聯合利華 (UL) 2011 Q2 法說會逐字稿

So, good morning, everyone, and welcome to Unilever's Second-Quarter and Half-Year Results Presentation. We appreciate your continued interest in our business and you taking the time to join us today.

The presentation of our results this morning will be given by Paul Polman, our Chief Executive Officer, and by Jean-Marc Huet, our Chief Financial Officer.

Paul will begin with an overview of the highlights of the year so far, including the changes to the organization that we recently announced, and then Jean-Marc will take you through our performance in more detail. Paul will conclude with his perspectives on our progress, where the business was at the start of 2009 and where it is today. Finally, he will summarize our outlook for the rest of the year before opening the floor to questions.

As usual, I'll draw your attention to the disclaimer relating to forward-looking statements and non-GAAP measures. And with that, let me hand over to Paul for his opening remarks.

Thanks, James. Thanks, James, appreciate it. And good morning, everybody. I hope most of you have had at least a little bit of a holiday or a break before the reporting season hits.

Before I go with my talk, I was just talking with Julian, Julian Hardwick, who's here in the audience with us. I want to thank Julian for all the support we've had over the years. Julian will be moving on, I think we'll have an opportunity to officially recognize you, but this is the last quarterly call I think you're part of and being here, and wish you obviously all the best in all the future challenges and opportunities that come your way. But thanks again for what you've done for the industry as well.

Now let's get into the results. The results we have announced this morning represent, in my opinion, encouraging progress. They show that the transformation of Unilever is continuing and that we are competitive in even the most challenging conditions. We are the first to acknowledge obviously that there are still more to do, and I will always say that. But these results leave little room for doubt.

The Unilever today is fully fit to compete. We estimate that the markets globally are growing at about 4% to 5%. The underlying sales growth we achieved in the first half was a healthy 5.7%, with 7.1% in the last quarter. We're growing ahead of the markets and outperforming key competitors in the key categories that we compete in. That's now two quarters, for the bulls amongst us, of volume and price growth in an increasingly tough environment.

Volumes are slowing a little bit, as you might expect, as we are taking pricing, and I've always mentioned that. And in some markets, unfortunately, our competition keeps trailing. Solution Wash, Spreads and Hair are all good examples of this. However, we even have accelerated volume growth through the first half in a number of categories, for example, in Savory, Fabric Softeners, Hand and Body, Ice Cream, Oral Care.

Just as we explained in Singapore, the profile of our growth is also starting to reflect increasingly the strategic choices we are making as we turbo-charge the Compass. We are allocating resources more sharply, concentrating our A&P investments behind those brands and those categories where we see the greatest potential and strategic potential for profitable growth.

So, encouraging top line performance, with prices more or less where we want them to be, and with the market prices of commodities now stabilized, I believe, for the balance of the year. I'm also pleased that margins and overall earnings are in line with our expectations, and Jean-Marc will say more of that a little bit later, so I won't repeat that now.

It is from this position of strength that we have announced the further organizational changes to take our business to the next level and our transformation from a EUR40b to EUR80b company. The time is right for these changes. I believe that they will truly help us start leveraging the competitive advantages of our organizational model, the right changes at the right time.

Let me just briefly remind you for a second of the journey we've been taking over the last few years. The One Unilever was the start, a massive change. Massive. That was absolutely necessary and very courageous by my predecessor. But not enough to reignite growth. The 9 for 09 Initiative was the first attempt to change the agenda away from restructuring and establish volume growth as the clear business imperative. You cannot save your way to prosperity, you have to grow.

The simple priorities we introduced were successful, you agree with me, where -- enabling us to kickstart growth in 2009 in tough environments. Then came the launch of the Compass in 2010, which has established a common operating framework globally for this company, something we've not had before, to win across all our businesses.

It brought the discipline we needed, with its four non-negotiable elements that we talked about -- winning with brands and innovation, winning in the marketplace, winning through continuous improvement, and winning with people. A sharpened performance culture with bias for action, putting the customer and consumer at the heart of everything we do.

Support behind our brands was stepped up, with A&P up EUR700m over the two years, and significant investments were made in improving again the product quality, globalizing our IT system, and expanding our capabilities and sharpening the edge in our people.

We also strengthened the role of the functions, if you remember, at that time. Global structures were put in place for the first time for the product supply chain for marketing and for IT. And we created the enterprise support organization to allow for better leveraging and best practice diffusion across the world, and reducing cost.

We further strengthened our leadership team with numerous internal promotions as well as external appointments. Jean-Marc or Pier Luigi both being here are examples of that. This allowed -- by doing this, this allowed the go-to markets and category organizations to focus even more on what they know what to do best.

We saw the early benefits of the Compass in our results. Volumes, as you know, reached a 30-year high in 2010, and growth is now consistently ahead of our markets after many years of share decline.

With the turbo charging of the Compass in 2011, we once more step-changed our strategy. We sharpened our vision and introduced, as you know, the Unilever Sustainable Living Plan, a revolutionary commitment, I believe, a commitment that consumers will see as the only one that is responsible in the future. It aims to double our business whilst reducing our overall environmental impact. No other company of our size has gone this far.

It is revolutionary, and it is rapidly building Unilever's credibility, both with stakeholders and as an employer brand to levels we have not seen before from any of our competitors. In fact, this morning, I was reading the Russian monthly letter, and we became the preferred employer in Russia. So I want to officially congratulate them for that.

Yet, all these changes that we're announcing are badly needed in an increasingly more challenged world.

We're also making sharper choices, clustering countries together into those where we aim to win globally, those which are D&E led and those where we want to win differently. Resource allocation for the first time has significantly been sharpened around these priorities, and I think the results that we're announcing again today reflect this.

Now, the new organization we just announced takes the journey to the next level, bringing even more dedicated focus to the categories to drive innovation and simplify and strengthen at the same time our go-to-market structures, again, for maximum commercialization.

So, what are we doing? We're scaling and simplifying the categories to bring focus and depth to innovation and capability-building. And we are simply running at the same time the go-to-market structures for scalability and speed whilst maintaining the consumer proximity.

These changes improve as well the connectivity between the category and clusters, the brands, as we call them, brand development or category organizations and the go-to market or brand-building organizations, resulting in bigger and better innovations that we can roll out faster globally.

The numbers will make that clear. We're actually combining our 11 categories that we have into four mega-categories, and upgrading those to the president level. These categories have a more natural fit.

Take, for example, Personal Care, one of the four mega-categories, that will be run by Dave Lewis. It will now be able to fully compete holistically with companies like L'Oreal who are already focused this way. This allows us to put an integrated beauty care strategy together and manage our core equities, like Dove or Axe, holistically, with even more senior firepower.

Another example is the Refreshment unit, one of the four, that will be led by Kevin Havelock. It combines ice cream and beverages. It allows us to better leverage, for example, our out-of-home or impulse opportunities. Antoine de Saint-Affrique will do Foods. And I will take personal responsibility for the time being for our Home Care unit, so that I can actually stay close to the successful implementation of these changes.

Each category will be responsible for developing the overall strategies, including the category-related R&D which is now much more linked, as a result, to the market needs.

Now, at the same as we're doing this, we are making our marketing organizations simpler and faster. We're eliminating the regional structure which has sometimes acted as a barrier to speed. And frankly, the way the regions were configurated, did not always reflect the optimal consumer touch points.

Here we're moving from 22 MCOs or market organizations to eight mega-clusters, from 22 to eight, under, as you've seen, Harish Manwani's capable leadership. It allows us, for example, to form one Africa cluster now, which Frank Braeken will lead. Or a real European cluster, which includes the Central European countries which are increasingly part obviously of what is happening in Europe, and Jan Zijderveld will continue to bring his energizing leadership to this expanding region.

Now, the removal of these regional structures allows us to de-layer and to better organize around the consumer once more. The management touch points in the organization will fall dramatically, from 11 categories and 22 MCOs to four mega-categories and eight clusters.

Better alignment, faster speed, better strategies and plans. So, substantial changes and exciting changes that allow us to have bigger and better innovations, driven with a stepped-up speed and alignment, sharpened capability-building, take the Beauty Care of Dave Lewis now. Better fit of our clusters around the consumer needs and stages for development.

And equally importantly, now a flexible allocation of resources globally, putting our resources, be it money or people, where we want them to be. No less important than it driving our business farther and farther, which is obviously the main driver of value-creation, it will actually also save costs, it will take costs out of the organization, mainly coming from the elimination of the regional structures and simplifying -- and streamlining these interfaces I talked about.

Now we can go in that a little bit more in detail if you want to in the Q&As, but I think that if you will look at this a few years from now as one of these defining moments, that we are truly starting to leverage our organizational model to competitive advantage.

Let me pass it over to Jean-Marc for a second to take us through the details of our performance in quarter two and the first half of the year as a whole. Jean-Marc.

Thanks. Thank you very much, Paul. Sorry. We shouldn't be treating innovation like that.

Good morning, everybody. Good morning specifically to you, Julian. Let me, without further ado, start with the results.

Underlying sales growth in the quarter was strong at 7.1%. This is the best quarterly performance Unilever has delivered since the fourth quarter of 2008. But unlike 2008, we now see a good balance between price and volume, with both contributing positively to our growth.

Turnover was EUR11.9b in the quarter, up 1.5% on the same period last year, with the strong euro resulting in a negative ForEx effect of 5.6%. We also saw a small positive contribution of 0.4% from the acquisition and disposal line, as the benefits of our stepped-up M&A program start to add to our revenue for the first time.

For the half-year, turnover was EUR22.8b. That's up 4.1%, with underlying sales growth of 5.7%. Now with our markets growing globally between 4% and 5%, we see this as encouraging performance. It represents the market-beating growth which we prioritized so highly.

Underlying volume growth for the first half was 2.2%. Underlying price growth was 3.5%. And currency had a negative impact of 1.6%. If rates were to remain at end-July levels for the balance of the year, we'd see around a negative full-year currency impact of approximately 2%.

There are many examples from across our business with strong performance in the first half. In the emerging markets, we once again saw double-digit growth in many key countries. India, China, Indonesia, Turkey, South Africa, Mexico, Argentina are amongst the bigger examples of this, and this despite most of them experiencing heightened competitive activity.

In the developed world, our Western European business grew at 1.3% in the first half, volume stable, up 0.2%. Now as you will all remember, our first-quarter performance looked weak, minus 2.8%, if I remember correctly, whereas in the second we saw much stronger growth at 4.8%. Now both these quarters are unrepresentative of the underlying trends in Western Europe. So we actually see the business as stable, in line with the market, another example why we should not read too much in 90-day results.

Finally, we also saw consistent levels of growth across our category portfolio, with all four achieving underlying sales growth in excess of 5% for the first half of the year. This is broad based, it's consistent growth, exactly the model we are working towards.

We also had a good first half, serving the professional food markets within our Food Solutions business. High single-digit growth is strong performance, and made a significant contribution to our overall growth in the Savory, Dressing and Spreads categories.

Also encouraging is the increasing evidence that we can win in categories where competition is most intense. Let me just take Hair as an example. Our business continues to strengthen as we step up our innovation performance and start to see benefits from the recent acquisitions of TIGI, and more recently, as you know, Alberto Culver. We now have nine quarters of continued growth despite key competition lowering prices in a number of important markets. Examples are India as well as the US.

Our shares are up in a number of key markets, including the highly-competitive examples that you see on this chart. Although progress is most rapid in China, we've also seen healthy share gains in the hugely important US market, helped by the brands of Alberto Culver.

Competition has been even more intense in the Laundry category. As you know, commodity costs are up sharply, and although we've often led prices higher, the increases have been insufficient to cover cost inflation, which is normal. This means that the industry margins are under great pressure. At the same time, levels of price promotion, while not at the same extreme level it is in 2010 last year, they are still at historically high levels.

Faced with these challenges, we prioritized our market shares and brand health consistently. We've acted decisively, and with good effect. Underlying sales growth was high single digits for the first half, with a good balance between volume and price. In the area managed by Harish -- Asia, Africa, Central-Eastern Europe -- the heartland of our Laundry business, growth was in double digits. Shares overall are flat, but in key Asian markets, we are gaining share strongly, China, for example, or India, as you can see on this chart.

This success has come at the expense of margin, and we now disclose underlying operating margin by category. But this is not only for us; it's also for the industry as a whole. But remaining competitive in all circumstances is absolutely the right thing for us to do, and we have repeated this. We said that we would put our brands first without compromise; that's exactly what we have done.

The overall Unilever business model today is much more robust. It allows us to face competitive challenges in specific categories without undermining the overall profitability of the group. So, our position is absolutely clear, we will not concede ground in the face of aggressive competition.

Let me now turn to Ice Cream. Here again we're seeing share gains, both globally and in key countries. In many cases, these gains are in emerging markets, but we also see positive share momentum in Western Europe and in the very competitive market of the US where, as you know, as we said in Q1, we introduced Magnum, and this is turning out to be an outstanding success.

Innovations continue to strengthen and our funnel is healthier than ever before. Projects are getting bigger, being rolled out to many more countries.

Let me just give you an example. A few years ago, a new Axe deo variant would reach less than 20 countries, probably mostly in Europe. Today, if you take Axe Excite, it's been rapidly launched on a global scale, reaching 100 countries in a very short period of time. That would not have been possible a couple of years ago.

Also importantly, the portfolio as a whole is delivering more. The proportion of our turnover coming from products launched in the last two years continues to be around the 30% level. Let me give you some life by giving you some real examples, starting with our Skin category to illustrate this.

The second quarter saw early examples of innovation in our Sara Lee business, recently acquired in Europe. The Radox Spa range has made a promising start here in the UK, where it's been launched alongside a separate smoothie range for bath and shower. Turning to Asia, we saw a series of launches of male-targeted skin care products. This includes the Vaseline Men's Face range in Thailand.

Let's look at Oral Care where our business is holding share despite intense competition, as you know. We continued to roll out the Sensitive Expert range, reaching key European markets as well as Turkey and Indonesia. We continued the rollout of Close-Up Fire Freeze that I just touched upon, with launches across the Middle East, Southeast Asia, Pakistan, Brazil, building on the success that we initially saw in India. With both of these innovations, we are encouraging consumers to trade up actually in this difficult market for enhanced benefits in health and freshness.

Turning to Tea, we've just launched the new Lipton Sun Tea range in France, and the results are very encouraging, although a little early. This is a seasonal variant. It's got fruit-based flavors intended for infusion in cold water for summer drinking when the summer arrives. There are samples available in the foyer for you to enjoy after the presentation.

As well as innovating faster, we're also taking our brands into more markets. In the first half of this year, for example, we've done the following, completed the launch of Magnum in the important US market, as I mentioned; launched Axe into China, both for deodorants and skin cleansing. We've extended the Caf Zero concept from its successful base in Italy into Spain, Greece and the Benelux. We've reached more than 50 markets with our Clear brand in Hair Care, the latest being Mexico. We've launched our deodorants in Thailand. We've taken our Cif surface-cleaning brand into Malaysia and the Philippines. And finally, we've launched Sunlight dish wash in emerging markets such as Bangladesh and Pakistan.

We're also making good progress in reshaping our portfolio, as you know, with the great brands of Alberto Culver, but also Sara Lee, increasingly part of our business. Let me now just update you briefly on the integration of these two recent acquisitions, specifically given that we have rated our M&A over the last couple of years.

The integration of Sara Lee Personal Care is nearing completion. It's a good example of speed of action that we are developing in Unilever, within four months or so. Early performance from the new portfolio is encouraging overall, although somewhat mixed at brand level, Radox, Neutral doing very well; Duschdas, a little less than we expected for now.

Importantly, we expect synergies of around EUR75m on a full-year basis, which is in line with our earlier guidance. We continue to expect restructuring and integration costs to be around EUR150m in total, EUR30m charged last year, EUR90m this year.

The Alberto Culver acquisition was completed in May, and already we have early integration actions well underway. We anticipate most countries will be integrated before the end of the year. In terms of synergies, we continue to expect levels of synergies in excess of 10% of the acquired turnover, restructuring costs of around EUR200m, two-thirds falling this year.

So, in summary, we're building a stronger portfolio. We're continuing to accelerate the pace of our innovation and new market launches.

Let me now turn to the rest of our income statement, starting with the cost base. Commodity cost inflation continues to be a major challenge for the industry, and it's obviously a topic of heavy focus for yourselves as analysts and investors.

Let me importantly start by confirming that we continue to expect commodity cost inflation for this whole year to be between 500 and 550 basis points of turnover, exactly what we said in Q1. Overall, we see market prices across our range of commodities as broadly stable. Since our last update at the end of April, there has been some minor softening in some commodities, particularly edible oils, but further increases in others such as sugar. Crude oil, however, remains stubbornly high, in the $115 to $120 range, that has been in place basically since April.

Importantly though, for us, I believe we're much, much better placed to manage cost inflation today than we were before. Firstly, we have much more clearer visibility around our exposures throughout the business. In 2008, we had examples where we were long in palm oil in one part of the world, short in another. Today, this cannot happen. When we make a call on a market dynamic, we do so in a coordinated way for the whole of Unilever. I have one sheet of paper with Pier Luigi with an overview of all our exposures and hedging positions, monitored daily, allowing much faster and better informed decision making.

Secondly, we're much more responsive. We're able to react with speed to changes in market conditions. Having split physical buying from risk management activity, we can typically take a buy or an unwind decision within a day, rather than the weeks or even months that it used to take us a couple of years ago.

And thirdly, importantly, with new capabilities in place over the last 12 months and the benefits of our performance culture starting to land, we have a level of accountability that leaves me and us confident that we can manage our cost base effectively.

Of course, with this level of cost inflation, our savings programs become even more important than ever. And it is for us reassuring to see continued strong delivery from our many savings projects and with a clear step-up, as we told you in the second quarter and a total contribution in the first half of around EUR600m.

With projects slightly more biased to the second half of the year than the first half, we now expect full-year savings to be in excess of EUR1.3b, which is similar to the level that we achieved in 2010.

Alongside this strong savings performance, we've also seen significant price growth. The size of commodity cost inflation, some 15% of our cost base, has been such that price increases have been inevitable. For the first half, underlying price growth was 3.5%. This continued a trend which has been in place for around 18 months, with quarterly underlying price growth reaching 5.1% in Q2.

Looking ahead, we see more stability, with most new pricing actions now in the market. But let me tell you, we will not make the mistakes of 2008 when we probably priced, likely priced, too aggressively. Come what may, we will remain competitive in the marketplace. As such, our expectation today for the second half is for underlying price growth to stabilize at or slightly above the levels seen in Q2.

Now it's normal to see gross margin deteriorate at times of high cost inflation. In addition, as you know, price action typically lags cost increases. This is a dynamic we've seen again in the first half of this year.

So for us, it's not a surprise that gross margin was down by 230 basis points in the first half of this year. Obviously, pricing, and importantly, savings, provided some positive momentum, but this was more than offset by inflation in both commodity costs and in our factory and distribution costs.

In particular, we are seeing high wage inflation in our factory, distribution operations in emerging market. We estimate the running rate to be approximately 10%.

At the same time, this 40% year-on-year increase in crude oil, as you know, has impacted not only plastics, chemicals that we use in our products, but also operating costs, naturally, in our factories, warehouses or distribution services.

Lastly though, we've also stepped up our investments in key areas, as you know, over the last 24 months or so, particularly in product quality, so important for our consumers, and in manufacturing capabilities, specifically in emerging markets where the lion's share of growth is coming from.

Our gross margin in the first half was also impacted by mix. An example of this is Japan where the natural disaster that took place in March led to sharply lower sales in our heavily Personal-Care profitable-based business.

So, with pricing higher in the second half than the first, we expect the year-on-year movement in gross margin to improve as the year progress.

We're also confident that the level of advertising support that we put behind our brands in the first half was competitive. This is something that you can see clearly reflected in the strong volume performance that we have delivered. Our A&P spend this year in 2011 is more evenly-weighted than it was in 2010. You can see that on this chart.

Although our half-spend was 150 basis points lower than in the first half of last year, it's only around 40 basis points lower than the spend for 2010 as a whole. In practice, we don't manage, as you know, our A&P investment in terms of basis points. We look at the absolute spend that we need to support our innovation, our new market launch activities, and ensure, importantly, that our brands are fully competitive. Looked at in these terms, you can see that we've increased our spend from the second half of last year, and we plan to maintain this level in the balance of 2011.

We're also making great progress in our global initiative to drive higher effectiveness and efficiency in our A&P spend. Our efforts here allow us to invest more behind our innovations and new market launches, driving the long-term brand health which is so pivotal to our success and the virtuous circle of growth.

As we've expected, underlying operating margin was down in the first half. The fact that the reduction was only 20 basis points is thanks to continuous improvement programs we're driving with discipline throughout the organization. We see this in particular in our indirect costs, which were lower by 60 basis points in the first half of this year.

Let me just be clear, when I talk about indirect, we're talking about costs excluding supply chain and A&P. It's a considerable part of our cost base and one which we will continue to drive lower.

The improvement in our indirect costs in the first half comes after a full-year reduction of 40 basis points the last year. So the progress is clear, consistent progress and invaluable as a source of funding for our brands. This could be enterprise support launched in the first of April of last year, the organization which we're using to increasingly leverage our scale in back-office activities. It could be the substantial simplification we've made in our ERP platforms, consolidating from more than 100 a couple of years ago to one global standard supported by three regional platforms. And there's more to do here, as you know. Or just the leaner and faster organization that Paul has been talking about, which we now have in place.

I'm confident that we are establishing the rigor, the discipline to continue on this path of lower indirect both for the second half of this year and for the years to come, as part of continuous improvement.

Turning to the bottom line, fully-diluted earnings per share for the first half was EUR0.77. That's an increase of 10%. Our core EPS growth was 3%, with currency, other minor elements reducing the 5% growth seen in operational performance.

Let me now turn to trade working capital. This was negative for the seventh successive quarter. At the end of H1, we had trade working capital of minus 1.4% of turnover. Although any person in our industry would see it as a very strong position, it does represent a slight deterioration from the position at the same time last year when we were at minus 1.9%. So it's clear there is more work for us to do, specifically in receivables, but we do remain confident that we'll good improvement in the second half with respect to our cash flow, driven by working capital.

In absolute terms, we saw a significant outflow from working capital in the first six months. This does reflect the normal seasonality of our business, exacerbated by the very low position that we achieved at the end of last year.

Working capital outflow of EUR1.2b negatively impacted free cash flow in the first half. Net CapEx, as we continue to support growth, of EUR0.9. Tax and other items were approximately EUR1b.

But against these outflows, operating profit before depreciation and amortization was at EUR3.8b, up around EUR200m. As a result, free cash flow was EUR800m, down around EUR500m on the first half of 2010.

Just concluding, net debt was at EUR8.1b at the half-year, up from EUR6.7b at the end of 2010. The main driver of the increase was the significant cash outflow from the Alberto Culver acquisition, $3.9m, which we completed in Q2.

Importantly, the pension deficit has fallen to EUR1.5b at the half-year from EUR2.1b. The main contributor to this has been improved investment returns, with healthy growth in scheme assets in both the first and second quarter, and lower liabilities obviously. Cash contributions to pension in the first half were just over EUR200m, down by more than EUR100m on 2010. We still expect full-year payment to be around EUR550m, well below the EUR700m contributed last year.

Finally, I can confirm the next quarterly dividend will be EUR0.225, which will be paid in September.

And with that, let me now return to Paul.

Thanks, Jean-Marc. Overall, our progress is good, in fact, I believe a little bit better than we might have hoped for at the beginning of 2009. We made good progress. We've reignited growth, reaching a level that some suspected our portfolio was not capable of delivering. Underlying sales growth has stepped up steadily, from 3.5% in 2009 to 4.1% in 2010, and as you've seen, 5.7% for the first half of 2011. And throughout this period, our volumes have been positive, even in the last six months, when often we've been leaders, we've been leaders once more in driving prices higher. Unlike our experience in 2008, we're starting to prove to ourselves that we're able to grow both price and volume at the same time.

Unilever had become also familiar with gradual erosion of market share as well. Turning this around was critical in building the confidence, convincing our own people that we have what it takes to win, even in these very competitive markets that we deal with.

At the heart of our new competitive is our approach to innovation. In 2008 we had far too many projects, most of them launched in just a small number of markets with very little incremental turnover. Our resources were scattered too much and we, frankly, were unable to leverage our scale.

We set out to launch fewer but bigger innovations and to reach many more markets with far greater speed. At the same time, we started to improve product quality throughout our portfolio and support our brands with more and better advertising. Two-and-a-half years later, we have delivered strongly against that intent. Now we routinely roll out substantial innovations to 30 more markets within 12 months.

The proof obviously is in the numbers, firstly, in the volume performance, I've discussed, and secondly, in our innovation metrics themselves. Our innovation right now is running consistently above 30%. We have more projects with incremental turnover in excess of EUR50m, and the number of projects launched in 10 or more markets within the last 12 months is up from nine in 2009 to more than 60 in 2011. And last but not least, we have a stronger and more valuable project funnel.

Equally, we have significantly stepped up our white space expansion, as Jean-Marc took us through. Our portfolio today includes 130 new brand-market combinations that were not in place two years ago. That's an awful lot and more than this company had seen in a decade, and we don't talk that enough. But you've seen some major ones.

And we've also made good progress in improving the discipline, something very important in consumer goods, and focused everybody on execution as well. I often say execution of strategy. On-shelf availability has substantially improved. Our in-store presence is greatly enhanced. Customer service levels are no longer holding us back, and we're becoming the preferred supplier for the retailer, especially so since we are bringing value and innovation to the market ahead of our other competitors. There is still much more to do, of course, but our progress is good.

And at the same time, we strengthened our top-line performance we've also seen robust improvement in both our margins and our cash delivery over this period. Key to this has been the level of rigor and discipline I believe that we have installed throughout the business. Continuous improvement mindset that Jean-Marc and Pier Luigi and others are championing is now a tangible part of how we work. Wherever there are costs that our consumers are not willing to pay for, we are steadily but surely taking them out of the system.

And we're not there yet, that's the fun part of it. But the progress is clear for all to see, and it's a clear driver of the virtuous circle of growth that we are determined to create. And we're making good progress in the challenging -- complex challenge that we have of changing the culture in Unilever.

The performance culture we set -- that we set out to build is starting to take root. And the bias for action is improving with more to do. Our people are more externally focused and aware of how critical the consumer and customer are in all that we do to drive our success.

We're faster, clearer in our choices, and more disciplined in how we act on them. Most of all, we are more confident in our business with the self-belief that only comes with a consistent winning record. Now we're taking it one step further again with the new organizational model, sharpening our strategy, adding capacity, and driving speed, not a day too soon, again, because things are tough out there. I've been saying that since 2009, and you're starting to see that more and more in real life.

In Western Europe and North America, the outlook remains gloomy. The markets are not growing. Different people obviously have different figures and different points of view. But we can all agree that there is very little if any growth in these markets. And with the real austerity cuts still ahead of us once more in many of the European countries, as well as in North America. It is unlikely that this will change for the next few years.

In the UK, if you just look at ASDA's income tracker report, which I read with great interest, spending some time here, the average disposable income is down 8%. In fact, the drop is bigger than we've seen since 1977.

The UK and US retailers are reporting declines in their like-for-like sales. And this is before most of the austerity measures once more are really starting to bite. We can all see equally how tough things are for the consumer. That's what we care about.

We continue to expect the recovery in these developed markets to be long and drawn out, with consumer levels -- consumer confidence levels with only a few exceptions, like Mexico or China or India are still below the 2008 levels for most markets.

Fortunately, in the emerging markets, growth is more robust, although here again, I want to stress it. We cannot escape the effects of the slowdown in some of these countries, as I've flagged before, as prices start to hit and our measures are being taken to slow down some of this excessive growth that we've seen.

We saw a modest slowdown in China in the economy in late 2010, albeit from an exceptionally high base. And as you've heard from Hindustan Unilever, which has produced superb results, we've recently seen now also a similar pattern happening in India after several interest rate increases.

But you can keep the emerging markets in perspective, obviously. We're very happy that the growth is there, that the growth is strong, in Asia, Africa, and Latin America. And with more of our business in these markets than with any of our major peer competitors, we continue to be well placed. We are the emerging market company.

In today's challenging environment growth is at a premium, and it's no surprise that competitive intensity remains high in those markets where the growth is, although, interestingly, as you've seen from these results, it is especially in those markets that our growth has strengthened.

The Indias, the Mexicos, the Argentinas, the Chinas, the Indonesias, and the list goes on. We do, however, see some signs of more rational competition in some places as cost inflation is starting to hit them as well and depressed consumer demand is start to have some effects.

Against this background, let me finally look forward and say what are the few key things that remain to be done, where it is that we need to get to the next level in our journey? Let me briefly pick up four actions that I think really are going to make the difference.

First, we need to make sharper choices, continue to do that on how we manage our portfolio. We have a series of clear category strategies now. And there will be uncompromising alignment of our resources behind the most strategic growth opportunities.

Second, we need to implement this new organizational structure and land it quickly and efficiently. We need to raise the bar further still on innovation capabilities and the speed with which we roll them out globally behind this new organization.

And thirdly, we need to drive further our industry-leading approach to sustainability, make our Unilever sustainable business plan come alive. It is a series of bold commitments and hard measurable targets. But this is a call to action, not just for Unilever but for the industry as a whole. We're starting to bring it to life, but we can and will need to push it much harder, especially with our brands in the years to come.

It's the right thing for society, as I mentioned, but it's also the right thing for our business. Consumers are increasingly aware of the sustainability issues and the challenges that this world faces. And it expects companies and brands to provide solutions. In the long term, a sustainable business model will be the only model in my opinion that consumers will give permission to upgrade. We're setting a lead in this area, continue, and plan to stay in the lead, and obviously accelerate our growth as a result.

And finally, there remains more for us to do in driving rigor and discipline throughout the total business. We now are far enough advanced on enterprise support and global IT systems that we can harness the power of these assets and ensure continuous improvement that that becomes the norm in everything we do in the Company and good enough, again, there's still enough juice in the system to go after.

I will close my comments with a few words on the outlook. You're always getting excited about that, for the rest of 2011. There is now doubt that the second half of this year will challenge us once more. However, we start from a position of confidence with a strong first half behind us, positive momentum in most areas, and even stronger innovation program in the second half.

This is a new level of energy and spirit that we're bringing to the business. Assuming no further major shocks in the system, assuming no further irrational competitive activities and some of these trailers coming along finally, then we look forward to the second half with confidence.

Our priorities remain unchanged. We will continue to focus on profitable volume growth ahead of our markets, steady and sustainable improvement in underlying operating margins, and strong cash flow. We stayed focused on doing the right thing for the long term and above all maintaining the long-term health of our brands.

And on that note, ladies and gentlemen, let's open it up for questions.

(inaudible - microphone inaccessible) form here if you want to ask a question in the room, you just raise your hand. If you're selected, please hit the red button on your console. Please tell us who you are. And please restrict your questions to two so that we get around to everybody if we can.

We're also taking questions on the line. If you want to poll for a question on the line, you press star, one. If the question perhaps has already been asked by a member of the audience, then you press star, two in order to cancel your question.

So we will start in the room. And Michael eagerly has his hand held high. Why don't you begin?

Good morning. Michael Steib from Morgan Stanley. Two questions then. Paul, can I just ask you for some further clarification on the organizational changes that have been implemented. You commented twice on it. I imagine there's quite some scope for a potential disruption when you make pretty radical changes in your reporting lines and so forth. So my question is, are these changes now largely complete? Or are there still sort of big appointments, bigger changes of areas, responsibilities to come over the next six to 12 months? That's my first question.

And then the second question is on pricing. Jean-Marc, you said that the outlook for pricing in the second half should be broadly stable. Should we read that that you're basically done with the price increases now? And pricing in the way you report it, it's just essentially stable at this level because of the mathematical effect year on year. So you happy with the pricing now, assuming commodity costs stay where they are. You're pretty much done with that.

Yes, the answer is yes.

But I want to add to that. We've seen some trailing in some of the categories. We expect competition to come up. There's one thing between what they say. There's another thing, what they do. And there's one main competitor that has defined the definition of promotions as pricing as well. So we're watching that closely. I just want to be very clear of that.

On the organizational changes, we frankly announced them in full transparency three months earlier than I would've liked to because of Mike Polk having a super opportunity to become the CEO in Rubbermaid. And we regret that Mike was a great guy and a great member of the team. But it gave us an opportunity to implement something we've been working on for a long time.

Our plan was to announce it in September and put it in place in January 1. We've now announced that in the summer and put it in place in September 1. But at the same time, all the people will be responsible for delivering this year. That's very important for us because it's probably one of the toughest years I've seen in 30 years in consumer goods. So the targets, the payments, the performance, everybody delivers this year, and we don't get sidetracked from that. That I can assure you.

Then we hope over September to December to put all the changes in place. There is a fair amount of change we said. But there's also fair amount of continuity that we are having here. For example, the clusters are more efficient clusters where the key players are already in place, bar two of them, for the markets. So going to these eight clusters doesn't really require as much change.

In the categories, the key players that are now managing the individual brands stay in place but we're creating these mega-categories to get that scale and efficiencies.

So although the change is a major on in terms of the way the organization is going to function moving forward, we're trying to do that respecting to the fullest, if you want to, the players that are actually in place. So I think we can manage that, but that's obviously the key priority for us, for myself, my leadership team over the next few months, as it has been since the summer to be honest.

[Sylvie].

(inaudible - microphone inaccessible).

Yes, so it's a few things. I'll really briefly go through them. We think the market globally is growing about 4% to 5% in the categories that we compete in if you average that out. But it's a difficult number. But I think it will be anywhere between 4% and 5%.

And if you look at the volume side of that, it will be about 2%. I saw some of our competitors saying 1% or whatever, but in our mix, we read it at about 2%. So if you see our volume growth being 2% more or less, it's what it is over the six months. If you just focus on that, it's 2.2%. We think that's slightly ahead of the market.

If you then look at value because we're leading in many of the cases, we're ahead of the market. 60% of our business is building share. We're looking at that at individual sales. And I think that more or less reflects what I'm seeing here. So that is on the volume side.

I don't think that that should significantly change. Obviously, when there is pricing pressure in the market and economic pressure, the volume will probably be a little bit recalibrated versus the pricing. And that is what we see right now. So I think that is very clear.

The other purpose of that recover, obviously, we're very pleased with how that's recovering. In fact, if you look at the US, I just came back from Chicago and spent some time with that wonderful team there. You look at Tresemme or you look at Nexus or you look at Motion, they are all leading brands. And they're actually some of the fastest-growing brands. And if you add Suave to that, that is our brand, our hair care business in the US is doing very well. And there's no reason why we can't get the market leadership.

I saw the same in Mexico. I see the same here in the UK. Our hair care business is actually growing now for nine consecutive quarters. Remember when I said when you do an acquisition a few meetings ago that one of the most important things is build it off strength, not off weakness. And here, we're having a strong hair care business that continues to grow that we're adding strength.

And on top of that, we have brands like St. Ives that perfectly fit our skin care brand, our skin care category that Dave Lewis is now leading and Antoine was leading before.

Now obviously, I'm not going to comment on the rollout plans unless we announce them. But you will see that we will increasingly leverage that business, again, on a global basis. The business has been very successful where the people have built it. But one of the attractions of aligning with ourselves in this merger if you want to is to leverage our global scale, our deeper knowledge of technology in hair care, and apply that to their businesses and make it broader available to the consumers globally. And that is what we're working on right now. And you'll see that appearing.

There was also a question about ice cream.

Yes, the ice cream itself. One -- that's why I don't like to talk the ice cream. But if you look at our European results, to be honest, over six months again and not get excited over three months here and three months there, we had a very good June month, an absolutely lousy July month, believe it or not, was one of the worst July months again in 70 years. Today, it's raining here. So I think the summer is over in the UK.

But we need to have increasingly the global business. That is important because the world's climate will change tremendously. It's happening. And you get these shocks everywhere now. But the same time, I was in the US just a few weeks ago and took a week of holiday there, tremendous drought. So that's why we launched Magnum there because we can help these people. We can help these people. And Magnum is now the best solution for drought in the US.

And the same thing in the Far East, our Far East business is growing tremendously as well. So whilst we pointed out in our European business, obviously, as a correction over April, May, June, the total effect for the Company is 0.2% or 0.3% or so over the quarter, whereas, James, because you did that calculation because we knew that the question was coming.

Yes. So we had a super second quarter, probably inflating our performance in Western Europe by about 2% in the quarter.

So 2% on Western Europe for the quarter. So it's 0.1% or 0.2% for the company.

Yes, 60 bps.

That's the benefit of being globally in scale. So that gets to your question.

Susanne? Can you just make sure you press the microphone because the people can't hear you? That's it. Thank you.

Okay. Yes. Susanne Seibel from BarCap. I've got a question regarding your advertising and promotion spend, could you talk a little bit more about the components, advertising versus promotion, how that has developed over the last two quarters, and how you see that developing going forward, please?

Yes, Susanne, that's the right question. The advertising and promotion over January-June is up versus the six months before. It's very important. We've increased spending versus the six months before. And we will keep at least the spending at the current levels for the second half.

Our innovation program is more balanced, in fact compared to last year more skewed towards the second half. So you'll see more spending in the second half as a percent of turnover. That is really what we are seeing, what we always have been seeing.

The EUR150m reduction more or less that you see in the first quarter versus the year ago splits about EUR75m, EUR80m in savings efforts. We have a tremendous effort in the Company on return on marketing invest. And we can drive that further. A little bit of a mix towards more digital and a better cost equation there. And the rest is the promotions because, when you see the cost environment going like this, the promotional intensity gets less. So our advertising spending is fine. I'm perfectly happy with that.

On top of that, we have seen in these markets that we compete in a reduction of some of the spending. India was an example of that, a reduction of some of the spending as compared to just try to make the numbers work. So we actually think that they are competitive. And they should be competitive for the rest of the year.

What we have said before, I still stick to. We want to keep the absolute spending about flat with efficiencies that will be more, but the absolute spending about flat. We're not going to compensate in A&P automatically for the high top-line growth or for the pricing because that would be false economics. If people think that, all right, now you need to grow A&P by 7.5% because your top line is growing so fast, it's the stupid way to run the business. So that's why you will see efficiencies there. So that's good cholesterol.

Jeremy.

Hi, Jeremy Fialko at Redburn here. A couple of questions. First one is on the gross margin. You talk about an improving trend within the second half. Does that mean they'll be down but just by less than they were in the first half? Or do you think they could actually be up within the second half or even full year?

And secondly, on your CapEx, that was you said is around 4% of sales I think. Isn't your guidance of nearer 3.5%, is this just kind of a phasing issue? Or do you think that sort of CapEx is stepping up sort of more permanently towards the 4% of sales? Thanks.

Sure. So let me take the first one, which is on gross margin. I can come back to if I'm not answering your question. But specifically for the second half of the year, obviously, you have to take the first half of last year and the second half of last year into account as well as the points that we've made on pricing, commodity costs, and savings and the like. And then you'll get a good view on where gross margins will be.

On the second point, in terms of CapEx that we just -- sorry.

Yes, I'd just like to remind you that we have announced about EUR5b of investment for 30 factories in the next three years to come. So there is a real investment that is happening to step up our capacity ahead of growth so we can sustain our long-term volume growth programs as well.

So indeed, on this point, if I just take you back to Singapore and we had a graph which showed the underinvestment in CapEx of the past, the period that we're going through today, which is somewhat of an overinvestment to take into account the underinvestment and then a more normalized level from '12, '13, onwards. So it's very much in line with what we've been expecting. To tell you the truth, we haven't been expecting 3.5% for this year, but much closer to a 4%. And only once we've gone through this period will we start to get greater efficiencies when you're looking at CapEx as a percentage of sales.

Jeremy, we've always said more or less 4% because the CapEx is basically the beginning of the year that you have a fairly big transparency of what you're building. We just opened a few weeks ago, Pier Luigi and myself, a wonderful deodorant factory in Cuernavaca in Mexico, not far from Mexico City with the President Calderon, which is a state-of-the-art factory that will supply the US and many parts of Latin America and drive our market leadership to even higher levels. So those are the type of things we like.

All factories, by the way, that Pier Luigi mentioned, bar one, are in the emerging markets. We are the emerging market company.

Julian.

Julian Hardwick at RBS. Two questions from me. Jean-Marc, at the first quarter stage, you indicated that you expected margins, operating margins to be down in the first half but up in the second half. Is still -- is that still your expectation as regards the second half for operating margins?

And perhaps a question for Paul, as we sit here today relative to your thoughts back in February, what's really changed in terms of how 2011 has unfolded, different from your perspective?

So just taking the first point, let me just be very clear. There is indeed, what we said in Q1 still holds today in terms of first half, second half. But I think the most important qualification that we're also making today which we make in Q1 is the need to protect our brands.

This is a difficult consumer environment. This is a difficult competitive environment. And that is our first prerogative. It's all about driving profitable volume growth. And so that's just a qualification that we gave at Q1 that we're giving ourselves today. We're going to do the right thing for the business.

Yes, between February and March when we were here and now, it's a short period of time. And I think one of the key things of good leadership is to see reality in the eye, to not create a world around you that isn't there but to just be realistic. And again, once more, it doesn't mean you can't grow. But if you start from the right base, I think you end up with a higher probability of doing the right things.

And what I see that is different between now and, let's say, February, March is that the competitive environment has started to realize as well what was going on. We were the first ones out there with significant costs. You were surprised and said why is it 500, 550 basis points? Subsequently, we've seen others go up two times or whatever and change them. We've never changed it. We have that estimation. It's not that we're smarter or not. It's just that we see reality.

We're also really saying the economy is tough. Everybody now all of a sudden, I saw a statement from one of our competitors yesterday that the US and Europe isn't growing. Well, if you only discover that now, where have you been?

So we have built our business models on that basis. And I think what is good now is that people see what the environment is so that some of these actions in the marketplace hopefully become a little bit more rational. So what I hope going forward is that we see the competitive environment reflecting the reality of the world. And that is a better environment I think to do business and face your competitors than what we have done in the past.

So that gives me a little bit more confidence. And we're seeing now -- at least we're hearing more talk. And we're seeing selectively some of the price movement coming through from the competitive side.

We'll take one more in the room, and then we'll go to telephone. Harold, you've had your hand up for awhile.

Yes, morning, everyone. Two questions, the first one again, sorry, on the kind of a volume question. You say, you've repeated a number of times it's critical really not to get -- to let the volume go as the prices have gone up. Where do you think is that critical level where you just say, right, this is now too low? I'm going to renegade some pricing, and linked to that, where you've moved early on pricing, so where -- some areas you've raised prices for awhile now.

What was the initial volume reaction in, let's say, six or nine months further down the line. How has volume performed? Do they respond back upwards once you've gone through the initial phase?

My second question is on laundry. If I'm not wrong, Paul, in a prior life, you were very successful at managing that category. Could you maybe give us a bit of a 360 view of Unilever's laundry business today and what you think are the key issues that need solving and maybe some of the ideas you've got? I'm talking there as a category head rather than CEO.

Sure, but we're not going to discuss the strategies publicly and have our competitors run away with it. But I'll give you at least some answers. But don't push me too far on this. I often still say friends is what I would say.

The first thing is, on pricing and volume, obviously, what we've seen -- and you really have to look at it by category and by brand. So it's a very granular discussion. But what we broadly see is, in overall volumes, I'm happy if we go more or less in line with where the markets are in volumes. We should not push it too far and create dysfunction in the markets.

In an environment like this with the cost pressure, it is better to implement the pricing and have some stability there. And if you grow volumes too fast in this environment as well, it probably means that your pricing, as far as competition is concerned is not on strategy. So you have to be careful there.

What we normally see is, in our business, is where we take prices up, we expect where we are leaders to take the prices and lead that. But then we expect competition to do vice versa where they are leaders. That last part has been missing until now. And I hope that we will see increasingly.

Normally, you'll wait two or three months, which is a normal cycle to see if competition comes up. For example, in laundry, even in Europe, we have led on pricing increases. We've seen volumes being slow. But our total laundry business has been more or less flat on volume over the last quarter. And yet we've been able to establish quite some pricing around the world. We expect our volumes to come up a little bit as our competitors face the pricing. So we watch that carefully.

If that does not happen, we will adjust again. In some of the markets, like in Turkey, where we are now market leader on laundry, we've taken prices up. One competitor, our number three competitor in the market has not yet. That needs to happen now. Otherwise, the industry will not accept that long term. That has nothing to do with Unilever or not. It's the discipline of consumers, if you want to.

But broadly, we're able to take prices. Where we see the two categories where we are growing, which is laundry and hair care, we see that if one of our competitors loses share, then the first thing they do is drop the price. We've seen hair care go down in India by 14% on the big size, 33% on the small size, by one of our competitors.

We've seen hair care go down in Chile. We've seen hair care adjustments in Mexico when we launched the Clear brand. But our brands are now in a [facial] program, are strong enough that we carry this business forward, could do better, but here we're not going to react just unnecessarily in pricing but (inaudible). So we look at each of the categories. But we're starting to see on the positive side some movement to the up to close that gap.

In terms of the laundry business, the laundry business is an important business for us. By far in the emerging markets, if you want to, we are the number one. In fact, in unit sales, we sell far more detergent than any of our competitors. And we have good shares in most of these markets. And not surprisingly, these strong markets is where competition is coming in.

What we see now with the strategy we have and the structure that we have is actually interesting. But the competition coming in I've always said is a good thing. And some people were cynical about my comment. But it is a good thing because you look at India, for example. Our detergent business is growing fast. It requires the best of our organization. It requires the best in terms of what we put out there in formula. It requires the best in terms of where we put our spending and how we do it. And you actually see that these markets either develop faster, or your shares are growing.

In our case, in the emerging markets, our laundry shares are actually growing. So I always say competition is healthy. But that is where the battles are right now. And obviously, when people come in, the profitability will be under pressure. The incumbent has to defend himself or accelerate. We're not talking defending anymore. We're talking about accelerating. And that is what we're doing.

The key issue over time will be -- is to be sure that you have good positions in these markets and that the pricing and spending level stabilize so that you get a reasonable return. I'm not happy about these returns at all. But we're not blinking. And we're not letting competition just buy business.

And the Company is big enough now and healthy enough in all the other parts of the markets that the total adds up. So you need to judge us on the total because, today, the fight is there. And at other times, the fight is somewhere else.

In the margarine market, we have seen significant price increases because it is much more linked to raw materials. We have seen actually a slight dip in volumes over the first quarter. But now consumers again have fully bought into the fact that margarine is a healthier alternative than butter. And certainly, it makes you live longer. And we start to see these markets growing again over the last quarter.

So we think that you can still at low level grow the margarine market and reflect in pricing the right cost structure. It's also certainly in the economic times that we're facing. Margarine is economically also -- it's a healthier thing. But it's an economically far more attractive supposition than butter. It's very clear.

We're going to go to the telephone lines now. I think we've got Marco on the line. Marco?

Yes, good morning, all. I've got two questions, if I may. The first is could you -- a more strategical question. Could you elaborate a bit further on the category definitions for Home Care and Refreshments? How broad should we actually see these definitions and especially also in the context of your comment made on accelerating the M&A platform?

The second question is more on the volume side. And maybe you could help us a bit more understanding the volume slowdown in the Americas. And perhaps you can give us also a split between North and South America.

And my last one is more on the phasing of Alberto Culver synergies. You highlighted to see about two-thirds, if I recall rightly, of costs being taken in 2011. Could you also update us on the synergy phasing? Thanks.

Yes, Jean-Marc will get to the synergies. Let me just very clearly briefly go on the Refreshments. We call it Refreshments right now. It includes all of our beverages. So that is our [key] business, our big [others] and fast-growing other soy business in Latin America. Then we have the Buavita business in Indonesia and one or two other things, like the Kissan business in India. So that's all included, including our ice cream.

And we don't want to go beyond those categories. That ice cream is a refreshment, obviously, we have now introduced -- we haven't talked here, but we've introduced in Europe a product called Cafe Zero, which is absolutely a brilliant product. If you haven't had it yet, you should try it, and you're hooked for the rest of your life.

But that's a hybrid between ice cream and beverage, so that would fit in that category. Because we're combining that and looking at that holistically already for awhile, we see broader opportunities. But don't try to push us here into a comment on acquisition because of we changing the category.

Our priority still is 80% of our growth or 85% -- sorry, 90% or 95% of our growth, as I said before, is coming from making our current brands stronger and making them available to more consumers. That doesn't change because of the organizational change.

On Home Care, the same thing, the whole category includes household cleaning and includes laundry. And laundry is a broad definition of fabric care and gets you into different categories, if you want to, adjacent categories than we are in now. It's totally acceptable. But there's enough opportunity to grow our pure laundry business.

And in Home Care, we have enough opportunity to expand our core brands. We just launched Domestos in Turkey. We just launched Clorox, the household cleaner in Russia, which is off to a good start. So our household cleaner business, which frankly has not been as high a priority as I would have liked it when I came in, is growing actually very fast because there are an awful lot -- there are about 800m Chinese that are now all of a sudden getting a toilet or a kitchen.

So brands like Domestos and Cif are very well placed to make that available to the rest of the world. So we like to stay with our core brands and making them stronger. But we can look at it now more holistically as we create these mega-categories.

On the volume in the Americas very briefly, the volumes in Europe and the Americas are soft. I've said that, North America I'm talking about. But Latin America is doing very well. Mexico is doing very well. The south cone is doing very well. Central America is doing very well.

So the only market that you could have -- it's positive in growth but that I would say is a little bit soft in the last quarter is Brazil, where we still have good growth. But we have implemented new trade terms that we think are very important for the future. We have seen a destocking effect of about one week in the quarter with some of our retailers.

Our shares, which I look at, which is far more important to me, but our shares are growing in about 60% of the business. And so overall, that is healthy. There are always some challenges. But overall, that is healthy.

We have a liquid detergent now that we have introduced that is doing very well that just has become market leader again in the segment. So I see that going in the right direction. But obviously, now, we need to start seeing in Brazil as well the volumes pick up again because those are big markets for us.

North America will continue to be challenging. I don't think you should expect a miracle from that market in the current economic environment. But we are growing share in our -- sorry, in our personal care business. We're doing very well. We've launched Dove Men+Care in the US. Now we've launched Magnum in the US.

We've launched actually our wonderful Knorr jelly bullion, which has an incredible loyalty once people start to use that product. Again, if you haven't tried it, you will change your life by moving away from these granule bullion blocks to a natural product. It's rapidly approaching the EUR100m turnover for us globally, outgrowing anybody.

So we are investing in the US now, Alberto Culver coming in that we will invest behind. So we should see our volumes grow in the US, our business grow behind our initiatives in a market that will stay flat.

We'll go into the phasing and the synergies.

Yes, so synergies for Alberto Culver, approximately 10% of turnover. Don't expect much, not more than EUR10m or EUR15m for the second half of the year, either because we reinvest, but more importantly just implement the business. So those 10% of turnover, you should expect from 2012 onwards.

So one more on the line, and then back in the room. Pablo?

Yes, thank you. Three very quick questions. On the M&A front, can you comment on the Company's attitude in terms of entering new categories?

The second point, why are margins in laundry so low? Thank you for giving the disclosure, the new disclosure. But that's a category where you have 40%, 50% market share in several markets in laundry and home care margins are only about 6%, well below the Company average.

And the third and last, if I do the math, you took a little more pricing in Asia second quarter, plus the 6 points, very little in Europe, yet margins in Asia are down for the first half, and in Western Europe, they are up. Does that mean there's been a big reshifting of A&P, significant cuts in Europe, increases in Asia? Thank you.

Okay. Very, very briefly, you see our strategy, as I explained in the introductory talk, you see our strategy coming to life. Europe is a low-growth market. It's not pulling us down anymore, which we've always said was our priority. But in our strategy, we invest where the growth is. We invest where the profitable return is. So we will invest more people, resources, money, innovation in the emerging markets to keep our growth at the 10% level. That is what we're doing.

In some parts of the world, we will compete differently. And as a result, you'll see economics between the regions, which now changes by the way because we will have eight regions. But you'll see the economics by the region taking different forms in line with our strategy. You shouldn't read in that, should we not get to an average because you don't run the business with averages.

In fact, for too long, we've run the business on averages. And you get to the lowest common denominator, which doesn't lead to anything. You run the business with choices. And the choice here is faster growth in the emerging markets and an overall profitable model for the company. So that is how you have to judge us. And as a result, you will see these differences continuing as we move forward. It is a full reflection of our strategy.

The second thing is, are we getting in new categories or not? I just -- again, we are in new categories bit by bit, but on a very controlled basis because, again, our growth is coming from making our products and the categories that we're in broader available. We now have 2b consumers using our products every day. There is no reason why it can't be 4b consumers. And that is our prime driving of growth.

But having said that, we have just launched over the first half of this year Pureit, our wonderful water brand that is now EUR100m in turnover, having 5m people in India using it already. We've just introduced that in Brazil and Mexico, in Indonesia, now looking at some other countries. So that is potentially a big brand that fits perfectly with our Unilever for simple living plan of bring health and hygiene to people.

It's not a plan that will give you the bottom line right away. But it is a plan that gives people access to safe drinking water in many places of the world that it's not available at the most economical cost. So that is a new brand.

Cafe Zero that we just launched, is that a new category or not? I think it has potential. It still needs to be proven.

So we are looking at adjacencies but not going too far from our core and continue to focus on strengthening our core. Behind these results, what you see is that our stronger brand and our categories that we want are actually doing -- getting stronger. And that is the most important thing in bringing this strategy to life.

Thank you. And the laundry margins, why are they so low?

Now on the laundry side specifically, I think we've talked the laundry side. There are some battles there that we just went through with Harold as well. There are some battles on laundry that we respond to, but we will not let competition undercut us. And right now, there is a competitive intensity in some of these markets where we have a good market position because some of our competitors are coming in at prices that are well below us. We have to respond to that (background noise).

We don't think that is going to be a long-term thing. We think that that eventually will stabilize because, certainly, by our calculations, our competitors are losing money there hand over fist. And that is not a sustainable position.

Thank you.

Xavier Croquez, Cheuvreux. Two questions. The first one is the market share review within HBC. You said laundry was up or was flat. What is going on in hair once adjusted for acquisition? What happens in skin and deo, which normally is always a highlight?

The second thing is, what do you see in Russia and Eastern Central Europe? Thank you.

Well, Xavier, the thing that -- why we don't talk deo anymore is because we always had the deo story, but now we have so many other stories that I deliberately stay away from deo. But you are very happy to hear that our deo shares are up and that we have a very good innovation program on deo. We've launched Axe Excite, which is one of the biggest launches. We're now going with confidence into China as a result of that. Rexona, Rexona for men, the Dove Men's launch now coming in also in deo is driving that category from a solid base to higher levels. And my opening of the factory in Mexico is an example of that.

If you look at HBC, the category that in the quarter probably underperformed is personal cleansing because that's where we've seen the highest price increases. This is the bar soap, where we had more pricing than any of the other parties.

Our face with Pons is doing well with Pons Natural. We're increasing our skin shares in key markets, like India. We're growing our skin business in markets like China that are very important to us.

Hair, likewise, our hair is -- I take six months. I don't take one month. But our hair business in India is very healthy. Our hair business in China is going very well. We've just introduced Dove in China in the first quarter of this year, which is off to a tremendous start. We're taking share there from the market leader.

So our hair business, we've just had the introduction of Clear in Mexico. I've seen a market reaction of, again, 15% price reduction by the key competitor in anti-dandruff. But again, we are establishing the brand, and we're seeing this as a long-term plan.

So we are very confident that we can grow our hair business. For nine quarters in a row, we have been able to grow our hair business. Alberto Culver has not come into these numbers because it's only for June. So there's not much Alberto Culver in there. That's just one month. And I think bit by bit, we will see our overall hair care shares moving into even more positive territory.

The rest of our skin care business, our hand and body business is doing well. It's actually accelerating growth over the second quarter. Oral is more or less flat in a very competitive environment. We have some markets that the share is up, France as an example. But we have some markets where the share is down. I don't want to deny that. But in total, that business is okay. But we don't want to put as much money in as a lot of our competitors with the priorities that we have. And hopefully that competitive environment also stabilizes a little bit.

We'll take one more.

One more question. So one more question, and then Paul will make closing comments. Bob?

Bob Waldschmidt at Merrill Lynch. Just a question in terms of cost savings, you said you're looking to be more maybe where we were last year, maybe EUR1.5b-ish. In terms of cost to provide, we were 110 basis points restructuring in first half. Can you comment about phasing of cost to provide? And then indirects, you've made good progress on that. How far can that go? Thank you.

So just on the point not EUR1.5b, we say in excess of EUR1.3b. I think that's where we were last year. And so in excess is higher than EUR1.3b. But just take that into account, not EUR1.5b. Just want to make sure that that's clear.

Restructuring is a very important area of focus in driving discipline, making sure that we look at the totality of our business. You'll remember that restructuring was 130 bps of sales last year. It's less so in the first half. Given the environment that we're in, we will accelerate if we see opportunities, etc. But as long as we're at or below the period last year, then we're doing a good job. And we'll just continue to do that.

And M&A restructuring on top of that, just for clarity, just in case that's not clear, so M&A restructuring will be on top of that 130 basis points, and we think around EUR200m for the year as a whole for M&A-related restructuring.

I owe Xavier the answer on Russia and CE, haven't forgotten. So in Russia, the actually -- Russia is still below pre-2008 levels as far as the economy is concerned. And actually consumer spending is still declining in Russia, which is important. So the markets are tough, although we show an improvement again in the second quarter versus the first quarter. I wouldn't read too much in there. Russia has a tough market.

But from our perspective, our business has been underdeveloped. We were not as persistent in the 2008 crisis and had to build up our business again. Subsequently, we bought Inmarko. We bought Baltimor. So our business is getting critical mass. And it is one of our investment markets.

We've just introduced Clorox as a household cleaner brand. And you will see continuous introductions as we strengthen our portfolio again. So overall, our Russian business is okay in a very difficult market. And I don't think that market will change. And so we deal with that.

And Eastern Europe has been soft for us. And I think some of our competitors were also reporting on that. Eastern Europe is a tough market. And again, I don't think that will drastically change. There are one or two bright spots in that whole thing. But it's a tough market, like Southern Europe.

We'll take one more question and that is it, or -- ?

Yes, if you like, one more.

We'll take one more question. Yes, go ahead.

Hi, it's Sara Welford at Citi. Two questions. First of all, on the organizational restructuring, in terms of profit responsibility, will that remain by geography? Or will that change to be by category? And hence, will that affect your primary reporting at some point?

And secondly, in terms of the emerging markets, at the full year, Paul, you talked about how the IMF forecasts were expecting a slowdown in some of the major economies. Can you update us on your views here specifically rather than what the IMF is saying of what you're seeing in the markets from the bottom up?

Yes, when I -- as I said to you before, when I graduated from university in Holland, my father gave me a little plaque that said an economist is someone who doesn't know it either. So I've become very humble. You put 10 economists in a room, you have 12 opinions.

But it doesn't take rocket science to see that these markets will slow down. And I was in China for two weeks not long ago and talked to a lot of people there as well. They have to control growth at about the 8% level. That's their new five-year plan, not at the 10%, 11% level because it has side effects that they don't want to deal with either, rightfully so.

So you see the emerging markets -- and Brazil, consumer debt is very high. You just look at some of the normal indicators and not get carried away and go back to some basic principles. So you'll see the Brazil economy, which is a big one. You'll see the Chinese economy. You see the Indian economy already. They will grow very strongly. It will have opportunities for us in our markets, which is really what we should be talking. But on a macro level, these economies will come a notch down.

I said it at the Bernstein conference. Everybody got excited and emotional because it's a new piece of information. But it's just economics 101. And we deal with that. And we deal with that in these results. The emerging markets in the second quarter did not have the equal economic performance as the first quarter, yet we stayed with our growth above double digits.

So separate what we do from these economies. But these economies are going to go a notch down. Also, because some of that is influenced by the demand coming from the development market, which is still two-thirds of the world's economy, and that is drastically being reduced right now in both North America and Europe. That will equally affect it.

So there are some things happening out there that will tell you that it is very unlikely that we see the growth at the levels that they have produced over the last 12 or 24 months.

Now as I said, if India grows at 7% rather than 9%, or if China grows at 8% rather than 10%, if Brazil grows at 6%, 7% versus the 8%, 9%, I'm happy. I'm happy. And I think it provides enough space for us as a company to continue to deliver the model that we're after. So I don't give you any excuses on that.

And then they had the other question you have.

Reporting.

On the reporting itself, no, we think that we can get the best of both worlds. We need to have a unique Unilever organizational model that fits our brands, our culture, our -- by grouping everything under our regional and by having eight clusters, it is easy for us now to manage the profits on a global basis, but it stays in the market. But the categories now will be far more transparent and responsible for delivering.

Our reporting, which in the past, our IT systems have supported it, were very much focused on country consolidation. Now we have changed that over the last two years and has taken quite some effort. Now we can also see what our products and categories do on a global level. So we'll get that transparency.

So I would expect the categories to be held accountable for a longer-term improvement in the category situation. We were talking yesterday, for example, if you are a category and you cannot show improvement in the return on capital employed over a three-year period because you are responsible for the capital investment, you are responsible for the big innovation that drives the category, then an alarm bell starts ringing.

Now my alarm bells start ringing before a three-year period I can assure you. But they are accountable for delivering results. But the profits will stay into the region, but in the new organizational model easier to make adjustments. With some of our competitors said this company cannot do, but we get the best of both worlds.

Look at how fast we reacted to India. We had to put more money in, but business is going significantly faster. Bottom line is encouraging. You look at the share of [Lever Henderson] on stock exchange. It's one of the best performing shares in the last 12 months. So we know how to do this, even if we get competitive battles. But we think there is more benefit to be gained from leaving the public responsibilities closer to the market.

No change in reporting this year in terms of disclosures and the like. There's obviously more emphasis on categories, the underlying operating margin today. But we'll be engaging with yourselves between now and the year end in terms of disclosures for next year resulting from the organizational change.

I want to wrap up. I just want to thank you. Thank you for your time again. Thank you for your interest in the Company, obviously, and the results. I really appreciate that. I hope you'll get a break. For us, the most important thing is to keep focused on the consumer.

In many parts of the world, the consumer is suffering out there. I go out there every day. I see consumers. I do home visits. And while some people might be better off in this environment, the bulk of the people are worried. You see them here in Europe. You see that in North America. And that should be our concern.

Any company that is not in tune with society, any company that doesn't try to improve the world that we live in I think is doomed to fail in the first place. We like to be 100% focused on helping these people out there with our wonderful products. And that is what we're doing over the second quarter, over the third quarter, and over the fourth quarter as well.

And whatever the numbers are at the end of the day, I know some of you get excited about 10 basis points plus or minus. I have good news for you. I don't. I get excited about getting this company to the faster cycle of growth. And we're getting a step closer with these results. And I hope that the next proof point again will give you a little bit more encouragement.

We've deliberately put results out here that have in there for the bulls and that have enough in there for the bears so that you are all busy again for the next few months. And I look forward to seeing you soon again. Thanks for your time. Bye, bye.