聯合利華 (UL) 2013 Q2 法說會逐字稿

We are about to hand over to Unilever to begin the conference call. (Operator Instructions). We will now hand over to Mr. James Allison.

Good morning and welcome to Unilever's second quarter and half-year results presentation. Today we're doing this via webcast. For the full-year results we'll be back with a physical meeting in London, but for the mid year we thought you'd appreciate a bit more time in your own offices in a busy results season.

We hope to see many of you in person at our annual investor event, which this year we will be hosting at our Colworth research facility here in the UK at the start of December, and you will receive more news about that very soon.

In the usual way the presentation of our results this morning will be given by Paul and Jean-Marc. Paul is going to share his perspectives on the first half year, Jean-Marc will cover the financial highlights and Paul will finish by looking at what we need to do to stay ahead of the curve in this increasingly challenging world.

We start with the usual disclaimer relating to forward-looking statements and non-GAAP measures. And, with that, let me hand over to Paul.

Thank you, James, and good morning to everyone. Let me start with some reflections on where we've got to in our strategy to transform Unilever.

After years of underperformance we set out to become a sustainable growth company, and this meant investing more; investing behind our brands, our people, as well as capabilities. We also strengthened the innovation funnel, with bigger and better launches that we now roll out faster.

These solid set of results we've just announced show, once more, that the transformation is fully on track and that the Company is competitive on most fronts.

As is so often the case, this is a journey that needs to be completed in stages, and I appreciate the fact that you've been patient with us in this first part.

This stage has got Unilever back to being a growth company; a pre-requisite for long-term valuation creation, with particularly strong performance in the emerging markets and in the Personal and Home Care categories, in line with our strategy. We are, therefore, delivering to our strategic choices.

As we all discussed together in Paris, we have now moved into the second phase of the journey. In this stage, we need to better balance the top line growth with the gross margin improvement so that we're able to fuel further investments, as well as driving profitability. We also need to deliver superior growth in Food and Refreshment, which is obviously an important part of our portfolio.

About 12 months ago we started focusing on what I call maxing the mix, and this is now bearing fruits. More and more of our innovations are landing in the market with more added benefits to our consumers, and that helps us justify the premium pricing and the better gross margins.

And, encouragingly, that's also reflected in our funnel of future innovations, with close to three-quarters of these future innovations set to deliver above-average gross margins.

Now, maxing the mix also means making choices; focusing on more profitable growth opportunities, sometimes foregoing less valuable volume, lending pricing where needed and making sure that our promotions are efficient.

We've also been reviewing our SKU ranges, eliminating the lowest profitable ones where needed.

And, obviously, we've stepped away from some of our businesses, which promised volumes but at unattractive returns. In parts, for example, of our US Ice Cream business, we've been able to do that.

At the same time we've stepped up cost-efficiency programs, on top of an already very active plan, including the rollout of the low-cost business models we talked to you about in Laundry and Ice Cream. We've been paying particular attention to these two businesses, where we also felt that the profitability was too low. And, again, results are starting to show.

We will talk more about that later, as we need to set the bar even higher once more in light of the changing competitive environment.

All of this has enabled us to deliver consistent, competitive, responsible and profitable growth. Above all, it has helped us to improve gross margins, despite the increased competitive intensity and, yes, challenging macroeconomic conditions.

We've been consistently transparent with you on the way we see the global economy developing. Economies in Europe are expected to stay soft and markets are expected to stay down. The real issue of relative competiveness, frankly, is not being addressed fast enough, and we all know that the political system is grid locked.

In the US, indicators are still mixed as well, although some more positive signs.

I think it's way too early, though, to call victory. While some of the confidence and employment data would point to a modest economic improvement, this unfortunately has not flown through to our markets, where consumer spending is still flat. The enormous deficits also still need to be addressed, and don't forget that.

Add to this that on both sides of the Atlantic competition and promotional intensities are once again increasing, with often value-destroying activities.

Now, in emerging markets, again as we've been continuously pointing out to you, there also continues to be noticeable slowdown. Brazil, Russia, India and China have all seen downgrades to growth forecasts, and the markets in which we operate certainly have slowed. Many of the currencies have weakened at an accelerated pace and, some of you have seen, significantly.

Citizens are demanding transparency, accountability and good governance at increasing rates. Protests on the streets of Egypt are not isolated incidents any more as recent events in Turkey and Brazil have shown.

Now, we are realistic about this new normal. We believe we are well placed to navigate this (inaudible) world. The Unilever sustainable living plan is a potential source of competitive advantage and increasingly recognized as such in this environment we now live. And we're starting to see this greater advantage and recognition, not only from the outside but also translated in these sustainable results that we are giving you.

Against this background I am pleased with the first-half results. Underlying sales growth grew at 5% in line with the first quarter. It was a good balance between volume and price. In fact volume was 2.6% in the first half, which was ahead of our markets. And if you look at, for the ones who want to go into the details of the second quarter, volume actually picked up to 3% as pricing eased.

The emerging market business potential is also clear. It posted again another quarter of double-digit growth. This reflected the investments made behind our innovations, market development and, obviously, the in-market discipline you have now become accustomed to with the roll out of the Perfect Store program, which we actually expect to reach about 6 million outlets globally by the end of this year.

Now, I am especially pleased to see Home Care delivering continued strong top line growth, but now also combined with a step up in profitability, despite a very high and actually increased competitive intensity. We have invested significantly in improving our product formulations in this category, and that shows through in the head-to-head blind testing on performance.

Despite these investments, gross margins are up enormously as we work mix and expend our low-cost business models we talked about.

The new detergent with wash booster for outstanding results even in quick wash helped to drive double-digit growth for the Dirt Is Good brand. And our superior liquid relaunch that is now starting to hit the world with the best product ever undoubtedly will help us maintain this momentum.

The consistency and the consistent above-market growth in Personal Care also shows what can be achieved in combination with strong innovations and well-supported brands.

The recent launches, like Axe Apollo already in 60 countries, and the continued success of TRESemme, Dove Men+Care, as well as Clear, show the benefits of rolling out strong global innovations across multiple regions.

In both Home Care and Personal Care share gains are broad based across the world.

Now the Food business is also showing signs of picking up as stronger innovation plans are put in place and we focus on fewer bigger brands. This is starting to pay off. Let's look at it in detail.

Savory and Dressings both now show solid growth. Knorr, our largest brand and priority here, grew nearly 5% in the quarter. This was driven by market development activities, such as the What's for Dinner Tonight campaign, consumption-building activities, especially in Africa and further extension of the superior performing baking bags and jelly bouillons.

Now we've also seen signs of improvements in spreads and are optimistic that we're back on the right track. Second quarter sales development was better than the first, although still negative. We expect to see a continuation of this improving trend in the remainder of the year as we continue to work on the price, taste and naturalness of our products. In fact the Gold variants that have already been introduced in more markets are doing well.

In Refreshments there has been a further improvement in our Tea business, and you know what I thought about this. But now it is demonstrating continued progress. In fact this is the first full year of our turnaround plan. This includes the successful launch of the new, even better-tasting Lipton Yellow Label teas in a number of countries.

And we've been successfully building a more global Ice Cream business, as you know, with 40% of our sales now in emerging markets where the sun tends to shine for more of the year. That meant that we could roll out a very -- that we could compensate for a very poor start to the season here in Europe and the US, as well as rationalize portfolios by eliminating low profitability but still grow overall on this business.

I have already referred to the work we have done across the business on maxing the mix and stepping up cost-efficiency programs. As a result of these activities, gross margins increased by 120 basis points with actually all categories improving. And core operating margin, as a result, was up 40 basis points. This, again, after a substantial reinvestment back into our brands enabled by the headroom from these higher gross margins.

Specifically, we've actually increased once more our spend on advertising and promotion by over EUR200 million or 40 basis points in the first half, building our brand equities across all media channels.

Our digital investments are up 20% in the first half on top of the 50% increase on last year. Digital has already become an indispensable part of most of our brand communications, and the results we're getting are unprecedented.

Take, for example, the recent Dove Real Beauty sketches, which showed how, as a global company, we can harness the power of digital wealth in an agile and nimble way to create a global phenomenon. In less than a month's time it had over 200 million views. This gained it the recognition of being the most watched advertising online ever.

By the way, this digital strength is also shown in China where our Cornetto micro movie and music videos have just hit 370 million viewers, and I had to ask twice if this number was right but I can confirm it.

The quality of our advertising has been recognized with 44 Cannes Lion awards this year, making Unilever the most awarded advertiser; well ahead of any of our main competitors.

But what means even more to us is that in the same week Unilever was rated as the most effective advertiser of the Effie's Worldwide Index, so we're on the right track to strengthen and continue to strengthen our brand equities.

Now you've heard us talk many times about the virtuous circle of growth and the first-half-year results shows that this is now starting to gain traction. And you can see from this chart that we've put the Unilever sustainable living plan at the center of that model. It is now firmly established in the business and shaping our brands and supply chain strategies.

Innovations like the new compressed deodorant in the UK show how consumers increasingly understand and appreciate the benefits of less waste in products they buy, as long as they do not have to compromise on performance and value.

At the same time we're reducing waste and saving costs in our supply chain. More than one-half of our manufacturing sites have already achieved zero non-hazardous waste to landfill. And we have now set ourselves the target of having all of them achieve that by 2015. That's again a new standard being set in our industry.

We also continue to manage the future risks in our supply chain. With 36% of our agriculturally raw materials already coming from renewable sources, we also have a better grip on the volatility that increasingly is there. And I was pleased to see that our recent hosting of the Global Food Security and Nutrition event in London, as part of the G8 meetings with many heads of state present, is starting to translate itself into further growth opportunities for Africa.

Now let me now pass over to Jean-Marc, who will go over the financial performance in more detail.

Thank you very much, Paul, and good morning to everybody.

Following the approach we took at the last full-year results presentation, I will focus only on the key financials for the half year, and that should give us more time to answer your questions. As before, we've included an appendix in this presentation, which shows the development of turnover for the second quarter. So let's start.

As you have seen, underlying sales grew by 5% in the first half year, driven by the emerging market growth, double digit, at 10.3%. Let me just say a few words though about developed markets, where sales were down by 1.6% in the first half year and by 1.3% in the second quarter.

There was an improvement in Europe from the first quarter to the second quarter. And we posted volume growth which was ahead of our markets. Ice Cream sales, as you would know, were slightly up in the second quarter, and that's despite the poor weather. And Spreads continued to decline, although less than in Q1. In the remainder of the business, sales were flat in markets that were down.

Turning to North America, performance was mixed. We have maintained share in total, and our Personal Care business specifically continues to do well. Our share in hair care remains well ahead, but sales in the second quarter were down as we lapped pipeline fill ahead of a major launch last year and with evidence of some trade destocking this year.

Now Paul has already referred to the actions we took to step away from volume in Ice Cream with low profitability SKUs, and that is something that we did in the second quarter. And in Spreads, we maintained share, but margarines have been losing out to butter for the same reasons as in Europe. Paul will return to this later.

Weaker exchange rates, particularly in Brazil, India, South Africa, Argentina and Indonesia, had an adverse effect on turnover of around 3.2%. And during the second quarter a number of these currencies, as well as others, slipped even further.

Today if the rates were to stay where they are for the rest of the year, we would expect the drag on turnover to be closer to 4.5% for the full year.

The impact of M&A in the half was a negative 1.1%, and this is principally from the disposals of Skippy and Frozen Foods in the US. And, as a result, our turnover increased by 0.4% only.

Gross margin, an area that we focused a lot on, was up 120 basis points in the first half of the year. The margin improvement is being driven both by cost-efficiency programs and the benefit from maxing the mix, which Paul spoke about earlier and we discussed a lot with you at the Deutsche conference.

Commodity costs were higher, largely as a result of the weaker currencies which affect the prices we pay in local markets. We continue to expect low to mid-single-digit inflation for the year as a whole.

Advertising and promotions increased by 40 basis points. Overheads were 40 basis points higher against a low prior year comparator, which included the profits on a land sale in India, which we talked about this period last year. And so core operating margin was up 40 basis points.

It is no coincidence that Home Care and Refreshments, the two categories where we have been rolling out the low-cost business models approach, showed the greatest improvement in operating margin. This program goes well beyond our traditional savings activities, which have tended to focus on incremental opportunities within product and supply chain costs.

Instead the low-cost business model teams looked at the whole value chain, end to end, in a holistic way; from the way we sell, promote and advertise our products, to the way we distribute them and all the way back through factories to the sourcing of the materials.

In Laundry we've applied this technique to about one-half of our turnover so far in terms of identifying opportunities. And we have translated around one-half of the potential in those countries into realized savings in the P&L to date. So around one-half.

Very encouragingly in the first wave of the roll out, where we're already into the stage of tracking delivery, we are seeing improvements in margins well above the rest of the business. So the opportunity to improve profitability in this category is clear. At the same time, we do see rising competitive intensity here. And we will reinvest savings as needed.

As you also know, we have a parallel program in Ice Cream which is also delivering good results, and we are in the early stages of testing the approach beyond that.

Turning to free cash flow, this was at EUR1.3 billion, which is EUR200 million lower than in the first half of last year, but EUR0.5 billion up on the year before that. Now, these swings reflect differences in the mid-year working capital position.

When we look at working capital what is more important than the position at a single point of time is to look at the average over the period. And that shows that our position, already very negative in terms of working capital and working capital days, has continued to improve.

Capital expenditure was at EUR0.6 billion, with a number of important projects being realized in the second half of the year. And that is the reason why we still expect the full year to be in line with our guidance of 4% to 4.5% of Group turnover.

Turning to core earnings per share, our core EPS increased by 3.6% to EUR0.76. You will remember that we are now reporting under the revised IAS 19 for pensions, with the back year restated to that standard.

The earnings from underlying sales growth and operating margin improvement were partly offset by exchange rate movements, and slightly higher interest rates. At constant exchange rates, EPS increased by 7%.

Turning to the balance sheet, adjusted net debt at the mid year was EUR9.9 billion; up EUR2.5 billion on the year-end position. This includes the adjustment for the final amount actually paid for HUL shares following the closure of the voluntary offer. As the offer was still open on June 30, the published mid-year balance sheet shows the full potential liability.

The net pensions deficit reduced by EUR0.9 billion to EUR2.4 billion. This is on a like-for-like IAS 19 basis. The reduction here, a very important reduction, reflects the cash contributions made, returns on investments, and the impact of higher interest rates used to discount liabilities.

The cash expenditure on pensions for the year is still expected to be around EUR900 million, and some EUR400 million of that was spent in the first half of this year.

And, lastly, the quarterly dividend is unchanged at EUR0.269, following Q1's increase at 10.7%.

Finally, let me confirm the position on the transactions in South Asia. The voluntary open offer for Hindustan Unilever shares closed on July 4 and completed on July 18. We have acquired just shy of 15%, 14.8% to be exact, of the outstanding shares, which takes our shareholding up to 67.3%. The investment has been a total of EUR2.5 billion.

In Pakistan we have so far acquired over 20% of the outstanding shares, taking our shareholding above 97% through an investment of around EUR350 million.

With these investments we have increased our share of earnings that comes from these attractive markets. And, with that, let me pass back to Paul.

Thank you, Jean-Marc, and I think from all that you've heard you can conclude that we've come a long way.

Step by step, we've put our competitiveness back as we've put in place again the building blocks for sustainable, and now also profitable, growth. And you've seen again many proof points in the numbers we have shared with you this morning. But not only that, the resilience and consistency that we have built has enabled us to compete well in what has proved to be again an increasingly demanding environment.

This has been the fit-to-compete part that you've heard us talk about so often, and the first-half results show encouraging signs that we are becoming fit to win. But I believe the external environment will again get tougher and we have to set the bar, once more, higher to continue to outperform the market.

No doubt that competitors have been restructuring at an accelerated pace, and some have translated that again in significantly increased promotional activity.

And we also see changes on the competitive front, be it through changes in the ownership of global players or the rise of new local and regional competitors in emerging markets. They're setting new benchmarks as well.

And, finally, the economic background will remain challenging for the foreseeable future.

This means that we have to raise our game once more to the next level. We're well placed to respond to these challenges and we'll talk much more about this at our investor event in December. But there are three areas that are already clear to me where we have to up the game.

The first one is to continue to step up our pace of innovations, and I would always say that. The second one is the need to rebase once more our costs. And the third one is the need to continue to push for this improved performance on Food. Now let me say a little bit on each of those.

In the first year or two of the journey to transform Unilever, better-in-market execution was probably the most important factor behind the improvement that we made.

In my view, that has now been complemented by the innovation pace which has become bigger, brought faster to the market and spread out across more markets faster. And let me reassure you that our innovation pipeline has never been as robust as it is now.

At the start of this year we've made further changes to bring the R&D organization more into the specific category teams. This will ensure that going forward we have full alignment of the research programs to the category strategies, sharper choices in the allocation of resources and greater speed by bringing marketing and development closer together.

Our partner-to-win efforts with our key suppliers are now also starting to pay off with better innovations from these suppliers starting to hit the market as well. And we were pleased to see that for the main pool of suppliers we were voted the preferred partner, and that is obviously very reassuring for future innovations.

We have already gone a long way in the quest for bigger, better innovations and rolled out faster. We're reaching more countries than ever before, have reduced the elapsed time between launching in the first market and the last and, as a result, see a significant step up on the incremental turnover behind these innovations.

Now let me just give you one or two examples in each of our categories to make that come alive. Start with Personal Care.

You can actually see here the new Dove repair expertise range of hair care products and if you haven't tried that yet I encourage you to do that. It's probably the best product that is on the market.

The shampoo includes a new smoothing system with a triple action to give a smooth coating, superior alignment of wavy hair and protection of the most damaging parts of hair at the tips. The conditioners use a proprietary micro [sheet] technology, offering a better feel when wet and superior hair detangling. And the range includes actually three new post-wash variants with unique benefits.

We have already launched in 12 countries in just two months' time.

Now in Home Care we have just launched this new concentrated liquid detergent in the UK; probably again the best that is available. This very innovative packaging comes with a built-in stain eraser ball making pre-treatment and dosing easier. And the formulation has been improved to give the best ever stain removal.

In Foods, the Knorr jelly bouillons continue to show their relevance in the wider range of kitchen environments as this great innovation travels around the world.

Most recently we've used the same technology to launch our range of jelly meal-makers, in this case we started in Russia, which will help in the preparation of local dishes. And the latest baking bag flavors in Latin America are another good example of global innovations made locally relevant.

Meanwhile, we have strong campaigns supporting these new taste propositions. We've launched liquid margarines and we've enhanced the rollout of the naturalness of spreads. These initiatives are lending most of them in the second half of this year.

In Refreshments, Magnum has had another exciting set of innovations this year from 5 Kisses to Pinks and Black and obviously the rollout of our pleasure stores. There is clearly no end to the creativity of this brand.

And, finally, the new Lipton Yellow Label teas, with patented tea essence technology that captures the full aroma, has boosted growth to double-digit levels in the markets where it actually already has been launched.

So some good examples of what we're doing already, but I will be the first one to say that there is still a lot of room to make even more of our innovations; make them more relevant to more people in more markets. In other words, even bigger and better.

Now let me turn to costs. In an increasingly competitive world we need to continually review the competitiveness of our cost base and this needs to be done with rigor and discipline.

Our ongoing savings program must continue to deliver and be pushed even harder. Jean-Marc has told you about the good progress we are making with the low-cost business model approach in Laundry and Ice Cream. That has some way to go still and we are already starting to test its relevance in other categories as well.

Beyond this, we are determined to continuously drive out costs, which consumers increasingly are not willing or able to pay for. This means driving beyond today's levels of overheads and finding greater levels of productivity in all areas of spend. We can also, as an organization, be faster and more agile.

The key enabler to both is to simplify and streamline our business processes and to reduce complexity further. This is feedback we continuously get from our people as well.

We've made progress, but deeper in the organization there is still too much getting in the way of clear accountability and fast decision making. We are determined to fix this and will speak more again about this when we meet in December.

We've recently announced as a first step that we are bringing together our enterprise services and IT organizations under our new head, Mark Smith, reporting into Jean-Marc. This will help us to leverage the scale now across both areas and to open up opportunities for productivity gains that were not so apparent before when they were managed separately.

And what we can do more to extend our global procurement capabilities in areas beyond materials and production we're going after as well.

We think we can do all of this without the need for major restructuring by maintaining the discipline you are now used to from Unilever. And we are mindful of building this way better shareholder value than spending enormous amounts of restructuring money again at your expense. But we must remain acutely focused on cost efficiency.

I've said before that it is important that Foods and Refreshments grow faster.

In Refreshments I'm pleased to see the underlying improvements now coming through. The turnaround plan in Tea is showing results behind the move to the more premium variants and the renewed support. In Ice Cream the focus on return of assets is already bringing improved margins and sharper capital choices.

For Foods it is likely to be perhaps 12 months later than I frankly would have liked to see. Our Foods portfolio is, however, stronger than it was. The footprint is more skewed towards emerging markets now and we have disposed of many of our businesses around the peripheries where, as a result, our sales are now concentrated on fewer bigger brands.

For example, the emerging markets are now close to 40% of our sales; up from just 20% not so long ago. And nearly two-thirds of our turnover is now in our EUR4 billion Food brands as a result of this aggressive divestiture of these non-strategic assets. These are brands with strong equities and broad relevance.

It's also probably now the most focused food portfolio of its kind with leading positions globally. That, I believe, is particularly important when it comes to leveraging the R&D to bring our innovations to market across the countries and regions.

Now in Spreads we know what to do, but it's also fair to say that I am as frustrated as you are in the progress we've made here and part of these challenges frankly have been self-inflicted.

It is about staying price competitive. It is about getting the right taste. And it is about the perceived naturalness of our products. That is the way to unlock the growth in this category and that is also the way that the growth is merited in this category as the healthy alternative to butter.

It will take time, but we have the technology, marketing skills, scale and now also the organization to deliver.

So, with that, let me wrap up. Our priorities for 2013 remain unchanged. These are volume growth ahead of our market, steady and sustainable improvement in core operating margin and, yes, strong cash flow.

We live in an uncertain world but we remain focused on growing both top and bottom line. I hope that the results once more we've shared with you today show that we really now can walk and chew gum at the same time.

With that, ladies and gentlemen, let me now open the line for questions.

(Operator Instructions). Please, please keep the questions to a maximum of two. I can see there's quite a few callers already on the line so that's really good if you can do that. And please just announce who you are and where you're from before you ask the question. Harold Thompson, Deutsche Bank.

I've just got two questions. The first one clearly on gross margins, very impressive, up 120 basis points and I think, Jean-Marc, you said that the work on maxing the mix has contributed to that performance.

Without wanting to get carried away, how much has this maxing the mix contributed to that 120 basis points? And, therefore, how should we think about the potential for that program to help Unilever going forward?

The second one is more a pricing question. 2% pricing in the quarter, it keeps coming down. I guess the pass-through effect would mean we'd get close to 0% by year end. What can you tell us on how pricing stroke, I guess, input inflation will look like in the second half? Thank you very much.

I'll get into the gross margin for one second and I'll ask Jean-Marc to do the pricing part of this.

On the gross margins I appreciate that maxing the mix is obviously a key driver when you do 120 basis points, which so far seems to be ahead of other reported results.

I also like to remind you, and you probably are the first one to know that, Harold, that we already started our journey of gross margin improvement over the second semester of last year, so there seems to be more consistency coming in.

As you see, the delta of these improvements between Ice Cream and Laundry where we focused on and the rest of our business. It is also fair to say that Personal Care and Foods are actually increasing its gross margin as well and they have not really been benefiting yet from this expansion of these low-cost business models.

So if you see 170 basis points, at least 100 basis points to 120 basis points is low-cost business models, but the rest is obviously the discipline of getting rid of your low profitable variants, the more profitable innovations. 75% of our innovations we now launch are margin accretive and these are efforts that have been done across the board.

So we think it is well implemented now with discipline across all the categories, but we also think there's more juice to come.

On pricing I'll hand it over to Jean-Marc, but before that let me just simply point out that as you -- we've always said pricing will ease off a little bit, so that should not be a surprise to any of us. But I also hope that you have noticed that across the categories the volume component is actually picking up and that's the most important thing for us. So it's quality of gross that counts and I'll hand it over to Jean-Marc.

So just for the second half we don't expect any further price increases in either Europe or North America. And, if anything, it could be slightly negative.

I think that there will be pricing expected from the emerging markets, given the currency devaluation that we've talked about. So the UPG of the second half will probably be a little less than the first half. Just some color on the first half; UPG was at 2.3%, roll over was around 1.5%.

Excellent. Thank you very much.

Celine Pannuti.

I have my two questions, the first one on what you mentioned for the American loan. On one hand, you mentioned that Brazil was helped by the SAP rollout with volume in and, as well, you've seen a hit on US sales because of some destocking. Could you maybe give a bit of color on the magnitude of those?

I understand that maybe Latin America and Brazil the issue could be a quarterly effect, but I was wondering in Q -- in the US one of your competitors has mentioned a slowdown in the mass market in personal care, so whether that could be something that will be more ongoing in the coming quarters. That's my first question.

Second question, coming back on what you just said about all the positive on gross margin and maxing the mix, is there a way you could maybe help us to understand the balance of what you say top line investment in an environment that is competitive versus all those goodies that you're making on the cost side?

I remember at the full-year stage I did ask you if you were happy with 30 basis point consensus. You said, yes. Now your margin is up 40 basis points, shall we raise the bar there? Thank you.

Let me quickly write down because they are two good questions. If you first take the Americas -- again I just want to be clear here, we've always said a slowdown in these economies and you actually see that happening. You just have to look at the macroeconomic numbers on Brazil, as you mentioned, and you know what we are talking about.

Despite that, we have double-digit growth in Brazil, and Fernando Fernandez do very well. We've launched TRESemme, which is now the second biggest hair care brand. We see our Knorr brand behind the baking bags and the bouillons getting strong. We see Magnum growing behind the very focused plan on Ice Cream and doing well there, thank you very much.

And our Laundry business, I'd like to remind everybody, despite having to deal with competitors at 30% lower pricing or more, still have a 70% share and that's a share that you also found a few years back. So the competitive battles are won as well, so we know what to do.

And Latin America will always have its ups and downs in some of the countries, depending on the political situations or some of the other battles, but we are getting good returns and we continue to grow double digit there.

North America, we agree with you. We've always said again that North American market is basically flat. I've said that before. And I also think that the growth that you're there seeing is not very well spread. We need growth that touches everybody in the population. We like employment levels to go up. We like consumer confidence to go up across the population to do well.

Personal Care markets are broadly flat. Interestingly on Personal Care, under Kees Kruythoff's capable leadership, we have grown the shares in all categories. We are now the number 1 in hair care from number 3. We continue to grow share. We continue to grow share in deos, continue to grow share in skin cleansing. So the strategy that we've put in place, we're happy about.

At the same time, as you have seen us, that we have now nearly come to the end of streamlining our portfolio to make it more strategic, and in line with the overall Company because, frankly, we were a little bit all over the place. And these big investments are now out of the system.

The reason the volume is slightly down over the -- the USG is slightly down over the first half, is really because in the base we had the shipping launches for our hair care launches last year and one or two other things. We are less concerned about that but, having said that, we need to continue to set the bar high in the US and we have plans to continue to do that.

On gross margins, I'll bring it back to Jean-Marc to give another perspective on that so that you can hear it from him. But, indeed, behind these gross margin results it is fueled by innovations, as I've now pointed out, and you see increasingly the proof points of them from the discussions we're having and the examples we show you.

And, actually, we're one of the few companies that continue to significantly step up its investments in A&P as well, to put our word where it is. And then we see the effectiveness of these investments going up.

The reason I mentioned these Effie awards is not say, aren't we good, but it is really a recognition from the outside world what a change has happened in a Company like this, and the effectiveness of our spending is going up.

So let me just step out onto Jean-Marc for the second point.

It's not appropriate at this point in time just to comment on consensus, but what I would say is the fact that in the second half of the year, on the one hand there are prior year comparators, which are a little bit more difficult. On the other hand, we have to step up our discipline around overheads, and this is an environment where we need to continue to invest in our business, be it in terms of product, support for our brands and the like.

We have a good view, given our forwards, in terms of commodity impact which, as you know, are always between three to six months. And the work that we're trying to do on maxing the mix, again as Paul said, is structural.

So we're confident with the types of margin leverage that we're trying to achieve. But, most importantly, is to walk, chew and gum, is to grow and drive margin at the same time.

Thank you.

Jon Cox.

I keep coming back to some of the questions that have been asked before. In North America, the underlying sales growth appears to be negative 2% in Q2 if you strip our Q1. You seem to be saying there's some one-offs in there. You talk about the comparable. You talk about the phase out of Ice Cream. I wonder if you can quantify them at all.

Also you appear to be saying that that's the worst of it over, we should -- you should start to go positive in the second half of the year. Is that correct?

And then just on the second question, to come back to the commodities viewpoint, would you agree with the statement that in the first half you didn't get any benefits at all from what is generally an easier commodity environment, and you should start to see those improvements come through in the second half of the year and this will add to the 120 basis points improvement we're already seeing with maxing the mix and the low-cost business model and, as a result, the gross margin improvement for this year is going to be above that 120 basis points? Thank you.

We'll continue the tradition that I'll take the first one and Jean-Marc the second one on the commodities, if you don't mind.

If you look at America itself, I just want to reiterate again, we are actually growing share and about 56% is the exact number, I'm looking at a sheet here, of our business. So it is healthy. But the market has slowed down a little bit and there is some effect of phasing that is in there.

Looking forward, the US will be a slow growth market, in line with the economy. I don't want to deny that. But I think we are well placed. We don't see any surprises. And the actions we take, the investments we make in our industrial base or in our brands give me confidence that we will show that growth, and we don't get carried away by three months here.

But our Spreads and Dressings business is growing. We're just celebrating the Hellmann's 100th anniversary; we see good shares there. We have just launched the Lipton Cups. We were late, no doubt about that, but that's a big growing part of the market in beverages in the US.

We're just entering, as we talk, Vaseline that historically has been, frankly, a neglected brand in the US, if I may be strong and firm. We have just launched a spray-and-go variant which is doing extremely well and the brand is moving back. Our other PC business is growing.

So we are starting to work now in the normal sequence of doing everything step by step our Knorr business, and I'm convinced that that comes back as well.

On Ice Cream, we've been having a little softness and that's a big part of our US business. And, frankly, we've taken there the decision, with our maxing the mix, that we don't sell the unprofitable variants any more. We've actually pared down our portfolio in Ice Cream. And then, obviously, we've had the weather effects there, but we don't want to complain about that, since we can't do anything about it anyway.

So if I look at the US going forward, if I look at the plans that Kees Kruythoff is putting in place, I'm confident there that with the portfolio getting in line with the Company, with the innovation programs that we have, the actions we've taken, that we will be able to continue to perform well in what is, indeed, an increasingly competitive environment.

We're growing our hair care, while some of our competitors basically are giving the products away. Don't underestimate that. And you see the same in deos. So we are not in the maxing the mix philosophy, into buying brands, buying prior promotional activity or lowering prices. This is quality, what you get, and that can only be to the long-term benefit of our shareholders.

Let me have Jean-Marc go into detail a little bit on the commodity side.

Please do not extrapolate the gross margin of 120 basis points. Firstly, remember that gross margins were up 60 basis points in the second half of last year. So, again, this maxing the mix program has been going on for quite a time now, 12 to 18 months, and so you do have more difficult comparables in the second half of the year.

Lastly, we do expect commodity costs to be between low to mid-single digit. And, again, do not only look at the spot price. It's the impact of the P&L. Do not underestimate the impact of foreign exchange, as well as duties and the like. And that's the reason why we stick with low to mid-single digit.

So bottom line is, please don't get carried away with the gross margin, but the improvements are structural.

Thank you.

James Edwardes Jones.

Quick question on currencies. You referred, Jean-Marc, to the likelihood of emerging market price rise in the second half, given currency weakness. To what extent does the underlying weakness in emerging market economies moderate your desires to raise price in those markets?

Well, we've always had this question now, James, in all fairness, for the last five years that some people are continuing to be concerned on the emerging markets. We've been very transparently saying that these economies are slowing down. We've seen that in China and India and Brazil.

We deal with that by launching new brands. In Brazil, we just launched Cif and Domestos. We launched Dove in China less than 12 months ago. We're launching other variants in Indonesia, and the list goes on.

So we compensate for that by stepping up our innovation pace, by working our costs and able to deal with that.

There is no doubt, you just have to be realistic, there is no doubt that the weakening of these currencies over the last few months has been bigger and deeper than anybody has anticipated. If you look at the public opinion and the research that is publically available, that you get probably more of than we do, nobody had estimated that. So we have to deal with it.

The good thing is that having the strongest brands in these markets, that allows you to deal with that better than our competitors and find the right balance. So that is what we do, and that is what we get paid for. And, again, you see in the emerging markets a 10% growth.

I also want to remind you, James, that, on average, for all of the emerging markets, there is not one market, I'm looking at Jean-Marc, actually, but there's not one market where we have more than 8% of our turnover, no?

That's right.

So we are a very well diversified company in that respect, and the whole discussion now about emerging markets, which is 60% of the business, soon 80% of the population is becoming simplistic. The world is not any more emerging markets and D and D&E. In many of -- what we still have in these discussions, as emerging markets, they have become very developed and very robust, and we know how to deal with that, and that is what you see in these results again once more.

I understand. Just to push you slightly, though, Paul, does this -- the underlying weakness in a number of emerging market economies, does that make you less inclined to force through price increases, perhaps, than you have in the past?

No, we will look at that very gradually because there are many factors in there. There are competitive factors in there. There's relative brand strength in there. We look at that very granularly.

But the pricing that you see moving forward, there is no doubt in my mind that there will be pricing in the forecast, as we have the 5% [grossing speed] in this environment where we are right now. The 3% volume, 2% pricing is actually a very healthy mix. I don't think that will significantly change, if you don't get too excited about two months here, three months there.

And the main pricing will come from having to price for these weakened currencies, and that we will be able to do.

Thank you very much.

Jeremy Fialko.

Really got one question for you, which is on the SKU rationalization you're doing as part of maxing the mix.

Really I wanted to know whether you could give us some sort of indication on whether that did have any meaningful drag on your underlying sales growth in the period. And whether it's a process which you think has actually got quite a lot further to go and it's something we need to bear in mind, when thinking about your sales growth, over the coming quarters. Thanks.

What I believe is that that a company is fit to win when they have the and mentality, not the or mentality.

Often people say, well, if you bring down your inventories, your customer service goes down, or if ask your customers to pay quicker, they will order less from you. We've proven that to be wrong. Some people will say, if you want better products, it has to cost more. We've proven that to be wrong.

And some people will say, you need more SKUs to grow. I actually am in the camp that if you have less SKUs, you can grow better. If you have more SKUs, there are always some SKUs on life support, and you know the National Health Service is becoming pretty expensive.

So rationalizing these SKUs is actually helping us bring in more focus. Sure there might, in some cases, be a short-term effect in a quarter but, longer term, it gives you better brand, better equities.

Where we see the short-term effect of this SKU rationalization, because we're about 20% down in SKUs, but I think we have a lot more to go. But, for example, in the US, in Ice Cream, there is some take-home, big tub-type ice cream variants that were totally unprofitable for us, in our definition, and so we go out of that.

There we make first a decision to go out and it might take a little bit of time to migrate some of the consumers, but it's the right thing to do. And we have a few of those examples. But, broadly, it should result in a stronger focus, stronger brands and, ultimately, stronger growth in a tougher environment.

Could you just clarify? You talk about being 20% down in SKUs. Can you tell us across what businesses and over what time period?

This happens across every business. A company like ours has over 100,000 SKUs in the business because of the different countries, sizes, promotional activities, the innovation pace.

But, for example, in Europe we were relatively less developed, in my opinion, on leveraging the European menu of SKUs. So if every country cuts by 20% but you have better transferability of SKUs across Europe, you can actually give the countries more choice, although your total portfolio of SKUs is less. So you have to think about that smartly.

We see the SKU reductions --obviously Savory has a lot of it, because we've done a lot of it, because that's a more complex category, but also in the other areas, we've done that.

And part of that is coming from reducing our promotional activities as we strengthen our innovations and strengthen our brand equities.

So it's across the board and we want to give everybody credit for that, but, for the Unilever people that are listening in, I also would say we still have some way to go there. So, I hope that it's registered as well.

So, thanks for that Jeremy.

Thank you.

Iain Simpson.

Just a couple of quick questions from me, if I may. You talked about some inventory level change as a result of SAP changes in Latin America.

Could you just quantify the impact of that on organic growth, either in your Latin American business or at the Group level? That would be extremely helpful.

And then secondly, on Laundry, when you say that your lean program is 25% of the way there, presumably -- is that 25% in terms of time to implement? Or is it 25% in terms of savings to be achieved? That would very helpful. Thank you.

I'll hand it over to Jean-Marc for LatAm.

So if you were to just adjust to your question, Brazil would remain a double-digit growth business in the second quarter. Latin America would also remain a double-digit growth for the quarter.

And on Laundry, I would agree with you there. The rollout, we have done that by priority countries and even in the priority countries where we roll out we haven't fully implemented these programs, because sometimes some structural changes in our sourcing or in our go-to-market need to happen.

So when we talk about 25%, it is 25% of implementation potential across the world. A lot of the savings are still therefore to be had as well, but it's not about the same 25%.

Obviously, where we have implemented first is also where we got the biggest bang for the buck, because that is obviously responsible. So I think in the savings time we might be 40% on the way and we still have 60% to go.

I would be the first one to say, being responsible for Home Care, that that unit does an outstanding job defending itself against very aggressive promotion-oriented buy-in of some of our competitors trying to get into some of the countries.

The latest one is South Africa, where we see the same continuous irresponsible behavior in the sales [con], so we have to deal with that phenomena. We will always stay competitive.

But, at the same time now, I think we will have a focus on the mix and we will have a focus on low-cost business models that should guarantee continued margin expansion. And that is the most responsible way to run that business, and we're pleased about that one.

Thank you very much, gentlemen.

Javier Escalante.

I'm trying to get this gross margin question dead for once and for all and I guess one good way to do it to the extent possible would be if Jean-Marc, please, would break out the 120 basis point margin improvement between raw material inflation, or the lack of thereof makes, and the more structural part, which is the supply chain initiatives. Would that be possible?

And tell us how that we are supposed to be looking at in the second half.

In due respect, I appreciate your question, but we are not going that granularly, nor do we want gross margin discussions to be dead. We want gross margin discussions to be alive as well inside the Company and outside all the time, as we move it into the right direction.

And moving that into the right direction, in a company of this size and complexity, means delivering the numbers, but juggling many variables, and to go into that level of granularity is a little bit of chicken-and-egg discussion we don't want to do.

There's a clear mix that's coming through. There's a clear ongoing savings program going through. There's a clear innovation part coming through with margin accretive innovations. There is a clear part of letting go of unprofitable activities. All these things add up.

And then, obviously, you have to deal with the volatility of commodity prices that might or might not get reflected in your ability to price or not price.

So it's all -- we understand the dynamics of this, but we don't spend any time internally any more to break that down and do the work for someone else.

So don't let the gross margin discussions go dead; keep it alive as well. Hold us accountable of continuing to improve it, like we've now done for the second semester and like we're planning to do moving forward.

Well, keep it alive. But the second question that I have has to do with the desire to improve the Food business and some of the weakness had to do with margarine and the issue there seems to be structural.

And, yes, I understand that you are working on the R&D part, but do you think that you may need to correct pricing vis-a-vis butter, in order to stabilize volumes in margarine, both in the US and Europe? Thank you.

Outright answer is yes, not beating around the bush. In the US, we're actually growing share because we've actually done that.

In the results you see now, including the gross margin improvement as a Company, we have put prices back in the US at competitive levels.

We've been too lax too late, and we know that in that business that we are in if you're off pricing strategy, you're not even getting the right to play in the game. So we need to be far more disciplined there.

And, frankly, first of all, let me remind you that Spreads is about 7% of our total business, but we are as passionate about that as the other 93%. The US is growing again now and is growing share.

We have some good innovations coming up and we're taking that same approach now in Europe and we're willing to do that to get that business growing again, all with a very responsible mindset of ensuring that the total Unilever Company provides the top and bottom line progress and you will see that coming through.

On top of that, we obviously have stepped up our innovations. That takes a little bit of time as that gets through the whole value chain, but just let me remind you that, as of now, we have just introduced in the markets and Fruit d'Or, which is a very important event in France, as you know, the Naturellement bon, which is naturally good product, which is off to a great start.

The Bertolli has introduced new (inaudible) launches in the Benelux, as we talk, and the Goodness of Sunflower campaign, which is obviously a much healthier product than butter, is now hitting the UK.

We've also corrected the taste of Flora, where we, frankly, did not have the consumer-preferred taste.

So we have taken quite some drastic steps, quite fast in this business over the last six months that are now hitting the marketplace.

But, to come back to your question, pricing and staying [onside] on pricing is a must and we have been poorly managing the enormous cycle of up and down on commodity in this category. And I can only say, shame on us, but we are fixing that now, like we have fixed all the other things in the business that we're talking about.

And can I squeeze one more thing, is basically if you can help u -- I think that you mentioned that currency neutral EPS was up 7%. But at least from what I understand, based on consensus and based on my own model, below-the-line items were a drag in this first half relative to consensus estimates and my own estimates.

Do you mind telling us what would be your assessments of core operating profit growth on a currency neutral basis, please?

Let me just try and give some help below the line to you. I'm not going to comment on any of your expectations. First reiteration, just on our tax rate, it was at around 27% for the year; should be 26%. The reason why it's somewhat higher is because of the tax on disposals. So 26% is the right number for the year.

If you're looking at our interest expense, somewhat higher; return on cash is a little bit lower; cost of debt roughly the same, a couple of one-off items in the second quarter. As you're looking at the second half of the year, remember that net debt is that much higher as we begin the second half than where we were on the January 1.

So you need to take that into account, and I think we've had enough discussion on gross margin A&P and overheads for you to make the other calculations.

The actual impact of foreign exchange, like I told you, in terms of top line is around 4.5%. In terms of core EPS it's probably closer to 5%, 5% plus for the year.

Thank you.

We need to be crisp now because we're beginning to run out of time. Warren Ackerman on the line.

I've got two questions. The first one is, gross margin's up 120 basis points but operating margin up 40 basis points in the first half. Obviously, the operational leverage would have been a lot better if overheads were not up 40 bps.

And the question is, how much of the 40 bps related to the first half last year regarding the Indian property profits? I think it was 20 bps on the operating margin in H1 last year.

And then, Jean-Marc, should we expect the overheads to be back into positive territory in H2, especially given your comments regarding the enhanced plans on overhead that you talked about today? And where do you see that extra potential coming from?

And then the second one is I'm surprised we haven't had the emerging market question yet, so I guess I'm going to ask it. You've now delivered the ninth consecutive quarter of double-digit growth at a time when the concern would be that growth would slow, which is obviously a very, very strong performance.

Does that mean, Paul, that market share gains are accelerating in emerging markets? And, if so, where is that most evident despite your comment, I think you used the word, reinvigorated competition there? Thank you.

I just want to be very quick. On the indirects, these are, indeed, once-off items. Underlying indirects over the first half is flat. We expect the whole year to be down, so there's no question about that. And what you see there is the effects of some accrual in India. So there's nothing there to be worried about and we shouldn't spend more time on that.

On the emerging markets, we are growing shares; that's absolutely true. But we've always said that the main driver for growth, Warren, in the emerging markets is market development in our categories, which is well ahead of the economic development, and, at the same time, obviously we continue to have an aggressive launch plan.

We shared with you last time that we've launched in about 200 country brand combinations just in the last three years alone. That continues. This year there's another 40 or 50 being added to that, and that is also holding up.

If your question is can you maintain the 10% growth rate in emerging markets, my answer is no, and I've said that every call we've had. Now, does that mean we don't do it next time? We'll see, because there's a lot of factors that play there.

But it is unrealistic to expect continuous 10% growth in the base getting higher and the economy's getting tougher. But we are setting the bar higher in the Company to do deal with that, and hope to continue to move up our innovations, move up our competitive bite to compensate for that. So far we've been able to do that and I'm very pleased about that.

I think that the balance between Europe, US, if you put it that way, and the emerging markets will slightly rebalance again to keep the overall growth of the Company, but probably the emerging markets coming off a little bit of the 10% would be realistic to plan on. There's no problem for us there. It's just the dynamics of what we're facing.

But we're pleased with the 10% growth. Obviously in Home Care that's more than 10% growth and Personal Care is more than 10% growth, to get the overall 10% growth, and these are obviously fabulous growth rates because they happen in markets where the competitive intensity is as enormous as it is in this part of the world.

Sorry, just to clarify the question on the overheads, are you saying, sorry, was that 40 bps in H1? Are you saying, Paul, that it will be down for the year? Is that what you said?

Because of the exceptional item for India we have to -- if you take the exceptional item out it will be down for the year.

Okay. Thank you.

James Targett.

Just two from me. Firstly, just following on from the emerging market question, I'm just trying to reconcile the solid performance in the second quarter with perhaps a more cautious outlook statement. I just wondered, looking at the Asian and AMET region, if there were any particular countries or categories that you were concerned about more than any other.

And then secondly, just on the innovation pipeline. You said it was obviously very strong for the second half of the year. Is there anything we should think about in terms of launch costs or extra A&P spend which might affect the demand so that the gross margin falls through to the bottom line? Thank you.

In D&E you say a more cautious outlook. I would say this Company has always had the same words, the same outlook. We've always said it's getting tougher in the emerging markets. You all interpret that Unilever is going to do well. So that's for you to do. That's not for us to do.

But we will continue to manage the business on a tougher emerging market. We've proven that to be a very valid strategy and that is one of the reasons, I think, why we've been able to keep this growth rate, because we've adjusted our plans accordingly. So we will continue to be of the same mindset that the global economy is more likely to be a little bit tougher.

I think we've lost 1% growth, according to the OACD, in the global economy just over the last 12 months. So, that's the reality of it; that's nothing to do with Unilever. And then we have to figure out what to do.

Let me just remind you that we have been in the emerging markets for quite a long time; over 100 years in many of these places. If I take the last 25 years, our average growth rate in the emerging markets has been 9%, and there have been ups and downs a little bit in that one, but it has been 9%. And I think, moving forward, that potential is there.

If you don't get too excited of three or six months and make your life depend on that, you have a Company that is very well positioned to continue to capitalize on that. And, frankly, if it's 9% or 8%, it's the quality that we are now putting in there, including the profitability as you'll have noticed, I think you should be very pleased from a shareholder perspective.

What we are focused on is, obviously, have that growth be diversified; as I said, not one country more than 8%. We are now truly unlike our competitive base in all countries with strong businesses.

We've now established our Chinese business, well over EUR2 billion. Our Russian business has now critical mass, doubled every five years for the last 10 years, so we have now a very, very good business with a few white spaces that obviously we are addressing. Our innovations are getting better, our new brand launches are more robust and our go-to-market capabilities are better.

If you take India, for example, we've added 1 million stores. It's hard to believe. This is a country we've been in from 1888 where we established our operations in 1903 and then the Indian organization under (inaudible) leadership comes back and says, hey what, we can set the bar higher. We can find another 1 million stores. We've added 20,000 Shakti [ladies]. So it is the perfect store program now in 6 million stores well ahead of target.

So a lot of people in this system are working very hard that when the going gets tougher in these markets that's really where you see the robustness of this organization and the tough get going. And I'm very pleased to see how we respond to that.

On the innovations and A&P in the second half once more, I've always said, and you know I have some credibility, that A&P in Unilever, at least under my watch, is not a turn on and turn off the tap. Every year when we can we will manage also the growth, the core operating margin expansion by being sure that the first priority is to protect our brands. That's what you pay for.

When you buy into a Company like this, you buy into goodwill and brand equity that we create on our own books by making our brand stronger and that can only come by being sure that the quality A&P is there.

I'm very pleased that the first half again has over EUR200 million in A&P. And I will be very pleased, no doubt, that the second half will also have an increase in A&P. And if that would not happen we now have the system in Unilever of full transparency and, by the way, also the system of discipline to deal with that.

We cannot just have Company assets that have to live for the long term, be dependent on one person or another by turning on and turning off the tap. That's like playing with fire. That's the essence of this Company. So I'm passionate about that.

On top of that on the key leadership and the global media setup that we now have, we really are bringing in the capabilities. This creating brands for life has really translated into Unilever becoming again the marketing company by excellence.

I was very pleased to see we are now the second most looked up company in LinkedIn, but I am very pleased to see that we are the preferred company globally for marketing people. That gives me reassurance because I think we had forgotten that we, as Unilever, first and foremost should be a marketing company about brands and not about restructuring.

So all that is coming back, but all that needs to be supported with A&P. All that we will continue to do, and don't worry about that. And write this down so that six months from now your first question confirms that, then we would be very pleased because we really continue to say what we do and do what we say.

We said we would get the growth back. We got the growth back. We said we need to first get that in the emerging markets healthy. We do that with PC. We say we need to get the HC business profitable. You see the first signs on that, the Home Care business. And then we say we need to fix Tea. I'm dissatisfied about that. I think you're starting to see the signs on beverages.

Now we say the Food business needs to grow. This is actually the second quarter, if someone peals the numbers you will see the Food business is going up as the first quarter.

And now we see we have an issue with Spreads. I'll be the first one that takes that responsibility. I have not delivered on Spreads. I am ultimately the responsible person. But I feel now that we are on the right track to do this. We've changed the team. We have a good strategy. So I hope I can report better numbers on Spreads otherwise I lose my own creditability.

But it will be in a tougher market, so the overall numbers I think will more or less stay the same and that is a good performance for now if you buy into the long term.

So that's where we are, tough as it may be. The good thing is we all have holidays. I hope you are enjoying them as well. If there is one group that needs to take a few weeks off it's you guys because you've been extremely supportive of our Company and we appreciate obviously the continued interest.

As I said, this transformation is fully on track. We're growing the top line competitively. Our gross margins are now also improving consistently and we are able to invest in the business for continued growth.

But we are not stupid, the competitive environment is getting tougher. The economic environment is getting tougher. New competitors are entering. We need to set the bar higher.

The past performance, our strategy up to date, only got us this far and we now have to raise the bar and again once more talk to you about what the next steps are in this transformation of Unilever. And that is the sharpened and renewed strategy that we will obviously talk to you in December and that is what we are working on and discussing with the Board.

I certainly look forward to seeing you there but, more importantly, I would be very pleased if you have a wonderful time with your family, recharge the batteries and see you all back in a few months' time. Thank you very much.

This conference has been recorded. Details of the replay number and access codes can be found on Unilever's website. An audio webcast will also be available on Unilever's website www.unilever.com and on the investor relations app.