Unilever PLC

Good morning, ladies and gentlemen. I will shortly be handing over to the Unilever team to begin the conference call. For those participating on the teleconference this morning, you may indicate your desire to ask a question at any time during the presentation by pressing star 2 on your telephone keypad. If you later wish to retract your question, please then press star 3. To ensure that all participants receive a high-quality audio experience, please call from a landline rather than a mobile and avoid using a speakerphone to ask your question. Instead, please use your telephone handset to minimise any background noise. If you do experience bad quality audio, then please try redialing. I am now delighted to hand over to Richard Williams at Unilever. Please begin your presentation.

Good morning and welcome to Unilever's half year results update. We expect prepared remarks to be around 30 minutes, followed by Q&A of around 30 minutes or a little longer. 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. Well, we've delivered a strong first half of the year. It's a result of our continued focus on operational excellence, which is behind our step up in competitiveness and the associated good financial performance. We've continued to progress our growth agenda by developing our portfolio into high growth spaces and by focusing on differentiated innovation and our purposeful brands. We're pleased This is translated into underlying sales growth of 5.4% in the first half with volume growth of 4% and price growth of 1.3%. In the second quarter, our underlying sales growth was 5%, 3.3% volume and 1.6% price. Our pricing is accelerating as we take action to offset the impact of rising cost inflation and it crossed the 2% level in June. At our quarter one trading statement, we said we expected a decline in underlying operating margin in the first half of the year. And we indeed saw that with a drop in underlying operating margin of 100 basis points to 18.8% as we lapped the period last year when we were conserving brand and marketing investment during the onset of COVID-19. We also confirmed with our quarter one trading statement that we expected to deliver slight improvement in underlying operating margin. Since then, over the last quarter, we've seen further significant cost inflation emerge. Cost volatility and the timing of landing price actions do create a higher than normal range of likely year-end margin outcomes. We're managing this dynamically and expect to maintain underlying operating margin for 2021 around flat. And Graham's going to give more background to that in a moment. Earnings per share in constant currency were up 4%, but the impact of translation to euros at current exchange rates means that the headline EPS was down 2%. We delivered a strong 2.4 billion of free cash flow and we're pleased that on an MAT basis, our key competitive measure of business winning share remains at a healthy 52%. We continue to be guided by our five strategic choices, which clearly set out our priorities for our portfolio development, how we win with our brands, our key markets and key channels of the future, and an organization leading with purpose and a growth culture. And all of that underpinned, of course, by operational excellence. We continue to make progress on our strategic change agenda. The acquisition of Paula's Choice is an important step in evolving our portfolio into higher growth segments. Paula's Choice is a perfect addition to our prestige portfolio. It's digitally led, it's a cruelty-free skincare brand with a strong presence in key growth markets like the US and has excellent potential for further international expansion. The brand has pioneered science-backed products and is a very strong direct consumer e-commerce business. The operational separation of our tea business is now substantially complete. We've created an attractive standalone business with dedicated leadership, and actually we're already starting to see signs of the benefit of focus. We're very pleased with the progress we've made on the complex separation. We've filled 3,500 vacancies around the world, and we're in the middle of moving nine tea factories across into the new business. We've established the sales organizations in our largest markets, with the systems implementation on track to complete over the next two months. We will start to engage externally very shortly to execute an outcome, and this could be through an IPO, through a sale, or through partnership. The exact timeline to conclusion will depend on which of these paths maximizes value creation for Unilever shareholders. Strategic portfolio changes delivering results. Prestige grew 27% with strong growth offline and online, and functional nutrition, which combines our VMS and health food drinks business, grew by 18%. Together, Prestige and functional nutrition contributed 50 basis points to Group USG in the first half. At Q1, we announced a share buyback of up to 3 billion, which reflected our strong free cash flow delivery and balance sheet position. the first tranche of 1.5 billion euros will be completed on or before August 27th. Right, turning to our categories, this slide which we introduced at the start of last year continues to be a very useful way of illustrating how consumer demand and sales have been changing through the pandemic. The operating environment overall has seen improvement but remains extremely volatile. COVID-related restrictions are still in place across many emerging and developed markets, and we expect that they will continue in line with the case numbers. So we can expect these channel dynamics and consumer behavior to continue to be impacted accordingly. We are still managing in COVID times. As already mentioned, prestige grew strongly, though it's worth noting that the comparator will start to get tougher in the third quarter. Hygiene and in-home eating, the categories that saw the biggest spike in demand a year ago, both declined in the quarter as we lapped very strong comparators in the prior year. While both saw a decline in Q2, demand remains above pre-pandemic levels as consumers follow enhanced hygiene routines and continue to enjoy increased cooking at home. We'll see more about that in a second. In the US, for example, 55% of Americans are saying that they're cooking more at home now and over 50% say they will continue to do so even in a post-COVID world. And the picture globally is that 47% of consumers are saying that they have changed their eating habits. Functional nutrition grew by 9% and has one quarter of Horlicks sales for quarter two within the reported USG numbers now that we've lapped completion of this transaction. Importantly, other personal care categories comprising DOs, hair, oral care and skin care grew double digit in the quarter. Now, while consumer usage occasions dropped sharply in the prior year, we have seen these occasions slowly return in some regions as social restrictions and workplaces reopen. But occasions and therefore aggregate demand globally still remains below normal levels. Our out-of-home business grew strongly against a weak comparator as restaurants and out-of-home ice cream locations reopened with lockdown restrictions easing. Consumption levels are still below pre-pandemic levels with many cities and locations around the world still missing the key tourist trade. Now, looking through the lens of our divisions, beauty and personal care grew 3.3% and a half with volume growth of 1.8%, price of 1.4. And as restrictions eased in some of our markets, this growth accelerated to 4.2% in the second quarter. Skin cleansing declined as we lapped the spike in demand from last year's household stocking. I think it's fair to say we're well past peak sanitizer, but sales remained overall above 2019 pre-pandemic levels. We continue to deploy our innovation capabilities on big initiatives on our big brands. A great example is how we further extended the Dove Care and Protect antibacterial range, which combines efficacy against germs with the unique care of Dove and is now available in over 50 countries. That's a good example of big innovation rolling out fast and at scale. Skincare here in oral as well as deodorants grew as some living restrictions were eased and usage occasions for consumers increased. Deos, which saw an 8% decline in the first quarter as social occasions were limited, grew double digit in the second quarter as we started lapping at the weaker comparator and levels of usage began to pick up again. But again, not all the way back to pre-pandemic levels. A highlight of the half was our launch of an inclusive deodorant under the Degree Rixona brand name in the US. It's designed for people living with visual and motor disabilities. And this innovation picked up several of a total of 24 Cannes Advertising Lion Awards for Unilever. This is the highest number of lions in the FMCG industry. I do think it's credit to some of the great marketing talent in our organization and the powerful purpose-led brands in our portfolio. But let's be clear, the reason I care about creative awards is that creativity is proven to tightly correlate with increased ROI on our advertising investment. Foods and Refreshment continued its strong growth trajectory with underlying sales growth of 8.1% and a half, 5.8% from volume, 2.1% from price. We're now lapping the higher demand base from the prior year. Our second largest brand in the company, Knorr, continues to develop propositions to offer high quality and healthy products for in-home cooking. After a successful launch in Brazil, we've rolled out our zero salt bouillon across Europe, tapping into this home cooking trend with healthier alternatives for consumers. And this directly links to our commitment that 85% of our global foods portfolio will help consumers reduce their salt intake to no more than five grams a day. This is part of our future food strategy, where we're helping people transition towards healthier diets, as well as reducing the environmental impact of the global food chain. Hellmann's grew double digit as it communicated its purpose to make taste, not waste, by using dressings for creative cooking that reduces food waste by using leftovers. Our vegan variants perform particularly well And in addition to encouraging consumers to reduce food waste at home, we have committed to halving our food waste in our direct global operations from factory to shelf as quickly as by 2025. Ice cream grew across both out-of-home and in-home, driven by China, Turkey, and India. Out-of-home grew against a weak comparator, with sales seeing double-digit growth despite the depressing impact I mean that in both senses of the word, of poor weather in much of Europe in April and May. Our collaboration with singer-songwriter Miley Cyrus delivered our highest ever brand engagement for Magnum with content around Miley in layers. It's been trending on YouTube and Twitter, and it does reflect the multi-layered nature of our delicious new Magnum Double Gold Caramel Billionaire. Our food solutions business continued to recover, led by China, where the number of restaurants we're serving is now 5% higher than it was pre-pandemic. The US is also showing an improving picture with restaurants back open, although the hospitality sector in Europe remains severely impacted with restrictions in place for most of the half. At a global level, restaurant demand overall remains below pre-COVID levels. And finally, home care grew 4.5% in the half volume-led. After negative price in the first quarter, pricing has accelerated through the half, driven by Latin America and Turkey. Home and hygiene declined as we lacked a surge in demand from the start of the pandemic, but growth remained strong over a two-year period, and our new surface cleaning range under the Domestis brand is performing very well. Laundry grew 6% with growth driven by China, where our comfort fragrance boosters innovation with dual-color beads and luxury inspired fragrances has performed well. We're also expanding our super premium brand called The Laundress into China and sales there now make up over a third of total brand sales with the US also growing double digit. We really do have a strong innovation pipeline in home care. It's rooted in our clean future agenda and the tough on stains but kinder to the planet relaunch of our Dirt is Good brand known as Omo in many markets or Purcell in the UK is performing well. Now our new businesses, Prestige and Functional Nutrition. Prestige continued its really strong growth trajectory with 27% USG in the half and our living proof launch in the curly hair space with products which offer three times stronger curls backed by proprietary technology is performing especially well. And as I mentioned, the Paula's Choice acquisition is a sign of our commitment to continue to build skill and capability in this attractive segment. Functional nutrition grew 18% and a half with strong growth, particularly from VMS. Some of our more recent acquisitions like Liquid IV and Smarty Pants haven't yet dropped into our reported USG numbers. because we haven't had them for more than a year, but they're growing well. If these brands were included, functional nutrition for light growth would be over 30% in the half. As already mentioned, prestige and functional nutrition contributed 50 basis points to Group USG. E-commerce. E-com grew 50% in the half. It now makes up 11% of total group turnover. And despite lapping last year's sharp increases in online shopping at the start of the pandemic, we do continue to see strong growth for Unilever ahead of the market. And we don't see this trend reversing as we exit the pandemic. With that, let me give my husky voice a break and hand over to Graham to cover the regions. Graham.