Unilever PLC

Good morning and welcome to Unilever's third quarter trading update. As at H1 we are presenting our results to you from our respective homes so please bear with us if things are not as smooth as we'd hope. I know it's a busy results day for many of you so we'll aim to keep the prepared remarks for around 30 minutes and have Q&A at the end. Alan will give an overview of the business and performance before passing to Graham to cover our divisions and regions in more detail. Alan will then wrap up with some concluding remarks. All of today's webcast is available live, transcribed on the screen as part of our accessibility program. First, I draw your attention to the disclaimer to forward-looking statements and non-GAAP measures. And with that, let me hand over to Alan.

Well, thanks, Richard, and good morning, everyone. Overall growth in the quarter, as you will have read, was 4.4%, 3.9% from volume, and 0.5% from price. Consider this to be a strong performance. Our portfolio's resilience, our ability to respond with speed and agility to rapidly changing consumer behavior and country and channel dynamics has served us well. The emerging markets grew 5.3% as China recovered, and India and Brazil both returned to growth. Our developed markets grew by 3.1%, and that was led by ongoing strength in North America. Now, Graham will explain more about the individual country and regional performances. That will give you more insight, and it's more reflective of how we run the business than these developed and emerging market aggregates. Year to date, our underlying sales growth is now 1.4%. This headline growth figure obviously masks huge volatility across our categories, channels, and geographies. And as we look to the coming quarters, we think that the operating environment will remain unpredictable. And in truth, I continue to be perplexed by talk of a quick recovery. Public health stats in most countries are getting worse, not better. The start of October saw the highest number of new cases reported in a single week, over 2 million, with notable increases in Africa and Europe, and with Argentina and other parts of South and Central America still experiencing very high numbers of cases. Those of you in the UK and parts of Europe will currently be witnessing the reintroduction of lockdown. So we hope for the best, but we're certainly not relying on it. The resilience of our portfolio, the agility of our business and the speed with which we take action, excuse me, will continue to be key. Our focus remains volume-led competitive growth and delivering absolute underlying profit and free cash flow. We've seen and responded to these continuing changing dynamics across categories, channels, and geographies. The shift to online continues to accelerate, and e-commerce represents 9% of our business in the year to date, 10% in the quarter, and that's up from 6% in 2009. E-commerce sales grew 76% in quarter three, and that includes the headwind from food service e-commerce. I won't go through all the shifts we're seeing as they're very much in line with what we shared at the half year. However, I do want to say as a context for everything else that we talk about, that we remain very, very focused on driving operational excellence through the five growth fundamentals that you see here in which we set out at the start of the year. Over 50% of our business is winning value market share, but this is not yet where we want it to be. Our goal is 60% of our business winning share. And as we explained with our first half results, we're ruthlessly focused on these five drivers of competitive growth, and that includes stepping up BMI investment where required. At the same time, we have continued to drive our strategic change agenda, taking action to strengthen Unilever's business for the longer term. In this quarter, our proposal to simplify our dual-headed legal structure have received very strong support from both NV and PLC shareholders, with over 99% of both sets of shareholders voting in favour of unification. The GroenLinks Private Members' Bill, which I'm sure you have all heard about, was finally tabled in the Dutch Parliament, a bill which, if it were enacted, would seek to impose an exit tax on companies leaving the Netherlands under certain circumstances. The table bill contains a number of amendments to the previous proposals, which we've been reviewing carefully. Despite the amendments that have been made, we've received legal advice that if the bill were enacted in its current form with retroactive effect and applied to unification, it should infringe EU laws, the Dutch UK tax treaty and other tax treaties with states in which Unilever shareholders reside. It's not clear when or if indeed at all the bill will be enacted, nor in what form. As we have previously stated, the Board's intent to proceed with their proposals, provided that unification in the Board's view remains in the best interests of Unilever, its shareholders and other stakeholders as a whole. And the Board will continue to update shareholders as appropriate. Sustainability is not surprisingly being embedded into every part of the business, and you can see it reflected much more directly in our divisional category and brand agendas. In September, we launched our clean future strategy in home care, which aims to eliminate fossil fuel derived carbon from our cleaning products by 2030, replacing that carbon with renewable or recycled sources. We intend not only to transform our own business, but in this case to help shift the whole industry. And this commitment came just on top of our ambitious proposals to help fight climate and nature change and protect and regenerate nature, which we announced in June. And of course, as part of reshaping our portfolio, we continue to work to implement the separation of our tea business, a process that's expected to conclude by the end of 2021. And with that, let me hand over to Graham to cover our performance in more detail. Graham.

Thanks, Alan, and good morning, everyone. On this chart, we've again broken down our portfolio performance to show how the pandemic has impacted consumer behaviors and the channel dynamics across our markets. The category groupings on this slide are the same as we first presented at our half-year results and are a pretty good way of understanding our performance. The Q3 growth rates demonstrate the huge variations in demand that have continued during this quarter, albeit at less extreme levels than those that we experienced during Q2. Consumer demand remained elevated for hand and home hygiene products to combat the spread of COVID-19, and we were able to drive strong growth of 19% in our hygiene portfolio, which comprises our skin cleansing and home cleaning businesses. Our in-home food and refreshment business grew by 12% as we tapped into the opportunity presented by the continued shift to eating at home. Conversely, lockdowns and related channel closures continue to negatively impact our food service and out of home ice cream businesses, but at lower levels compared to the second quarter. Together, these businesses declined by 16% in the quarter. Within beauty and personal care, Skin cleansing grew by 20% as demand for hand hygiene products such as liquid hand wash and hand sanitizers remained high. We've responded by launching hand sanitizers in 65 new markets since March. And while we believe that heightened hygiene concerns will continue, we shouldn't expect a repeat of the exponential growth in hand sanitizers that we saw in the second quarter. Lifebuoy, which is a brand now in 55 countries, is growing share in 93% of its markets, and as of September, became our latest 1 billion euro brand in Unilever. Lifebuoy delivered growth of 67% in the year to date, and has a compound annual growth rate of around 13% across the last decade. At the end of this quarter, we launched the first ever hand sanitizer from Dove. This product is clinically proven to moisturize skin for up to eight hours while being 99.99% effective against both virus and bacteria. Now this is an innovation that took six months from concept to launch and solved a really big technical challenge of how to keep the alcohol and moisturizing care ingredients separated within the formula. Our patented microemulsion technology means that we're able to offer hygiene reassurance through a high alcohol content whilst at the same time providing moisturization to mitigate damage to the skin and improve skin condition. Our Prestige portfolio grew by 8% as we refilled the health and beauty channel, although footfall does remain somewhat subdued. The business has been pivoting to e-commerce, which continues to grow, but not enough overall to offset the impact of retail door closures. The rest of BPC continues to see lower consumer usage due to restricted living conditions and consequently fewer personal care occasions. Sales declined by 2%, which is an improvement compared to the second quarter, as many countries eased their lockdowns. Hair grew overall as a decline in the hairstyling segment was offset by growth in our wash and care products. Our in-home food and refreshment portfolio grew by 12% as in-home eating occasions continued at elevated levels. And we tapped into this trend through our Knorr at-home toolkits and Hellmann's Stay Inspired and Staycation messaging to drive incremental penetration and sales. We have been actively shaping our portfolio, our innovation and our brands behind these growth opportunities, shifting the portfolio to tailwinds and boldly healthier choices to encourage diets with a more diverse range of vegetables. Examples of this are plant-based and meat replacements under the vegetarian butcher brand, which we've now launched in over 20 markets and Hellmann's Vegan Mayonnaise, which is now available in 30 markets. We continue to modernize our scratch cooking ranges and renovate the Knorr portfolio through healthier recipes and a new visual identity with the Knorr Promise, which means sustainable sourcing, 100% natural and 100% recyclable. This is a great example of closing the brand do versus brand say gap. Sales of ice cream grew by 3% in aggregate. That was driven by both volume and price. We've pivoted our portfolio to ensure that our out-of-home products are also available in in-home relevant formats, such as multi-packs. In-home ice cream grew by 16%, led by Ben & Jerry's and Magnum, which has more than offset the 13% decline in out-of-home ice cream sales. The food service channel remained either fully or partially closed in many of our markets, and food service sales declined by 21%. The sequentially improving trend has plateaued. Although China food service returned to growth in August following the lifting of restrictions on restaurants, the outlet open rate is not expected to recover to pre-COVID levels, given that some outlets have gone out of business. In Europe, whilst restaurants began to reopen during the quarter and sales benefited from consumers holidaying at home, the outlook has turned more negative since then, as many countries are closing restaurants again due to escalating infection rates. Turning to home care, our home and hygiene brands delivered underlying sales growth of 18% as consumer demand for household cleaners to combat the spread of COVID-19 continued, with germ killing and antibacterial benefits particularly sought after by consumers. Domestos continues to grow double digits, and we have now launched the brand in China, as well as extending the brand to bleach-braced spray and wipe formats. Laundry sales grew by 4%. Fabric solutions grew low single digits, although price declined as we passed through reduced commodity costs, particularly in our European and Southeast Asian markets. Fabric sensations grew low single digits as we launched new comfort fragrance boosters in China. These are jewel color beads with luxury inspired fragrances. In our biggest laundry market, which is Brazil, Omo Concentrate has been a growth driver and is a great example of our home care clean future strategy in action. This is a six times concentrated laundry liquid that can be easily diluted at home. Consumers are reassured with the value proposition as the pack is 20 to 30% cheaper than a standard three liter pack. And the six times concentrated formula is being rolled out across our brands in Latin America as part of recession proofing our portfolio. This is an example of how we crack the code of delivering superior performance alongside sustainability and consumer value. Now, before I cover our geographies, I would like to say a few words about how COVID-19 continues to influence the operating environment for our business. We've moved out of response mode and into a mode of living with COVID. In many markets, there is now a disconnect between the progress of the pandemic and the level of economic activity, given differing government responses with choices having to be made about whether to open up the economy to protect livelihoods for people on a daily wage or to lock down the economy to fight the virus and protect health. The different policy responses, which include emergency stimulus and consumer handouts, have impacted our performance in the quarter, for example, in Brazil and the United States. Although this is a top line trading update, we also thought it would be helpful to remind you about some of the levers of gross margin. As we explained in our half year results, COVID on costs and adverse mix have been having a negative impact on gross margin. We shared the second quarter figures with you in July and since then, currencies have devalued further in several markets and inflation has returned to some of our commodities. Let me turn now to the regions in a little bit more detail. In Asia Amit Rup, underlying sales grew 4.5% with 3.7% from volume and 0.7% from price as lockdown restrictions eased across much of the region compared to the first half of the year. China grew by double digits led by beauty and personal care categories and a return to growth in food service. After a strict lockdown earlier in the year, India saw a pickup in economic activity, even though cases of COVID-19 continued to increase. India grew by low single digits, driven by growth in food and refreshment, and in hygiene. Turkey grew with the easing of lockdown restrictions, and Indonesia declined by low single digits. In Southeast Asia, Thailand declined, reflecting reduced tourism and heightened promotional intensity, whilst Vietnam saw mid single digit growth. Turning to Latin America, Latin America grew by 6.5% with volume growth of 2.1% and positive pricing of 4.2%. After a negative second quarter impacted by COVID-19, Brazil grew by high single digits in the third quarter. Growth was led by food and refreshment, with demand being supported by government consumer subsidies. These are not expected to continue at the same level in Q4. In Argentina, growth was driven by home and personal care categories, including strong growth from our newly launched dilutable laundry liquid. And reported growth was also helped in Argentina by a soft comparator in the prior year. Underlying sales growth in North America was 9.1% with 8.6% from volume and 0.5% for price. Regional growth includes the negative impact of around 1.5% from our food service business, which was impacted, of course, by channel closures. In the USA, food and refreshment grew by 18%, excluding food service. Sales of food and refreshment for consumption in the home continued to be a big driver of growth alongside hand hygiene, although the latter is not expected to remain at the very high levels that we've seen over the last six months. Our green cleaning brand, Seventh Generation, and more recently acquired health and wellness brand, Oli, each contributed strong double digit underlying sales growth. In Europe, underlying sales declined 0.8% with positive volumes of 1.3% offset by a 2.1% decline from price. Price declines were driven by a step up in promotional intensity across the region as the depth and volume of promotions increased. In Italy and Spain, countries with big summer tourism seasons, out of home ice cream contributed to a double digit decline in both countries. The UK, in contrast, grew by mid-single digits as demand for in-home foods and hygiene products remained high. Our food service business in Europe continued to be challenged, albeit less than in Q2 as restaurants began to reopen during Q3. However, as I mentioned earlier, many countries across Europe are currently closing restaurants again. Turnover for the third quarter was 13 billion euros. That's a decline of 2.4% versus prior year, driven by currency. Underlying sales growth increased, as you know, by 4.4%. Acquisitions and disposals increased turnover by 1.3%, with acquisitions contributing 1.4%. Net currency-related items reduced turnover by 7.7%. Based on spot rates, we would expect a full-year negative currency translation impact of around 5% on turnover and around 6% on EPS in 2020. We will need to navigate through currency depreciation, rising commodity prices, and a wider landscape of pressure on consumer spending power going forwards. And with that, I'll hand back to Alan to wrap up.