Unilever PLC

Good morning and welcome to Unilever's first quarter 2024 trading statement. We expect prepared remarks to be around 20 minutes, followed by Q&A for around 30 minutes. And all of today's webcast is available live transcribed on the screen. In a moment, I will hand over to Fernando to take you through the details of the first quarter results. And after that, we will take your questions. Now, first, let me set out some of the highlights of the quarter as I see them. On the results themselves, we delivered underlying sales growth of 4.4%, with volume growth increasing to 2.2%. This growth was led by our power brands, up 6.1% in the quarter, with volumes up 3.8%, with growth across all five business groups. It is only the first quarter of the year, but with these results we do see signs of improved momentum that supports our full year guidance. At the same time, we have used the quarter to progress our growth action plan. We've also announced some important changes to the portfolio and we launched a major productivity drive. Let me take these briefly in turn now, starting with the growth action plan, or as we call it here, the GAP. As a reminder, this is a plan with three elements intended to deliver faster growth, a more focused and productive way of operating and a sharper performance edge. And all this with the goal of ensuring that in everything we do Unilever is simpler, better and more impactful. Now first on faster growth. It starts with our power brands. The enhanced focus here is to ensure a stronger execution of the core gap plans as a means to deliver faster growth including through category expansion. And the measures we are putting in place to achieve this will inevitably take time, but they are on track. On unmissable brand superiority, for example, insights gained from pilots covering nearly a third of our turnover are being used to complete granular brand assessments. This will be extended to cover 50% of turnover by the end of May. And based on these assessments, targeted action plans are already being developed and will be in place across all the power brands in the second half of the year. And on innovation, having identified the key platforms, we are now focused both on brilliant in-year execution of the big initiatives and on building the multi-year pipeline that we expect to deliver the step up in incremental turnover that we are seeking. Again, this will take time, but we are already seeing good examples of the bigger, more impactful innovations and approaches that we would like to replicate. Some examples, Vaseline Glutahyla going from strength to strength with its new variants and rollout to new markets supporting Vaseline's double-digit growth in the quarter. Liquid IV, which is being extended into sugar-free and has recently been launched in Canada and here in the UK. Nutrafol's entry into skincare, tapping into our R&D expertise. And the launch of Persil's 15-minute wonder wash, which we expect to create a new segment in the market by tapping into changing laundry habits. Of course, the continued success of Hellmann's plant-based offerings and Magnum's Pleasure Express range. Some of these we have discussed with you before, but that is the whole point. We want innovations that can scale and build category value over years, not just a constant churn of new news that doesn't really shift the dial. On the second element of the gap, productivity and simplicity. We are making good progress on embedding a net productivity mindset and tracking the necessary measures, including reductions in cost per tonne, as we look to continue to accelerate gross margin expansion. We will say more about this at the half year results. And for today, let me say a little more about the work that we're committed to do to focus our global sustainability efforts around four key areas, climate, plastic, nature, and livelihoods. Last month, we published our latest climate transition action plan with updated targets for achieving net zero emissions across our value chain. We have also now shared details of the specific goals that we will pursue within each of the priority areas. Now on this, let me be clear. We are doubling down, not watering down. Doubling down in those areas that most materially impact the business and where a more focused approach will enable us to drive real change at scale. And we are doing so with goals that are stretching, but that are also intentionally and, unashamedly, realistic. And on this, we were pleased to have got the support this week of the Science-Based Targets Initiative, which has formally approved our new Scope 3 near-term GHG reduction targets. And we want to continue to lead in this area and to build on the huge progress that has been made. but by evolving our sustainability agenda in a way that future-proofs the business and helps deliver the kind of positive change that we need. The third element of the gap involves sharpening Unilever's performance edge. We said that we would put a refreshed team in place to lead for this, and that we would set clearer priorities, more visible and stretching in-year targets, and that we would link reward more clearly to value creation. With the recently announced appointments of Mariette Dijger as Chief People Officer and Heiko Schipper as President Nutrition, the executive team is now complete. Mariette and Heiko both know our industry well and both come to Unilever with outstanding track records. Targets are in place to deliver the clear gap related priorities that we are all now focused upon. And at next week's AGM, we hope to get support for the reward framework that will help give expression to the shift that we want to make in strengthening the link between reward and performance. We will say more about the gap at the half-year point, but hopefully this gives a flavour of some of the areas where activity has been most concentrated in the first quarter. The benefits, as we have always said, will build as we go through the year. And this is important because the market share in the parts of the business that we can reliably measure remains too low. despite the strong and good performance of Prestige, Health and Wellbeing and Food Solutions, which is not included in our measure. We do expect to see the position begin to improve in the second half of the year as the gap measures become increasingly established in the way we operate on a day-to-day basis. And as I've said, we were determined that in everything it does, Unilever is becoming a simpler, better and more impactful organization. And it is this thinking that led to the announcement last month to accelerate the gap by driving our productivity agenda further and by simplifying the portfolio. Let me say a few words on each now. The productivity program we announced is hugely important as it will streamline the business. It will improve efficiency and the way We work and operate. Work to give effect to the program is already well underway. A dedicated cross-functional project team has been established to lead the process. Now there's much more to do, but we are confident of delivering the cost savings that we have set out of around 800 million euro. We are clear that the programme can and will be implemented in a way that speeds up decision-making and liberates trapped capacity within our business. Equally, we are very mindful that the people impact of these proposals is significant, with up to 7,500 roles impacted. We will embark on a consultation process to ensure the changes are introduced with the appropriate sensitivity and care. On the portfolio, the separation of ice cream makes good strategic sense, both for Unilever and for the ice cream business. As a global leader in an attractive category with outstanding brand power, we expect ice cream to thrive under a new ownership structure, one that is better suited to its distinct operating model. Work to separate that business is underway, and we expect the process to be complete by the end of 2025. And in the meantime, under Peter Terkovel's leadership, we are working hard to address the reasons for the recent underperformance in ice cream. We are fully focused on getting the business growing competitively again and improve on all measures. For Unilever, separation will allow us to put more energy and resources behind our global and scalable brands in categories that have complementary business and operating models, where we can leverage our innovation, R&D and go-to-market capabilities a lot more effectively. To summarize, our first quarter results give us confidence in our full-year outlook. We've made significant progress in instituting our gap measures. And work is underway to give effect to the broader portfolio and productivity program changes that we have announced last month. With that, let me hand over to Fernando to go through the details of the first quarter trading performance.

Thank you, Jaime. Underlying sales growth in the first quarter was 4.4%, consistent with the growth we delivered in Q4 of the previous year. Importantly, underlying volume growth increased to 2.2%. We are laser-focused on volume growth as a key indicator of the quality of our top-line performance as we deploy the Growth Action Plan. Our power brands that contribute approximately 75% of turnover led the way with underlying sales growth at 6.1%, driven by a strong contribution from volume at 3.8%. We saw growth across business groups with beauty and well-being leading the way and with both home care and nutrition delivering a notable improvement in volume. As expected, price growth continued to moderate at 2.2% for the quarter, with more impact felt in commodity-sensitive categories. Let's take a closer look, taking each business group in turn. Butane Wellbeing continued its strong performance, with 7.4% growth in Q1, driven by volume at 5.6% and price at 1.7%. In Core Hair, we saw balanced growth across our largest brands, with Sunsilk, Clear, DAVE and 3CEME all contributing well. The launch of DAVE Scalp plus Hair Therapy, clinically proven to support hair density, is off to a very good start. Core Skincare delivers volume-led growth with another very strong performance from Vaseline supported by its Gluta-Higher range. Pons Premium Innovation helps to maintain its good momentum in emerging markets. AHC Carver stabilizes its sales as we make progress with our Brand Reset Plan. Prestige Beauty grew double-digit, mainly from volume. All of the larger brands deliver positive growth, with a strong performance from Tatcha, Hourglass and Living Proof. Our newly acquired K18 hair care brand also made good progress, although it is not yet included in the underlying sales growth metric. Health and well-being also deliver another quarter of double-digit volume-led growth, with a standout performance from Nutrafol and Oli. Nutrafol makes good progress in the core range while also extending into skin care through a daily supplement which addresses the root causes of acne. Oli performed well on the back of a very successful entry into China, and Liquid IV is poised to benefit from the brand extension to Canada and UK markets. The continuing double-digit growth of Prestige Beauty and Health and Wellbeing combined, already for 13 successive quarters, is successfully reshaping our portfolio and increasing our exposure to the critical US markets, and in particular, to its selected premium and online channels. Personal care? grew 4.8%, comprising 3.4% in price and 1.4% in volume. A good performance versus a particularly high prior year comparator, especially in North America. Deodorants grew double digit, with a strong volume. Dab's growth was supported by the launch of whole body deodorants. Rexon and Axe also contributed well on the back of the continued momentum of the multi-year 72 hours non-stop odor and sweat protection platform and the new Axe fine fragrances range. Skin cleansing was flat, with a small increase in price, offset by the decline in volume. That grew both volume and price, with the launch of a premium range of body washes in the United States. In Asia, we saw the impact of commodity cost deflation on the personal wash business in India and market challenges in Indonesia, which resulted in declines in Lux and Lifebuoy, both large brands in these geographies. Oral care continued to deliver good growth, driven by positive volume and price, with strong double-digit growth in our close-up brand. As previously announced, a lead beauty disposal will be completed during the second quarter. Home care growth was 3.1%, with volume up strongly at 4.3% and price down 1.1%. The step up in volume from the fourth quarter was significant and it was broad based across fabric cleaning, fabric enhancers and home and hygiene. The negative price was driven by fabric cleaning, where we saw higher than expected cost deflation in laundry powders, which resulted in negative price in key emerging markets such as India and Brazil. Fabric cleaning volume growth was mid single digit with improved contribution from Europe. Strong innovations such as Persil Wonder Wash recently launched in Europe will support delivery of volume growth while price may remain negative or flat for the rest of the year. Fabric enhancers and home and hygiene both deliver mid-single digit growth, led by volume. SIF and Domestos both perform strongly, with the successful Domestos PowerFoam being extended into new markets and new variants. Growth in nutrition was 3.7%, with price up 4.1% and volumes down 0.4%, but on an improving trend. The sequential improvement in volume is important, remembering that nutrition is later in the commodity inflation cycle and is a category where there has been a substantial assortment rationalization, especially in Europe. Dressings was up mid-single digit, with positive volume growth. Hellmann's was supported by good progress of its plant-based range, new variants of flavor mayo, and a fourth consecutive year in the U.S. of the Super Bowl May Taste, Not Waste campaign. Scratch Cooking Aids also grew well as Nord launched superior bouillon and seasoning variants and extended its Eat for Good campaign behind locally relevant dishes. Unliver Food Solutions grew double-digit with strong volume, lapping a weak comparator in China. Horlicks extended its leadership in India and grew well with positive volume and price driven by sustained market development both in the kids' and adults' segments. Ice cream growth was 2.3%, with 3.2% in price and negative 0.9% in volume. In-home was flat, whilst out-of-home grew mid-single digit, in both cases led by price, offset by a decline in volume. The increase in pricing reflects necessary action taken, given the increased cost of critical ingredients such as cocoa and sugar. Significant operational improvements have been put in place in ice cream in preparation for the northern hemisphere summer season that is coming. So, that is the performance from the perspective of the business groups. Let's return to the group level. Turnover for the first quarter was $15 billion, up 1.4% versus the previous year. Underlined sales growth contributed 4.4%, but we saw a reduction from acquisitions of disposal of 0.9% with the exit from Suave and Dollar Shave Club, partially offset by the addition of Yasuo Ice Cream and K18 Herkea. The total currency movement in the quarter was minus 2%, comprising a negative impact of minus 4% from the euro strengthening against the dollar and most emerging market currencies, and positive 2.1% of extreme price growth in hyperinflationary markets. Based on the spot rates at the end of last week, we expect a broadly similar impact of currency for the full year. The full-year outlook is unchanged, both for top-line growth and margin. Our priority is to drive organic top-line growth and we expect full-year underlying sales growth to be within our multi-year range of 3% to 5%. Within this, we are expecting a higher contribution from volume, a critical indicator of the quality of our growth, especially after a period of elevated pricing. A good first quarter gives us confidence, but it is only one quarter and we have much more work to do. We expect a modest improvement in underlying operating margin for full year 2024. We are highly confident on the impact of our productivity program as a key driver of our gross margin expansion. This is giving us the flexibility to increase the investment behind our brands in marketing and research and development. In terms of capital returns to shareholders, we remain committed to an attractive, sustainable dividend. As previously announced, this will be supplemented by a 1.5 billion euro share buyback program, which we'll comment later in the second quarter. With that, we look forward to taking your questions. Thank you.

If you would like to ask a question, please press star 1 on your keypad. If you no longer wish to ask a question, press star two to exit the queue. When it is your turn to ask a question, your name will be called out. And finally, please keep your questions to a maximum of two.