聯合利華 (UL) 2008 Q1 法說會逐字稿

Welcome to Unilever's first quarter results 2008 conference call, hosted by Mr. Jim Lawrence, Chief Financial Officer, 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 of the replay numbers and access codes can be found on Unilever's website. A webcast and a podcast of teleconference will also be available on Unilever's website, www.unilever.com. We will now hand over to Mr. Jim Lawrence.

Good morning everyone and welcome to Unilever's first quarter results call and for me my third quarterly results review. As usual, I draw your attention to the disclaimer relating to forward-looking statements and non-GAAP measures. I have Charles Nichols and the IR team with me today. And we will be happy to answer your questions shortly. Before we do, may I summarize some of the key features of our first quarter performance?

It has been a good start to the year, with strong organic growth and underlying margin improvement. We are executing our strategy with focus and discipline. I'd like to highlight four elements of that strategy. First, we continue to invest behind our brands, while taking determined pricing action to recover sharply higher commodity costs. Pricing is up across all regions and all categories.

Second, we have a strong innovation program for 2008. Many of the initiatives are already in the market.

Third, accelerated restructuring is driving productivity across the supply chain and in overheads, generating significant savings. Additional resources have been allocated to value improvement, yielding new opportunities to reduce costs through purchasing and product redesign.

Fourth, we've made further progress on portfolio development. The Boursin disposal and the extension of the Pepsi Lipton joint venture were both completed in the quarter. The Inmarko acquisition of the leading Russian ice cream company was announced within the quarter and we completed that acquisition in April. We are progressing with the disposal process for our North American Laundry business and have had interest from a number of parties.

Let's have a look at the numbers in more detail. Q1 turnover was EUR9,570m, and that was 0.5% ahead of last year. That is after a 1.1% impact from disposals and after an adverse currency effect of 5.3% which reflects the strength of our reporting currency, the euro. Our underlying sales growth in the quarter was 7.2%, with 2.3% coming from volume and 4.8% from pricing. In aggregate, the phasing effects such as Easter, number of trading days, timing of price increases, the timing of systems implementations, in aggregate, these had no material impact on first quarter sales. The pricing actions which we are taking to recover commodity cost increases are essential to protect our margins and to ensure that we can continue to invest behind our brands for long-term growth.

Now, in the short term, higher prices are impacting volume growth across some of our consumer markets, and of course not just for Unilever. We estimate that market volumes are more or less flat across the developed economies. In developing and emerging markets, volume growth rates remain healthy but for the market had eased slightly from the highs of the last two years. And so, in this context, we believe that Unilever's overall growth in Q1, and our balance of price and volume, represents a good competitive performance just as we have targeted.

Let me now turn to our performance by region. Underlying sales growth in Europe was 2.3%, all from pricing. Now, within this, Central and Eastern Europe continued to grow strongly, with organic growth over 10%, mainly from volume. And Russia continues to perform in line with its priority status within our strategy framework, and we see growth in the high teens in Russia. Western Europe grew by just over 1%. And this included good performances in the U.K., the Netherlands, Italy and Spain. We also saw improvement in France, but we did have a weak start to the year in Germany after having seen a strong finish in Germany in '07.

The operating margin in Europe of over 28% was boosted, of course, by disposal profits from both the Boursin disposal and the extension of the Pepsi Lipton International joint venture. Stripping out these effects and the effects of restructuring, there was an underlying improvement in operating margin of 70 basis points in the quarter. And this shows the benefit of the accelerated restructuring program on our European cost structure.

The Americas region grew by over 6% in the quarter, again mostly on price. The U.S. grew by nearly 5%, with good performances across most major categories. We estimate that U.S. market growth in aggregate remains fairly steady at between 3% to 4%. Within this, however, we have seen weaker market demand in Personal Care, offset by price-led growth in several Foods categories in which we compete. Improving growth trend in Latin America continued from 2007 into 2008, with underlying sales growth just under 10%, and this included good performances in both Brazil and Mexico. Operating margin for the Americas was down 30 basis points on an underlying basis, entirely due to our increased marketing investment in Latin America, as planned.

Asia Africa. Asia Africa grew by over 14% in the first quarter, with an almost equal balance for us between price and volume. As I mentioned earlier, market volume -- market volume growth has moderated slightly from the highs seen in 2007, as prices have risen. But demand remains strong across most of these markets, driven by their economic growth and their people's rising incomes. Asia Africa remains a good place to have some of our largest businesses. Our growth was broad based across the region, of sight, excellent performances in China, India and Turkey. Of our major markets, only Japan and Australia failed to grow in the quarter. Strong consistent sales growth was accompanied by a 60 basis points underlying improvement in the Asia Africa operating margin. And this came despite the higher commodity costs and other cost inflation.

Now I'm going to move from commenting on our regions, commenting on our four categories. All four category groups delivered good growth in the quarter, both on price and volume. We have stepped up both the quality and the quantity of our innovation over the past couple of years, focused on four key themes. First, vitality focused innovation, targeting consumers' desire for health and wellness. Second, rapid rollout of winning mixes across key markets. Third, faster deployment of new technologies from the R&D centers to the consumers. And fourth, introduction of proven concepts to new markets and new cultures.

We have a strong program of new launches and renovations in 2008, and we are also benefiting from a continuing momentum of initiatives which we introduced to the market in 2007. The improved flow of innovation, supported with carefully targeted marketing investment is giving us a good balance of growth across our categories and across our big brands. Innovation also offers more value to our consumers and is therefore an effective tool to offset rising costs.

With that introduction, let's now look at each category group in turn. First, Savory, Dressings and Spreads. This category grew by nearly 8% for the quarter, with all of our major brands performing well. And the key innovation themes here are health and convenience.

Health, for example, reduced fat Hellmann's mayonnaise and Rama margarine. Our family spreads brands grew strongly in the quarter, driven by a new 'goodness of oils' campaign. We also launched Hellmann's olive oil mayonnaise in North America. And convenience, convenience is driving the success of Bertolli in the United States, where we have introduced a new range of sauces in microwaveable pouches. And also Knorr bouillon gels, which were launched in China late last year, are doing very well in retail and they're being enthusiastically received by chefs in China as we roll out into food service channels.

Next category, Ice Cream and Beverages. Ice cream and beverages grew over 7% in the quarter. Double-digit growth of Lipton was driven by a continuous flow of innovation in faster growing segments such as green tea, specialty tea and functional teas, as well as the consistent communication of the overall health benefits of tea. Our ready-to-drink tea, most of which is within the Pepsi Lipton joint venture, also posted strong growth in the quarter. Ice cream had a good start to the year, even though the all-important European summer has not yet begun in that quarter. Of course, if you look outside the window today, it certainly has started in April -- since April. We have many new products going into Europe for the 2008 season. These include Carte d'Or 'World of Chocolate', Magnum Temptations, and several new Cornetto variants. We also have a strong program for Ben & Jerry's, including entry into the premium sorbet segment.

Our third category is Homecare. Homecare had an excellent quarter, with growth of nearly 8%. The combination of global brand platforms and superior technology is creating opportunities for large scale innovation. All three of our global fabric cleaning brands, Dirt is Good, Surf and Radiant, all three grew strongly. We have leveraged Dirt is Good as a platform for global innovation and communication, with the launch of a harmonized Active Clean range across Europe and across Asia. Our fabric conditioner brands, Comfort and Snuggle, delivered double-digit growth through technology driven innovation, focused on fresh release fragrances, easy rinse formulations and concentrates.

Finally, Personal Care. Personal Care grew by nearly 6% against a tough prior year comparator. Specifically, our Personal Care innovation program was front-loaded in 2007. We had major initiatives, such as Dove ProAge and Clear shampoo launching in Q1. This year, we have a more evenly phased plan, albeit we did have some important initiatives in Q1. Following the launch of Pond's Age Miracle and Flawless White across Asia, we are completely renovating the core moisturizing range with new products, new packaging and new communication. We have launched a revolutionary upside down deodorant roll-on for Dove and Rexona in Europe and Latin America, offering roll-on users unrivalled comfort and product delivery. Axe added a new variant, Axe Chocolate. And we have introduced Axe Bullet, a new on-the-go body spray. For Dove, we are looking to recruit new users to the brand, with the global launch of Dove Go Fresh body washes, bars and deodorants. And we continue to drive the success of Clear shampoo across the D&E world with new variants and a strong marketing program for 2008.

So, for the four categories, in summary, big impact, globally relevant innovation which will drive the growth and the margins of our categories through 2008 and beyond. Let's now turn to operating margin.

Our reported operating margin in the first quarter was 19%. This included, of course, over EUR500m of disposal profits, nearly all in Europe, relating to the sale of Boursin and the transfer of Lipton ready-to-drink tea businesses into the Pepsi Lipton joint venture. So before disposal profits and restructuring costs, there was an underlying improvement in operating margin of some 30 basis points.

Spend on advertising and promotions, in combination, increased broadly in line with sales. Almost all of this increase aimed in advertising rather than promotions. And it comes on top of significant gains in media productivity that are keeping our media cost inflation well below market levels. This means that the combined benefits of volume/mix, positive pricing and cost savings were more than sufficient to offset a sharp increase in commodity prices and other cost increases.

The year-on-year impact of commodity price inflation was around EUR400m in the first quarter. That would be equivalent to about 420 basis points of operating margin. Many food commodities, with the notable exception of dairy, have continued to rise over recent months, and the petroleum oil price hovering now at around $120 a barrel. In fact, I think it was $125 overnight. While there are signs that some commodity price pressures may ease in the second half, we believe this is unlikely to have much of an impact on 2008 input costs. As things stand now, we are looking at a full year commodity cost impact in the region of between 400 to 500 basis points.

We are fortunate in having strong brands and formidable market positions. This gives us the pricing power we need to help offset these very significant cost increases. But we are also finding other ways to mitigate the impact. Margin-enhancing innovation, our accelerated restructuring program, buying savings, and other value improvement initiatives. In total, our savings programs delivered around EUR200m in the quarter, which was approximately half combined savings and half from restructuring and other value improvement initiatives. Our savings delivery is programmed to accelerate as we go through the year, to give a full year figure in the region of about EUR1b.

Earnings per share in Q1 were EUR0.47. We're 35% ahead of a year ago. This includes a net benefit from restructuring, disposals and other items of some EUR0.12. Before that impact of restructuring, disposals and other items, earnings per share increased by around 2% at current exchange rates, or 6% taking constant exchange rates.

We had a tax rate in the quarter of 22%. And that was helped by a low tax on disposal profits and favorable settlement of several outstanding tax issues in the quarter. The underlying tax rate for the year, and this is before restructuring and disposals, is expected to be closer to our long-term guidance of 26%.

Turning to balance sheet and cash flow, as usual, quarter one is a low cash flow quarter. In addition to the normal seasonal outflow from working capital, we experienced higher commodity costs and selling prices which increased the value of working capital by around EUR100m. And, in addition, we deliberately built stocks in advance of certain critical supply chain and systems changes. The higher outflow from working capital billed was partly offset by lower tax and pension payments, which left net cash flow from operations at over EUR100m. Also I should mention that during the first quarter, we bought back 29m shares for just over EUR600m. This is out of our 2008 buyback program of at least EUR1.5b.

This concludes what I wanted to say about our first quarter performance. We had had a good start to the year, strong organic growth and underlying improvement in operating margin, despite a challenging business environment. We're executing our strategy successfully, innovation, pricing, productivity improvement, portfolio development. And we are benefiting from the natural strengths of our portfolio. We have a broad geographic footprint, categories that cater for the everyday needs of consumers, brands and products that span price points from premium to value. All are significant advantages in the current markets. We continue to keep a close eye on our market competitiveness, remembering our three business priorities. First, to grow at least in line with our markets. Second, to improve margins. And third, to invest selectively for market share gain where the return on investment is attractive.

All this puts us firmly on track to deliver our 2008 outlook of competitive growth and underlying improvement in operating margin. While it is still early in the year, we now expect to exceed our 3% to 5% target range for underlying sales growth in 2008 and to increase underlying operating margin.

And, with that, I would be happy to take questions. We have about 35 minutes to go prior to 11 o'clock when we will need to close, and we look forward to hearing your questions. Thank you.

(OPERATOR INSTRUCTIONS).

I find it hard to believe there's no questions, but --

Okay. We have a first question and it's from Andrew Wood from [U.S.]. Please go ahead.

Yes. Hello, Andrew Wood at Sanford Bernstein here. I've got two questions. Firstly perhaps just if you could clarify some of the (technical difficulty) margin dynamics.

Andrew, apologies, but we had some sort of buzzing on the line. I'll have to ask you to repeat that first question.

Okay. Yes. My first question is on some margin dynamics. You said that the commodity cost impact was about 420 basis points in the quarter. You also said that pricing or reported that pricing was 4.8% or obviously 480 basis points, and your cost savings were at EUR200m. That's another 200 basis points of margin growth. So if I add together pricing and cost savings up significantly ahead of your commodity cost impact, I'm just trying to understand why your margin growth wasn't better than the 20, 30 basis points that you've reported. What am I missing in that?

And then second question is on the emerging markets. I was wondering if you could give me the aggregate growth in your emerging markets in Q1 2008, and just give us an idea as to how that was in 2007, perhaps in Q1 2007. You mentioned that there was a slight slowdown in volume in the emerging markets. I'm just trying to understand on a total organic growth basis if there is, in fact, a slowdown in emerging markets or whether it's sustaining the very fast growth from the last couple of years. Thanks.

Just to answer your second question first, we are not experiencing that slowdown in emerging markets, rather we believe that there's a slight slowdown in the volume growth, albeit still good volume growth in the D&E markets. And there is substantial pricing growth in the D&E markets.

As to -- go ahead.

Sorry, Andrew, on the margin dynamics, as you rightly say, 420 basis points of cost. The price growth of 4.8% of course translates into a margin impact of somewhat less than that. In fact, I think it works out at about 410 basis points on operating margin when you do the math. Also remember that there is a large block of costs which are not commodity related where we do suffer a degree of cost inflation. And, in fact, that block of cost is equivalent to about 40% of sales. And we're typically looking at an inflation rate across those costs, and we're talking about wages, salaries, accommodation costs, etc., etc., we're looking at an inflation rate of around 5%. So that really -- that explains the difference.

Just to give you a specific set of numbers for our D&E markets, we're pulling out Latin America and we're pulling out Central and Eastern Europe and taking away from Asia and the developed markets. We've seen for year to date 13.7% USG which is similar to the Asia AMET. And it's almost evenly split between volume and price. So, as I said, for us we're not seeing any slowdown.

That was more or less the same rate of growth as you saw in 2007.

It was.

Okay. Thanks very much.

Thank you, Andrew.

Thank you. We move onto our next question. Our next question is from the line of Mr. John Parker from Deutsche Bank. Please go ahead.

Yes. Good morning. I just wondered if you could talk a little bit how sustainable you see this emerging markets growth or D&E growth as you're seeing. It seems slightly counterintuitive that in these markets where spending on food and personal products is a relatively high percentage of people's income, yet you're not seeing a negative volume effect with the high pricing, whereas you are seeing a negative volume effect with a higher pricing in the developed world. Can you just talk a little bit about that and whether you think this emerging markets growth can be sustained.

John, happy to do that. First, let's make a distinction between our performance and the market performance and then between developed and the D&E world. Indeed, we are seeing, both for market and for our performance in the developed world, a volume which was about flattish, and substantial pricing. And that's for both the market and for us. And that's -- appears to be a bit of a trade off between pricing and volume at the moment. Now it's different by different categories, so we can get into the detail if you'd like.

But in total, as to the D&E world, the pricing is coming through both in the market and by ourselves. And the difference appears to be that whereas the market has slowed down a little bit in volume, we have not. And so we believe we're gaining share in that part of the world. As to the sustainability of both the market and our performance, I really can't make a macroeconomic call on the D&E world. But what I will say is that we see our own performance through this year, we feel very confident about continued good performance.

Thank you. Maybe a second question, just perhaps an update on the disposals program which obviously we haven't seen anything announced this year so far. Is this going as you expected in terms of timing and how long do you think it'll be before you complete that EUR2b of turnover that you'd earmarked for disposal?

I'm happy to comment on that. As you recall, it was in August that we said that we had identified businesses whose aggregate turnover for us was about EUR2b which we would seek to determine if there was a buyer who would buy it at a value greater than retention value. And we chose the particular businesses because we did not see them particularly adding to our strategy going forward. Not that they were bad businesses or bad brands at all, simply that we did not see them right in the heart of our strategy and we thought others might be able to see greater value in them.

Since that time, we have both announced the sale of Boursin and we closed the sale of Boursin at a very attractive price we think. That transaction was good for both sides, and certainly from our point of view we received proceeds greater than the value of keeping it.

We announced but had not closed on the sale of Lawry's Seasoned Salt to McCormick, that is under FTC review. But from what we understand, that review is going as expected and it will be closed within the next coming months. We see no impediment to that. And again, we felt that that was a business which was more valuable to McCormick than to us and we thought the transaction price was attractive to our shareholders.

We have announced that the North American Laundry business is up for sale. And we have said that there are interested parties with whom we are in discussion. The business is running well in the first quarter. We've got good innovation which have both come in and are coming into that business during this year. And because of the commercially sensitive nature of the discussions which are taking place, I'm not going to say anything more about that.

We have closed on a greater Pepsi Lipton joint venture. We took certain Lipton ready-to-drink tea businesses and we transferred them into the joint venture and received proceeds from Pepsi. And we think both we were paid fairly for their getting half of those businesses, and we think that the businesses will be worth more being managed within that joint venture.

Finally, there's been market speculation about Bertolli. So I should mention now that we are considering strategic alternatives relative to the Bertolli olive oil business. That is a EUR300m business. The Bertolli brand is much bigger than just the olive oil, and it is not our intention to sell the brand. And while we're reviewing strategic considerations for the olive oil business, there's nothing else that we're reviewing in that regard. And should we find something which was attractive, it would be under a licensed brand and just the overall business.

Now if you take all those businesses which I've mentioned, you're at about three quarters of the EUR2b. And finally, as timing, these are all good businesses, they all make excellent contribution, and so we are under no time pressure, no rush to sell any of them. And we'll only sell them when we can find someone who will pay more for them than they're worth to us, John.

Thank you.

Thank you.

Thank you. We move on to our next question. Our next question is from the line of Mr. Marco Gulpers from ING. Please go ahead.

Yes. Good morning all. My question is on your pricing strategy. You've mentioned on your input costs that you are expecting now between 400 and 500 basis points for the full year, versus 330 at least when you announced this at the full year results. I'm wondering how this plays into your pricing strategy for the remainder of the year. Should we be focusing on more pricing actions than initially planned for, and how do you plan to execute those?

And also in light of the, in my view, more easy comparables in the second half '08 on input costs, where is the main difference in your guidance for the full year results coming from? Thank you.

Marco, first of all, I should reiterate what our priorities for the year are because that guides not just our pricing but all of our actions. The first priority is to grow at least in line with markets. We will be competitive. And we will grow at least in line with markets. Second, we will raise operating margin, underlying operating margin.

When we gave guidance for the year, we were coming off a year in 2007 where we had seen steadily rising input costs from Q1 to Q2 to Q3 and then finally, as you mentioned in Q4, they had risen 330 basis points from a year earlier. In fact, in Q1 input costs rose greater than that. We did take pricing action, some 4.8% in USG, and with savings cost along with that pricing action we were able to raise operating margin in the first quarter.

As we go through the balance of the year, you're correct to point out that there are possibly easier comparisons. But we do now see, as we look through the balance of the year, that the commodity cost will be up 400 to 500 basis points. And while remaining competitive and while at least growing with markets, it is our intention to raise our operating margin. And we'll take the pricing actions which are consistent with both of those two things.

And you have to remember that we do have our savings programs which accelerate through the course of the year. That's the way they've accelerated in the past. We expect to see them accelerate this year in a similar way. We're looking for EUR1b of cost savings. And we're also looking for improvement in terms of mix. The innovations that we're launching, we're doing very consciously, with an eye towards mix impact and seeing that we get a better yield.

Another question, if I may, specifically on Personal Care, you mentioned that you had a relatively tough comparable in Personal Care in the first quarter due to the phasing of innovations compared to last year. Would this mean that you're expecting a faster growth in the coming quarters than in the first quarter, just on comparable basis for the Personal Care division? Thank you.

In Personal Care, we performed well across the European and Asia AMET regions. It was down -- not down, it was slower growth in the U.S. which we see is market related. And that's our absolute performance. In a relative sense, we did have a very fast start to the personal care last year because of the timing of our innovations which we see more evenly spread. I'm not going to give guidance on a specific category for the balance of the year, but we feel quite comfortable with the line-up of innovations that we have and how they'll be received by the market.

All right. Thank you.

Thank you, Marco.

Thank you. We move onto our next question. The next question is from the line of Julian Hardwick from ABN Amro Bank. Please go ahead.

Morning. I wondered if you could drill down into Western Europe a bit. It looks to me as though volumes are probably down a couple of points in Western Europe in the quarter. Is that entirely Germany? If you stripped out Germany what would the picture have looked like? And can you give us a bit of color as to whether there were any significant category variations within the Western European performance.

And secondly, could I just ask about the share buyback? You're clearly running well ahead of the EUR1.5b target run rate on the basis of what you've done so far this year. I mean did you -- should we conclude from that that your -- the likelihood is that you will be buying back somewhat more than EUR1.5b this year?

I'm going to take the second question first. We did do EUR600m share buyback in the first quarter. To date, we've done another EUR200m of share buyback. So you were right that we are, relative to the four quarters of the year, we are running ahead of a pro-rated EUR1.5b. Our guidance, though, on that remains unchanged, which is to say we will buy back at least EUR1.5b. And the rationale behind that of course is that we don't know whether we will get disposal proceeds or how much they'll be beyond what we've already banked with Boursin and the Pepsi Lipton Joint Venture. So when we get to the end of the second quarter, we'll update the market on how much we've bought back by that point and we'll see if there's any updating to do on the guidance overall for the year on share buyback. But that will be the time to do that. Not now.

As to Western Europe, the price realization was 2% in the first quarter and the volume overall in Western Europe was minus 1%. And we did have good performance in the U.K., the Netherlands, Italy, Spain, as I mentioned. In France, we saw growth under some very tough circumstances. But Germany was a country which experienced negative volume and that was in the order of 7%. But we did achieve pricing there in the order of 3%. We had good year in '07 where Germany was very strong. Finish, we had price increases which were announced as coming to effect as of January 1 in Germany. And we are expecting better performance through the balance of the year, but it has not been a good start to the year in Germany.

Okay. So, on a category perspective, were there any variations across Western Europe?

I mean, essentially, Julian, in terms of the overall category performance, it's pretty much followed the market. We have been putting prices up more strongly in commodity effective categories such as Spreads. That's clearly had a volume impact. In fact, actually, we are putting prices up in Spreads at a time when the butter price is coming off, so that is having a volume impact. Across the Home Care categories, actually performance has been pretty good. We've had a lot of innovation-led success in laundry. Personal Care also pretty solid.

Okay. So, ex-Germany, Western European volumes are flat. Is that [a function] of what you think the market's doing in Western Europe?

Yes, indeed. Yes, indeed. I mean, essentially, we think that the volume growth in Europe is basically zero.

Okay, thanks a lot.

Thank you, Julian.

Thank you. We'll move onto our next question. The next question is from the line of Mr. Robert Jan Vos from Fortis. Please go ahead.

Yes, hi, good morning everybody. I've one question on North America. You mentioned the growth there, but can you also say a bit on how the volumes did in North America, or at least whether they were positive or not? That's my first question. Thank you.

Okay. First of all, the Americas as a whole saw good growth. And we had a slight decrease in operating margin but that was entirely related to investment in A&P. And we believe that in the U.S. the market growth is around 3% to 4% entirely driven by price. As I said before, Personal Care, the market growth has slowed to less than 2% in the latest 12 weeks, which is about a point lower than the moving annual. But, in Food, we're seeing a slight up-tick.

In terms of our own business, I mean, essentially, the growth is coming from price. Volumes are flat.

Okay. That's very helpful. And my second question may have been partly answered, but just wanted to retry. If you look at the price component in Q1 within organic sales growth, it's 4.8%. When looking at the phasing of pricing in last year, in 2007, I would say that these big price components could continue for at least a couple of quarters. So can you confirm that? Or, putting it differently, do you -- can we expect similar pricing for the next quarter? Thank you.

Well, what I'll say is that, to refer again to our priorities, the first priority is to grow in line with our markets at least. And our second priority is to raise operating margins. Last year, we raised prices progressively through the year in order to offset partially the commodity cost input increases. This year, we've started off the year with, as you mentioned, 4.8% pricing, which we were able to take, and with the savings and with better yield in terms of our product offering, we increased our operating margin. As we look through the balance of the year, our guidance is that we will do better than the top end of our 3% to 5% underlying sales growth target. It is likely that most of that will come from pricing, although beyond that, I do not care to add anything else.

Okay. Thank you very much.

Thank you.

Jim, at this point, I'd just like to break off and take some questions which we're receiving online. We've had a couple of questions which actually relate to Latin America, which I'd like to just read out.

First of all, from Pierre Tegner at Oddo Securities, was asking about why the increase in A&P in Latin America.

And, if I can follow that on with a question from Stuart Reeve at BlackRock, about, again, Latin America. But, more specifically, the Brazilian market, wanting to know how much of that growth is volume driven and how much of it comes from price.

Good. Well, as to the A&P, we have created a matrix of countries and categories and identified where we think the greatest opportunities are to invest, based on market growth opportunity inherent, and based on our own structural advantages, both in terms of market share and in terms of innovation. And this is a very deliberate portfolio management and we have identified, for example, Russia and China as priority markets and invested in there. We've identified Personal Care, invested in there. We've identified Vitality-linked innovation and are investing there. And, within Latin America, you've got a tri-sector of D&E worlds, a good at market position, good strength in Personal Care, and even a fourth element, which is you have the good innovation opportunities. As to Brazil, we have 5% USG in the quarter. And, of that, price is 4.6% and volume is 40 basis points.

I think it's worth adding, at that point, you will recall that last year we took some fairly aggressive pricing action in Brazil. That had some impact on volumes, particularly in the hair category and so on, in the short term. And it's good to see that we're now seeing the volume growth come back into the business.

No, I think, with that, I think I'll go back to the BT for callers on the line please.

Thank you. Our next question is from the line of Arnaud Langlois from JP Morgan. Please go ahead.

Yes. Good morning, gentlemen. I have a couple of questions. The first one actually on A&P, you've just highlighted your strategy here, but A&P was still down in the first quarter. Is that actually a deliberate strategy to bring A&P down as a percentage of sales? Or actually is it likely we'll see A&P going up again in the coming quarters, keeping in mind that last year I think you invested something like 60 basis point in A&P?

The second question is related to your cost savings initiatives. I think you mentioned that there were 200 basis points of savings in the first quarter. The run rate of last year was closer to 320 basis points. I'm just wondering it seems to be slowing down, although I think you highlighted that it may be accelerating again in the coming quarters.

And, last but not least, I wanted to ask you whether you could give us a sense of volume and pricing by category? I was particularly interested in actually the strong performance in your Ice Cream and Beverages business, and so any indication of how you've been doing in terms of volume and pricing there would be very helpful. But if you could cover the other categories that would be great. Thanks very much.

Right, I'll tell you what. I'm going to take your second question, then your first question, then I'm going to turn it over to Charles. As to savings, the way our savings worked in 2007 was that we got 190 basis points in Q1, which, of course is less than what we have just achieved in this year's Q1. We then went to 210 in Q2, 240 in Q3 and we ended the year at 320. And, while we ended the year at 320, for the full year it was 240 basis points. But we're starting off this year with 200 basis points and we are guiding to around EUR1b savings in total and we expect that they will ramp up, quarter by quarter, in a way similar to that of last year.

As to your first question on A&P, as I said in answer to the earlier emailed question about how we spend our A&P, we focus it where we see the best opportunity. And we do it within the context of, first, we will grow in aggregate in line with the markets. And, second, increase operating margin. And, third, we'll be selectively investing where there's good return on investment.

Now, interestingly, in the first quarter in terms of advertising, advertising itself was up as a percentage of sales by 20 basis points. And we even got a bigger impact on that because we had lower media rates in developed markets. So we think that in terms of advertising, in terms of advertising effectiveness, we actually put out quite a bit more in the first quarter.

Promotions, though, were down by 30 basis points. And that is not because we believe that we got less effectiveness out of it. Rather, we think that we got better effectiveness for less money. Now, when you net it out, it's about 10 basis points below. But, frankly, that is certainly not an intention of getting savings through cutting A&P at all. It's simply that we spent what we thought we should spend to be competitive in the first quarter. And there we, there we go.

I'm going to turn the third one over, then, to Charles.

Yes, I think your question was about the price-volume growth across categories.

That's right, yes.

Just to say, as you can see that the underlying sales growth across the categories is pretty strong across the board, ranging from 5.8% for Personal Care up to nearly 8% in Savory, Dressings and Spreads and in Home Care.

In terms of pricing, it broadly follows the same pattern as commodity cost. So we're seeing the biggest price increases where the biggest commodity cost impact is in categories like spreads and dressings. And some of the smallest price increases in categories like tea, where, in fact the cost of tea has actually come off its peak so we -- there is less pricing action there.

Indeed, if you look across our categories across the various regions, we're talking about price growth ranging from low double-digits in Spreads. So as high as 10%, 12% in Spreads across America, Latin America, etc. In the case of Ice Cream, we're talking about something in the region of 10% price growth in the U.S. where the [berry] impact has been particularly large. Across our Laundry business, particularly in Asia where we tended to take the lead in moving prices, we're talking about price growth in the mid-single digits.

You particularly asked, I think, about Ice Cream and about price-volume relationship in Ice Cream. Bearing in mind that this is before we really get stuck into the big European ice cream season, nevertheless, we've had a good quarter in Ice Cream and we've had, yes, we've put some price increases through, but we've also seen volume growth across the business as well.

That's very useful. Thank you very much.

We have time for one, maybe two more questions, depending on the length of the -- our answers.

Okay. Does that answer your question?

Yes, I've said so.

Okay, thank you. We move on to the next question. The next question is from the line of Jeff Stent from Citi. Citibank, please go ahead.

Morning. Two questions, if I may. The first one is, with full year results, you split the sales into buying accelerated savings and underlying savings. You have said that roughly half of the savings come from buying. I was wondering if you'd be able to split out the remainder?

And the second, just to continue on the price topic, will you actually be putting further price increases into the market in the remainder of this year? Thanks.

As to the second question, we don't comment specifically on category in country and pricing. But I would be surprised if we did not see further pricing through the balance of the year.

As to the savings split, Jeff, as you say, 50% of the savings were from buying. Of the other 50%, it was split pretty similar to what we saw for full year 2007. So about one third value improvement initiatives of various shapes and sizes and about two thirds coming from the accelerated restructuring program.

Okay, that's great. Thanks.

Thank you, Jeff. We'll take the last question now please.

Thank you. Next question is from the line of Martin Deboo from Investec. Please go ahead.

Hi, Jim and Charles. Couple of quick two questions about restructuring and just a question on tax. Just on, first of all, the benefits of restructuring, just following on from Arnaud's question, I'd have expected you to get some saving benefit. Given you ended the year more strongly on restructuring than you started, I'd have expected the component of this quarter to be some saving benefit of '07, plus new savings in '08. And the number you've actually realized is -- seems low to me relative to that.

Secondly, in terms of the saving of your restructuring spend, I know you said not to like to guide on this, but you seem to have spent relatively little in Q1. Any indication of how it's going to phase through the rest of the year?

And finally, on tax, the operative word seems to be closer to long-run guidance of 26%. Do you have any feeling for where your tax position is going to net out in '08?

The -- as to tax, I'll start with that, we gained two points from the lower tax cost on the disposals. We gained two from the particular settlements that we did with revenue authorities around the world. And that's how you got from 26% to 22%. 26% is structural expected rate. And, this point, having seen 22% reported in the first quarter, we would not expect the tax rate to be higher than 26% for the full year. In fact, lower. But, what it actually is will be very much dependent on what disposals we do, where they are and what tax we pay on them. So I can't say anything more than we've said on that.

As to restructuring, we do expect to see the amount that we spent on restructuring go up through the course of the year, just as we did last year. We expect to see savings to go up through the course of the year, just as we did last year.

But, in the first quarter, I would note that the operating margin, underlying operating margin in Europe, where we have done quite a bit of restructuring, we've initiated several multi-country operations, three actually started beginning of the year, we had 70 basis points underlying operating margin improvement. And, across the Company as a whole, you will see those savings come through more in the balance of the year and we expect a total of about EUR1b.

So, we've come to -- I hope that's helpful, Martin?

Yes, that's good, Jim. Thanks for that, yes.

Okay. Well, thank you. This is the last quarterly call that Charles Nichols will be on. He'll be meeting with some of you in the course of the next few weeks. But, come June 1, Investor Relations loses Charles and James Allison will be joining the team. John Rothenberg will be back for the call next time. But, as this is Charles' last call before he goes on to be a Managing Director Unilever Ventures, I'd like to give him the opportunity of having the last word. So, Charles.

Well, thank you Jim. This is actually my seventeenth quarter since I started in Investor Relations at the beginning of 2004. And to say that this has been an interesting period to be in Investor Relations would be a British understatement I think. But, having said that, I've enjoyed it immensely and I'm particularly privileged to have worked with many of the people who are listening in on the line today. And it really just remains for me to say that I'm delighted to be handing over to James Allison off the back of a good set of numbers and with some real confidence for 2008. And so thank you very much, everybody. It's, as I said, it's been a real privilege and I look forward to taking your calls in a few minutes.

Okay. Thank you all very much. Thanks for joining us this morning.

Thank you. Ladies and gentlemen, that concludes your call. This conference has been recorded. Details of the replay number and access code can be found on Unilever's website. An audio archive webcast will also be available on Unilever's website, www.unilever.com. Thank you.