Unilever PLC (NYSE:UL) Q1 2016 Earnings Conference Call - Final Transcript

Apr 14, 2016 • 08:00 am ET


Unilever PLC (NYSE:UL) Q1 2016 Earnings Conference Call - Final Transcript


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Graeme Pitkethly

Well, good morning everybody and a warm welcome to our First Quarter Trading Update. Thanks for joining us at a slightly later time than usual, we will back to 8 AM UK time from next quarter.

I will begin with the market context and a brief review of our growth performance. Andrew will then take us through the categories and the regions and I will conclude with an update on three big initiatives, net revenue management, new functional models which is the next stage in our organizational transformation, and zero-based budgeting. Before we go further let me draw your attention to the usual disclaimer regarding forward-looking statements and non-GAAP measures, so let's get going.

We've had a good start to the year with another quarter of consistent and competitive growth ahead of our markets. In January, we said that we were prepared for the business environment to become even more challenging and that has proved to be the case. In Europe, markets continue to decline with stable volumes but falling prices, while in North America growth in our categories has eased back to only around 1%. In Brazil and Argentina, market volumes are contracting as consumers struggle with rising unemployment and the high local inflation brought on by currency adjustment.

Falling real wages are also holding back demand in commodity-exporting countries like Russia, South Africa, and in the Gulf. The economies in China, India, and Southeast Asia are holding up better but even here growth in consumer demand remains relatively subdued against historic trained levels. Looking on aggregate and taking a broad global average, market volumes in our categories are flat and pricing is around historic norms. But within these aggregates, we continue to see some strongly diverging trends. Many consumers are up-trading to higher value items for at least part of the daily or weekly shop.

Well at the same time those consumers are looking to economies by down-trading for other purchases. In a number of countries especially in Latin America, there are strong price inflation while elsewhere[Phonetic] price growth is relatively low or as in Europe there is price deflation.

Now despite this very challenging market backdrop, it is clear that it is still possible to grow through a broad portfolio, sustained investments in brands, and locally relevant innovation. In fact, we are growing and winning share in all four of our categories. Our first-quarter underlying sales growth of 4.7% was towards the upper end of the 3% to 5% range we have guided to for the year. The pickup in growth versus last year, came mainly in volume which was up 2.6%. Price of 2% continued at around a level we had seen for the last couple of years albeit with differences by region which Andrew is going to come back to in a few minutes.

While underlying sales grew 4.7%, turnover was down 2% at EUR12.5 billion. M&A added 0.7% mainly through the acquisitions of the Prestige personal care brands. These are performing well. Currency translation reduced