Unilever Management Discusses Q1 2012 Results - Earnings Call Transcript

Unilever (UL)

Q1 2012 Earnings Call

April 26, 2012 3:00 am ET

Executives

Raoul Jean-Marc Sidney Huet - Chief Financial Officer and Executive Director

James Allison -

Analysts

Celine AH Pannuti - JP Morgan Chase & Co, Research Division

Michael Steib - Morgan Stanley, Research Division

Harold Thompson - Deutsche Bank AG, Research Division

Marco Gulpers - ING Groep N.V., Research Division

Martin John Deboo - Investec Securities (UK), Research Division

David Hayes - Nomura Securities Co. Ltd., Research Division

Jeremy Fialko - Redburn Partners LLP, Research Division

Robert Waldschmidt - BofA Merrill Lynch, Research Division

Presentation

Raoul Jean-Marc Sidney Huet

Good morning, everybody, and welcome to Unilever's First Quarterly Presentation of 2012. For those of you who participated in the Unilever Sustainable Living Plan update earlier this week, thanks a lot for giving us 2 slots in your busy diary. I'll come back to the importance of our Sustainable Living Plan later in the call.

You will also have noticed the improvements and disclosure which we've implemented this quarter, very much in line with what we promised, and I hope that this is being helpful to you.

I will begin this morning by reviewing our overall performance in the first quarter and the category highlights. James will then review our geographical performance and report on the progress we have made in integrating our important acquisitions. I'll then conclude with some thoughts on the outlook for the year.

So let's get going. First of all, I draw your attention to the usual disclaimer relating to forward-looking statements and non-GAAP measures. Okay, good performance in a challenging environment.

Underlying sales growth was 8.4% in Q1, broad-based with a good balance between volume and price. Our sales are up or in developed and emerging markets, and we grew in all categories with positive volumes in each.

Strong performance in Personal Care and emerging markets, those were the key drivers behind our growth. So overall, a pleasing start, albeit against a weak prior year comparator in Europe and, as you all know, impacted by some positive one-offs which affected all competitors.

Turnover for the quarter was EUR 12.1 billion, that's up 11.9%. Volume growth contributed 3.5% and price at 4.7%, and that mainly reflects the carryover effect of price increases taken last year. In a period when pricing has been high, our positive volumes demonstrate the strength of our brands and the impact of our much improved innovation programs, although we have a long way to go.

Net acquisitions contributed 2.7%, and this reflects the consolidation of Alberto Culver which, as you know, we completed in May last year, and Concern Kalina, more recently, the leading local Russian Personal Care business that we acquired in December. FX was positive at 0.5%.

Emerging markets now accounts for 56% of our turnover in the first quarter. Underlying sales growth at 11.9% and healthy volume at around 5% plus, and this growth was widespread. Underlying sales growth in the so-called BRIC countries at 13%, but other markets importantly also played their part. Countries such as Indonesia, Vietnam and various markets in North Africa but also the Middle East.

As you know, we are well positioned in emerging markets. For well over the last 20 years, our volume growth has averaged around 5%, and we've delivered in good as well as bad times. In the last 4 quarters, our underlying sales growth has been in double digit on territory. Our Q1 results, we believe, are just another data point that suggests that emerging markets will drive Unilever's growth for many years to come.

However, as much as we are confident about our ability to outperform markets, there are many indicators that suggest that the global macroeconomic environment will remain very difficult.

While the growth prospects for consumer demand remain healthy in emerging markets, the fundamentals in developed markets continue to be weak. Consumer sentiment in Europe continues to suffer, and this has been going on for a while. Disposable incomes are being squeezed and households are reigning in their budgets, spending less and making whatever they have go farther. In the U.S., where economic indicators perhaps are more mixed, we still see 45 million people claiming benefits via food stamps.

Despite these challenging market conditions, which we expect will continue, we are in a good position as Unilever. Our brands cater for the everyday needs of billions of consumers. We have iconic brands that consumers trust, and that offer outstanding value for money with great innovations. This is why we are confident that we will continue over time to outperform our markets.

Now let me talk through some of the highlights of our category performance. Personal Care momentum continues. Again, we performed ahead of the market, with underlying sales growth in the quarter of over 10%, 6% coming from volume. Our hair care business continues to do well as the overall portfolio is really starting to work. For example, Dove Damage Repair and Clear have standout performance, but they've also been complemented by the rollout of Axe Hair in Europe. We've also launched TRESemmé in Brazil, where now our overall hair care market share is growing. But this is a highly competitive category. In parts of the world where competitors are under pressure, we still see this at times translated into price.

We also had great results in Skin Cleansing, where Dove again grew strongly, benefiting from the continued success of Dove Nutrium shower gels and the rollout of Dove Men+Care, which is now in more than 40 markets. It's an example of bigger, better, faster innovations. But we also had Lux and Lifebuoy also contributing strongly.

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