wanted somebody comfortable, I had plenty of other candidates that were very comfortable. He's going to be more uncomfortable because he's going to come with a different view, a challenge, and that's, I think, what the business needs.

I think we'll take from the air next. Can we have the next caller from the lines, please?

Thank you very much. The next caller is from Francois Digard from Natexis. Go ahead.

Good morning. Francois Digard from Natexis Securities. Two questions, if I may. The first one, could you share with us the reasons for which in Q2, when you look through regions and category, where the organic sales growth is the faster, like in Asia or personal care, the margins decline, while where it is a bit slower the margin progressed. I guess there is some kind of reason about product launches and so on, but if you could elaborate.

And the second one is about the EUR1.5b savings. Could you share with us what is incremental in that EUR1.5b versus what's still to be delivered by One Unilever? And yes, that's my question. Thank you.

Well, first, on the first question. I'm not going into a detailed review. If you look at the bigger picture, I think we have had -- first, across the board and across most of the categories we have had good performance. I think John went through the categories. And you see that a lot of the categories, personal care at 8%, household care around 6%, [household cleaning] 8%, laundry around 6%, with good performance in savory, good performance in ice cream, health perhaps a bit subdued, hair care was fine. Most of the categories performing.

In terms of the regions, the star, of course, was Asia/Africa. Good solid growth. Solid product innovation. Europe, 1.6%, dropped slightly below the performance of the first quarter but, as we have explained, there were some reasons. Altogether, we have here a 2% trend which we are comfortable with. And the Americas, we have 5% on average in Latin America. U.S., North America, give or take for the two quarters 3%, between 3% and 4%. Solid across -- I believe solid across the board.

As to the margin, if you look at the margin at half-year, I think you will see underlying progress in most of the regions and in most of the categories. You will see also in personal care perhaps some more investment in support of the innovation, which is very logical, and hence a slight decline in operating margin before our (inaudible) by the investment that we are making in innovation. For the rest, I think the situation as far as margins are concerned was overall healthy.

On the EUR1.5b, just not going to go into variance in the business, what we have said is that by 2008 we would be delivering about EUR1b savings through One Unilever. And I think we've delivered about, what, EUR700m by the end of 2006. And we were absolutely on track to deliver that. So there's no shortage. And we discussed about the EUR1.5b. You can cut it the way you want, but you get a sense of the sort of rate that we're going to have for the next couple of years. (Multiple speakers).

The rate of this thing is the -- but the 1.5 --

Can we have one more from the air, please?

Okay. Thank you very much. The next question is from Charlie Mills from Credit Suisse. Go ahead, Charlie.

Yes. Just going back to Martin's point about the emerging market performance, I wonder if you could perhaps break Western -- sorry, the European performance into how Eastern and Western Europe did on an underlying sales basis for the first half.

Just off the cuff, I don't need to ask -- I don't need to do the job. I have here the President of Europe and I have IR. So Kees, on the half, do you want to talk about, just roughly, the split performance?

Yes. There is, of course, a marked difference between speed of performance in Central and Eastern Europe versus Western Europe. As Patrick has said, we had in the second quarter in Russia alone a 15% growth. Poland, Hungary, Czech group, Unilever South Central Europe all performing in higher single-digit numbers. And therefore the consequence is, of course, that the net result for the rest of the (multiple speakers) is slightly above 1%.

Sorry, so that's Western Europe is --?

Charlie, both grew, with clearly a much stronger performance in Central and Eastern Europe, which is just over 10% of the total.

Okay. Thanks.

Good. We'll -- I think we'll take one -- two more questions. All right. The button is -- press hard. You'll get some help from (inaudible). Well, we have a new Chief Technology Officer.

It seems that you're going to apply your (inaudible) to the detergent business. And as R&D is key to these kinds of businesses, would you more or less be able to - thank you - support alone the R&D cost or would you need to share the R&D cost with the buyer?

The fact is that we have prepared for a potential disposal by rearranging our R&D activity in such as way that we are very clear that we can support our global business, which is still going to be household care and home care in the vicinity of EUR6.4b, with our R&D base.

As to future support to a potential partner or acquirer, I think it's just going to be part of the discussion and the negotiation. And I see no reason why we couldn't continue sharing technology there.

In your EUR2b plus disposal program, you just highlight the North -- the disposal of the North American. Is it because it's the biggest, it's the most advanced negotiation?

No, it's because it's the biggest, it's strategic. We think that's an important strategic step which we wanted to share also because we believe this is an industry, specifically in the U.S., where there is opportunity for further consolidation. And we believe our brand and this business can be a magnet for the consolidation as, and a lot because of our own efforts, we are driving the liquid laundry market towards more and more concentrate. There have been also changes in the supplier base when it comes to manufacturing, or some concentration. We think it's the right moment to engage in this discussion.

My last question on still the disposal. Could we have an indication or a flavor or something in terms of profitability of your businesses?

Just repeat what I said in the -- just in the speech, the only thing that I said is that altogether these businesses would be neutral in terms of margin impact on Unilever. I've also said that our U.S. business is profitable and grew nearly 4% in the first half-year. So I'm not under -- I'm not in a desperate situation. And this is why we are very confident that we will drive this process very effectively, as we have done in the past.

Last question. Okay.

Carl Short from Standard & Poor's Equity Research. I was just wondering, you split out the underlying sales performance between volume and price and I just wondered which figure contained the mix variance.

The mix is in volume, if I remember correctly. Just look at my --

Yes, that's right.

In that case, what -- have you got a feel for what the underlying volume or the real volume performance is as opposed to volume plus mix? Or is it not a figure that you calculate?

Well, I'm sure it's somewhere in the organization. I don't have it top of my head, so you will have to -- no. I don't have it. I have it on margin, but it's not relevant for the question. But I don't have it top of my head in --

Predominantly volume. I can certainly confirm that.

All right. Okay.

John will confirm. But, in any case, I think I would agree with the sentiment that in the volume performance, it's about [key] sales primarily. I would be surprised if the mix impact is of the magnitude that really --

Just supplementary to that, would you be expecting mix to add an increasing amount of sales for you going forward, given all the innovation that you're doing?

I would expect mix going forward to make a contribution to both top line and operating margin, because you remember the way we select the categories in which to invest. It's all about share, opportunity for attractive growth. And even though we put more resources there, by and large, this delivers increase in margin. So yes, mix should be a factor and [it is] in the speech. But one of the ways we want to pursue margin growth is driving more value in the categories in which we operate, more technology, and of course we need to be part of that.

Okay. So lastly, a summary, I believe a good set of results but, more importantly, a platform for further acceleration of the transformation of the Company. And we are raising the bar in terms of innovation, in terms of portfolio and in terms of margin.

Thank you.

Thank you very much. This conference has been recorded. Details of the replay number and access codes can be found on Unilever's website. An audio archive webcast will also be available on Unilever's website, www.unilever.com. Have a great day, everyone.