Unilever PLC

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Richard, you should go on mute when you've done the introduction.

Yeah, got it.

Good morning and welcome to Unilever's half-year results. As at Q1, we're presenting our results to you from our respective homes, so please bear with us if things are not as smooth as normal. Alan will begin with an overview of the business and performance, and we'll cover each of our three divisions before passing to Graham to cover the regions and results in more detail. Alan will then wrap up with some concluding remarks. We'll keep the prepared remarks around 30 to 40 minutes, leaving plenty of time for Q&A. All of today's webcast is available live, transcribed on the screen as part of our accessibility programme. First, can 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, everybody. The performance in the first half, particularly Q2, I think has shown the true strength of Unilever in these most demanding conditions. We've demonstrated the resilience of the business in our portfolio, in our continuing step up in operational excellence, and in the financial position of the business. We've unlocked new levels of agility in responding to these unprecedented fluctuations in demand, and we continue to strengthen the strategic future of the company. Before I get into the results, I would like to use this moment to thank every member of the Unilever team for the outstanding commitment and hard work that they've shown in these most difficult of circumstances. Thanks, guys. Now to the results themselves. Underlying sales declined 0.1% in the first half. Williams down 0.3% and price growth of 0.2%. And this essentially flat growth in aggregate masks some very big positives and negatives across our categories and geographies. And we'll explain those in the course of this call. Underlying sales growth was led by our developed markets, which grew 2.4%, while emerging markets declined by 1.9%. Graham is going to share more about what's happening at a country level. This D versus D&E aggregation needs decomposition to understand what's really going on. Underlying operating profit was 5.1 billion, which is a 3.8% increase versus the same period last year on a constant rate basis. And the business generated underlying free cash flow of 2.9 billion euros, which is up 1.3 billion versus last year. And that was led by working capital improvements as we focused on managing our receivables with rigor. I explained during our Q1 update that we're targeting the business on delivering competitive growth, absolute profit, and cash. And to avoid any doubt, I'm repeating again that our margin target outlook is withdrawn both for this year and beyond. Our focus for the year will continue to be volume-led competitive growth, absolute underlying operating profit and cash delivery. Margin is simply a byproduct of this. Underlying EPS increased by 6.4% and we are maintaining our quarterly dividend in line with the prior period. From the start of this COVID-19 crisis, we've been guided by a clear set of priorities that are very much in line with our multi-stakeholder business model to protect our people, safeguard supply, respond to new patterns of demand, obviously support our communities and preserve cash and balance sheet strength. The environment has demanded that we move with tremendous speed. Let me just call out a few examples in each of these spaces. We've redeployed 8,300 of our people to focus on areas of high demand space. We've also unlocked 300,000 hours of people's time through our internal digital talent marketplace that we call Flex. And what that does is it matches employees who have capacity with projects and opportunities to do interesting new types of work. Data from our personal productivity suite of software shows that we have become more collaborative and productive. We've seen a 41% increase in overall productivity, a 20% increase in internal collaboration time, and interestingly, a 19% increase in external meeting time. Use of our learning system has increased by 150%. We've had over 1,000 leadership town halls, including a weekly global town hall open to everyone. And I think as a result of all of that, we've seen record levels of employee engagement. In fact, our employee well-being score is up by 14%. Now, I think there's been two extraordinary achievements from our supply chain in the last few months. The first is how we've managed to keep all 221 of our factory sites running, despite fairly radical lockdowns in many countries. And as I'll show in a minute, we've also been able to scale up to support massive surges in demand in some categories and pull back where we've seen major drops. And an important part of this responsiveness has been to reduce our overall complexity. And again, I want to thank our supply chain colleagues for their amazing work. On demand, our teams have reacted very quickly to capture the new growth opportunities that this crisis has presented. We'll go into that in a lot more detail, but let me just give you three examples. with Unleaver's next billion euro brand, so Lifebuoy, which has been launched now in over 50 new markets in 100 days. We've tapped the opportunity in foods that's been presented by a radical shift to in-home meal consumption, and you'll see the numbers in a sec. And you know that our ice cream business has been hit hard by a sharp drop in out-of-home consumption, but our teams have moved at speed to drive strong in-home consumption We've unlocked the innovative Ice Cream Now home delivery e-commerce business, and we're busy activating our 100 Days of Summer campaign as lockdowns lift, although looking out the window here in Edinburgh, the 100 Days of Summer are a bit scarce. Communities, we've benefited from our product donations, and we're working through the Hygiene and Behaviour Change Coalition to tackle COVID-19 in low-income countries. through hand hygiene and surface hygiene interventions with Lifebuoy and Domestos. Listen to this. The first phase of the programme will reach 330 million people, including more than 100 million healthcare workers in around 40 countries. And these are great examples of brand do and the clear role of purpose during a pandemic. And I think on cash, the H1 number speaks for itself. We've maintained our financial strength. And I want to underscore that we have not sought COVID-19 related financial support from any governments. The step up in operational excellence that we're seeing is directly attributable to the five growth fundamentals that we set out back in January. They're as important as ever, and they are our blueprint for excellent execution. Improving penetration has a direct positive impact on volume growth and volume market share. from experience of many crises over the years that protecting volumes during a recession is the key to long-term competitive growth. In fact, brands which grow volume during recessions tend to grow value share over the subsequent five years 1.4 times faster than those that don't. And we've seen strong recent increases in our household penetration for our brands. We're now just over 50% of our business winning volume market share. Now is not the time for a lot of complexity in our innovation program. During this crisis, we're focusing on the innovations that bring higher incremental turnover. For example, in hygiene, in driving healthy in-home eating, offering better value products, and innovations that are designed for some of the fast-growing channels and in particular e-commerce. We've already cut over 20% of the tail of innovations, and we've reassessed all of our innovation plans in the light of COVID. Online shopping, especially online grocery shopping, will not revert to pre-COVID levels once social restrictions are no longer in place. And I'll give a few more headlines on e-commerce in a moment. But in a recession, the role of price, value, and affordability is, of course, key. and consumers are switching brands and pack sizes as people look to shop smart. It's never been more relevant for brands to demonstrate their positive contribution to society and address the issues that our consumers care about in an authentic way. So we're investing more of our marketing spend on communication, which is explicitly purposeful. I've already talked about brands like Lifebuoy and Domestos, which are communicating their hygiene message, But in doing so, they're providing information that's very relevant to COVID-19. And we're seeing that purposeful brands matter more to consumers and perform better. And we believe that's going to be both during and after the crisis. At the same time as demonstrating our resilience and agility, we've been taking actions to strengthen Unilever for the longer term and drive our strategic change agenda. We've announced the proposals to unify our dual-headed legal structure to create a simpler company with greater strategic flexibility. After a comprehensive review over the last 18 months, the board continues to believe that it is in the long-term interests of Unilever and our many stakeholders to modernize our complex legal structure. It's 90 years old and it's time to put Unilever on a level playing field with other companies so that we're best positioned for future success. As part of shaping our portfolio, it was actually in the second quarter that we completed the acquisition of GSK's health food drinks portfolio in India, Bangladesh, and 20 other predominantly Asian markets. We've acquired those iconic brands Horlicks and Boost, and it's very much in line with our strategy of enhancing our presence in healthy nutrition. In January, We announced as a conclusion of our overall portfolio review that we would conduct a strategic review of our global tea business. It includes leading brands like Lipton, RootBond, PG Tips, and the review every imaginable. We will retain the tea business in India and Indonesia and the partnership interests in our ready-to-drink tea joint ventures. The balance of Unilever's tea brands and geographies and all of our tea estates have a very exciting future, but this potential can be best achieved, we believe, as a separate entity. And a process will now begin to achieve this separation, which is expected to conclude by the end of 2021. And just for noting, the tea business that will separate generated revenues last year of €2 billion. In addition, while the world continues to grapple with the devastating effects of COVID-19 and issues of escalating inequality, it's more important than ever that we don't lose sight of the climate crisis and the very real and serious threats that it creates for all of us. Climate change, nature degradation, biodiversity decline, water scarcity, they're deeply interconnected problems and we're committed to find ways to tackle them simultaneously. So in June, we announced a wide-ranging set of commitments to help fight climate change and to protect and regenerate nature. And these commitments, they build on our target to have the greenhouse gas footprints of our products across the entire value chain by 2030. They include achieving net zero emissions from all of our products by 2039, which is 11 years ahead of the 2050 Paris Agreement deadline. And to accelerate action, our brands Over the next 10 years, we'll collectively invest 1 billion euros in a new dedicated climate and nature fund. And these commitments are the next step in our vision to be the most sustainable global business. In fact, our multi-stakeholder model remains as important as ever. Before I turn to the performance of the divisions, I'd like to show how COVID-19 is impacting the different categories in our portfolio using category groupings, which are the best way to understand our performance in the period. So this chart shows our H1 and Q2 growth rates. In the following slides, I'll focus in on Q2, but here we're giving both data points because Q2 is the first full quarter that's seen the complete impact of COVID-19 on the portfolio. And the variations in demand are stark. Our hygiene portfolio, which is made up of home cleaning and skin cleansing, had turnover of $4 billion in the first half. It grew by 17% in the half and 26% in Q2. The other parts of the portfolio where we were able to drive very strong Q2 growth is the sizable in-home foods and refreshment business. You see that at the bottom, and that grew by 17%. Now, by contrast, over on the right-hand side of the chart, our food solutions and out-of-home ice cream businesses together declined 42%. And those were severely impacted, obviously, by lockdown restrictions. So you can see underneath this rather bland, flat top line and a huge volatility at category level. And Graham will give a similar flavor of the dynamics by country. Let's move to our divisional performance. Within beauty and personal care, our skin cleansing business grew by 27% as we quickly responded to the demand for hand hygiene products. And by that, we mean liquid hand wash and hand sanitizer. We had a very small hand sanitizer business prior to the outbreak of COVID-19. We only had two manufacturing sites, but by the end of the first half, our hand hygiene business is already larger than that of the market leader last year in the whole of 2019. It really is a truly remarkable example of speed and teamwork. We now have over 60 sites producing hand sanitizers. We've stepped up capacity across multiple brands by a factor of, believe it or not, 600 times in just five months, and we've launched sanitizers in 65 new markets. Our prestige portfolio did decline by 10% in the quarter, and that was impacted by health and beauty channel closures in many markets that normal two-thirds of our sales. Our prestige business has been pivoting to e-commerce at pace, and that's grown strongly, but not enough to fully offset the impact of retail door closures. And for the rest of beauty and personal care, there has been a decrease in usage in some more discretionary areas. For example, hair washing care hairstyling, skincare and deodorants have all been impacted by lockdown living as people have not been socializing or going out to work and so there's simply been fewer personal care occasions. With such big variations and especially when looking at competitive performance, we really need to look at sub-segment levels because there's such a wide range of market growth rates across catchphrases and sub-segments. So on the right, you'll see we break down skin cleansing into bars, body wash, and hand hygiene that's made up of liquid hand soap and hand sanitizers. We have been able to grow ahead of the market in all those sub-segments, but just look at the incredible variation in growth rates. Similarly, in the hair care category, we're seeing different impacts in different sub-segments with particularly sharp drops in the hair styling segment where we over-index. Right, moving to F&R, foods and refreshment. As anticipated, out-of-home food and refreshment declined, in fact, by 42%. That was due simply to the closure of out-of-home channels during lockdown. Restaurants, canteen, leisure sites, travel hubs, tours, destinations, and so on. Our food service business declined by 56%, and out-of-home ice cream by 35%. though I have to stress that these remain fundamentally strong and strategically attractive businesses that we do expect will return to good levels of growth when leisure and eating out habits return to normal. In contrast, I think the hidden jewel in the portfolio has been our in-home food and refreshment portfolio that has grown by 17% in the quarter as consumers have eaten more soups, used more meal kits, and accompanied their meals with mayonnaise and a nice ice cream as dessert. Restricted living has meant that consumers are spending more time at home, and so we saw an increase in sales of food for scratch cooking, as well as in-home tea and ice cream, and that's been especially true in our U.S. business. Reflecting the shift that I already mentioned to online shopping and media consumption, Knorr's digital recipe inspiration campaigns and our Recipedia website has really helped drive e-commerce conversion and strong double-digit sales growth. In fact, our foods and refreshment e-commerce business to consumer business grew by 139% in the second quarter, and that was driven by our ice cream home delivery, ice cream now e-commerce business. And lastly, to home care. where home and hygiene sales were up 24% in the quarter with increased consumer demand for household cleaning products, such as SIF, surface cleaners, which grew by 20%. And working with environmental health experts, Domestos Bleach is educating consumers about the targeted cleaning of high touch surfaces in the home to help prevent the spread of COVID and Domestos grew by 37%. Within laundry, Fabric solutions declined slightly, impacted by the geographical lockdowns in Asia. Although, interestingly, future formats such as capsules and liquids did continue to grow. And I have to give a shout out to our cleaning group. Seventh generation saw strong double-digit volume-led growth. Fabric sensations did decline in low single digits. So last chart before hand over to Graham. We're also, as I mentioned, seeing significant channel shifts as consumers' behavior changes as a result of COVID-19. And I want to just give a little bit of a drill down on e-commerce, which continues to accelerate. Online shopping is here to stay even after social restrictions are no longer in place. E-commerce represented over 8% of the business in the first half, and that's up from 6% in 2019. Sales on e-commerce grew by 49% in the half, 62% in the second quarter, and that includes the drag on growth from food service e-commerce. We've really seen strong growth across all e-commerce channels with acceleration coming in the second quarter. So eB2B, for example, the Compra Agora business in Brazil that we've explained several times, that grew by 78% in Q2. Pure Play e-commerce grew by 58%, and Omnichannel grew by a remarkable 120%. Through a geography lens, we saw e-commerce growing strongly in all of the key markets, particularly in the second quarter, up 48% in Brazil, 59% in China, and I think 177% in North America. E-commerce now represents 12% of North American sales in the first half, And that's doubled from 6% in just 2018. In line with the five growth fundamentals that I mentioned earlier, we are ensuring that our innovation and marketing activity are well designed for e-commerce. And you can see a few examples here. Our SIF eco-refill range does provide the value density that makes it perfect for e-commerce. As I mentioned a couple of times, we're tapping into the eat at home meal delivery occasions with our Ice Cream Now program. And we have changed almost all of our advertising messages, both the content and the media choices. We've stopped out of home advertising. We've eased back advertising to people in severely locked down areas who are unable to shop. But by contrast, our brands are communicating digitally with messages that are relevant for locked down living. Things like stay inspired, home barbecue seasons and the summer staycation messages that I'm sure many of you will be familiar with. So with that, let me hand over to Graham to talk in a bit more detail about the regions and our financial results in a bit more detail. Graham.

Thanks, Alan. Before I cover our geographies, I would like to say a few words about the current environment. The WHO has again reported a record increase in COVID-19 cases across the globe with confirmed daily cases per million still trending up in the big geographies of the world. There are now more than 12 million cases globally with over 5,000 people a day losing their lives to this terrible disease. The risks presented by the pandemic have not reduced and many experts are warning of the risks of a second wave. While the search for a vaccine goes on, we will perhaps all need to be prepared for a sort of two steps forward, one step back dynamic in the months ahead. Now, with our wide geographic breadth, we're often asked how we see the macro environment developing over the coming months and years. And so let me offer a few comments on that subject. The only certainty at the moment in economic forecasting is that there's a huge range of possible outlooks, each containing differing assumptions, mostly driven by the scale and duration of lockdowns, the impact of restricted living conditions on consumer spending as lockdowns are eased, as well as ultimately the timeline for a vaccine. Now Unilever's in-market agility and the strength of local leadership is an important asset as we navigate through this widely varied picture of uncertainty and volatility. We believe that talk of a quick recovery is definitely at the optimistic end of the scale. A deep global recession has already started and consumer habits are changing quite dramatically. We're seeing a rapid rise in unemployment across markets. And even for those with jobs, we know some consumers will choose to save more. In a recession, the role of price, value and affordability will be paramount in driving the penetration of our brands. And we know that this is frankly an area of strength and deep experience for Unilever. Currencies and commodities have been very volatile in the first half, and we've seen an acceleration of currency depreciation through the second quarter. I'll come back to the impact of currency in our first half results and our currency outlook for 2020 a little later on. The spread of COVID-19, combined with the lockdowns and restrictions that have been implemented in many countries, has led to significant changes in the operating environment in our markets. As Alan has just said, the performance during the first half really shows the true strength of Unilever. Lockdowns have varied in severity, with some having a more acute impact on the supply and accessibility of goods, particularly those in India and in China. China was the first of our markets to be impacted by COVID-19, entering lockdown in January. Sales slowed significantly during the lockdown period, but with some recovery after April as the economy in China opened back up. In most other major markets, sales patterns in January and February were quite normal and COVID-19 didn't impact until March onwards. Brazil was impacted later than other major markets, with the effects primarily being felt in the second quarter, exacerbating conditions in a region where they were already very challenging. Let me turn now to the regions in a little more detail. Underlying sales declined by 2.7% in Asia and at RUB, with volume decline of 2.9% and positive pricing of 0.2%. Volumes were impacted by lockdowns of varying severity imposed across the region. China was the first market to enter lockdown, as I said, and that ran from January. It was eased in April, and then China declined in the first quarter. Following the relaxation of restrictions, China then returned to mid single digit growth in the second quarter, although food service remained challenging. India and the Philippines declined as strict lockdowns were imposed from March onwards, disrupting the flow of goods and negatively impacting consumption of discretionary personal care categories as consumers stayed at home. Market growth in India had already been slowing prior to the spread of COVID-19, and the market was further impacted by the introduction of a strict national lockdown at the end of March. This national lockdown continued until early June, when it was then followed by further regional lockdowns. Thailand was particularly negatively impacted from reduced tourism. Regional lockdowns were imposed in Indonesia as COVID-19 spread, and while growth was positive over the half year, sales declined in the second quarter. Latin America grew by 1.9%, with volumes down 0.8% and pricing of 2.8%. The impact of COVID-19 on the region was concentrated in the second half of the period. Brazil and Mexico grew in the first quarter, but volumes declined in the second quarter as COVID-19 spread. Mexico declined low single digits in the first half of the year, following a mid-single digit decline in the second quarter. Brazil grew low single digits in the first half, with a low single digit decline in the second quarter. Volumes grew in Argentina throughout the first half of the year, driven by in-home foods consumption against a backdrop of a prolonged and quite strict lockdown. Underlying sales growth in North America was 7.3%, with 7.7% from volume and a decline of 0.4% from price. This H1 growth includes a negative impact of around 3 percentage points from our food service and prestige businesses, which were impacted by channel closures. The decline in these businesses was more than offset by increased consumption of in-home foods and ice cream, as well as hygiene products. consumption which was sustained throughout the second quarter. Our foods and refreshment division, excluding the impact of food service, grew by 23% in Q2. Our supply chain responded quickly to increased capacity for products experiencing big surges in demand. In Europe, underlying sales declined 1.8%, with negative volumes of 1% and price down 0.8%. Negative volumes in Europe were a result of significant declines in the out-of-home ice cream and food service channels, as well as some reduced demand for personal care products. The most severely impacted countries were Italy and Spain, where increased demand for in-home eating and hygiene products only partially offset the negative impact of prolonged lockdown periods on tourism and out-of-home consumption, especially for ice cream. In the UK and Germany, however, increased demand in in-home eating and hygiene products more than offset declines in negatively impacted categories. Turnover for the first half was 26 billion euros, a decline of 1.6% versus prior year, driven by currency. Underlying sales growth declined by 0.1%. Acquisitions and disposals increased turnover by 1.1%, with acquisitions contributing 1.2%. In the second quarter of the year, we completed the acquisitions of the health food drinks portfolio of GlaxoSmithKline in India, Bangladesh, and around 20 other predominantly Asian markets. During the second quarter, we also closed the transaction to buy out the minority shareholders of our subsidiary in Malaysia. Net currency-related items reduced turnover by 2.5%, and based on spot rates, we would expect a negative currency translation impact of around 4% on turnover. Underlying operating margin increased by 50 basis points to 19.8%. Gross margin reduced by 30 basis points, with some impact from Volume D leverage in our out-of-home businesses. The major fluctuations between countries in Canada and Greece, which we've talked through earlier, have resulted in a negative mix impact on gross margin of around 40 basis points in the half and 90 basis points in the second quarter. We've also incurred additional costs to adapt and run our supply chain safely and hygienically and ensure the continuity of our operations with new sourcing routes and increased distribution costs and additional temporary labour to cover absenteeism. Taken together, these impacts reduced gross margin by around 40 basis points in the first half and 65 basis points in the second quarter, and we expect that they will continue at least for the balance of this year. Brand and marketing spend was down 100 basis points. We've been adapting and reallocating our BMI spend very dynamically on a weekly basis as the status of country lockdowns has changed and as consumer habits have altered. We reduced spend in channels, geographies and categories where local conditions meant that investment would have been wasted, but have diverted investment to support the many growth opportunities. For example, in Q2, we dialed back BMI in food service by 40% due to restaurant closures and in ice cream by 30% due to the significant declines in out-of-home ice cream consumption. but we protected and in some cases increased our investment in skin cleansing and home and hygiene. Taking a geographic lens, we dialed back BMI by 15% in China in Q1, but then increased spend by 16% in Q2 as the country came out of lockdown. We've been very focused on ensuring that the quality of our communication has not been compromised. For example, we've used more agile asset creation techniques, re-editing existing advertising, to be more relevant for the current environment. And this, combined with a softening in total advertising spend across markets, has increased efficiency in advertising. Let me be clear, we are in no way BMI constrained. We've been very dynamic with our investment and have deliberately kept some of our powder dry in managing the challenges of Q2. And in the second half of the year, we plan to invest heavily as lockdowns ease, consumers learn to live with COVID, and we expect significant investment to support brand campaigns and product innovations tailored to this environment. Overheads increased by 20 basis points. That included an adverse currency mix. Underlying earnings per share increased by 6.4% at current rates and by 10.1% at constant rates. Operational performance contributed 3.9% to EPS. Finance costs positively impacted EPS by 2.4%, driven by lower debt, one-off interest income in Brazil and India, and higher interest costs in the prior year as a result of a 40 million euro impact from the revaluation of cash balances that we held in Zimbabwe following the devaluation of the new Zimbabwe dollar. We expect the interest rate on net debt to be below 3% in 2020. Reduced tax costs contributed 5.4% to EPS, with our underlying effective tax rate declining to 22.6%. This was helped by a number of tax settlements, compared with 26.2% in the first half of 2019. The favourable impact was driven by a reduction in the India tax rate and the replacement of Indian distribution tax with a dividend withholding tax. We expect that our tax rate will be around 25% for the full year in 2020. These movements were slightly reduced by an increase in net profit attributable to minority interests following the completion of the merger between Unilever's listed subsidiary in India and GlaxoSmithKline's consumer healthcare business there. Currency movements reduced EPS by 3.7% in the first half, And based on spot rates, we would expect a negative currency translation impact of around 5% on EPS in 2020. Alongside competitive volume-led growth, absolute profit, and cash, that's our three simple but important KPIs. And they really are the cornerstone of how we are managing our performance during the pandemic. Free cash flow in the first half of 2020 was €2.9 billion, up €1.3 billion from €1.6 billion in the first half of 2019. The improvement was primarily led by working capital improvements, in particular a reduction in receivables year on year. To make sure that we convert absolute profit into cash, we've set up specialist teams in every market to focus on receivables. Whilst we will bring in the cash on time, we will also pay our suppliers on time and even early for small suppliers where they need it. This is part of our commitment to make available up to €500 million of cash flow relief for any vulnerable small and medium-sized suppliers. Cash tax paid was lower as the prior year included payments relating to the disposal of the spreads business together with other tax settlements. Unilever has a very robust balance sheet and a strong liquidity position, which is reflected in our credit ratings, which are currently A1-A for long-term debt. It is critical that we maintain our strong balance sheet in these uncertain and challenging times. Our net debt remains at 1.9 times EBITDA, in line with our long-term leverage target of around two times. We have US and European commercial paper programmes with around €1.3 billion of outstandings at the end of June, backed up by around €7 billion of undrawn committed facilities. In the first quarter, we secured €2 billion of additional funding in the debt capital markets. This was a prudent move to take advantage of the relative market stability at that time to bolster our headroom and our financial flexibility. At the end of June, our cash and undrawn facilities totaled 11.9 billion euros, which is 2.7 times the amount of debt that we have maturing over the next 12 months. Our pension deficit has increased by 0.2 billion since the 31st December of 2019 to 0.4 billion. And that was a result of falling discount rates, partially offset by positive investment returns. And with that, I'll hand back to Alan to wrap us up.

Apologies, guys. Lesson learned not to hit hang up when you're trying to hit unmute. So there's, I think, little doubt that the first half of 2020 has seen some of the absolute most testing conditions that most businesses have ever encountered. We do feel that Unilever has demonstrated the resilience of our business in our portfolio. in our continued step up in operational excellence and in the financial strength of the company. We've unlocked new levels of agility as we responded to record levels of growth and frankly record levels of decline in some countries and categories all at the same time. Our supply chain has shown that it can switch off, switch on and adapt at pace And we continue to strengthen the strategic future of the company through our unification proposals, the evolution of our portfolio, and these climate and nature commitments that we make as part of our sustainability journey. We're moving out of response mode to living now with COVID-19 as a permanent feature. There is no quick fix. A new normal will emerge. We've maintained Unilever's financial strength during the first half, so we are not investment constrained in the second half of the year or beyond. We've been disavowed and we now plan to invest heavily behind BMI to further strengthen our competitiveness. As Graham has said, there's a huge range of possible macroeconomic outputs and we believe that a quick recovery is too optimistic. We can't reliably assess what the impact on our markets and business will be, which is why we've withdrawn our growth and margin outlook. What is important is that we continue to drive operational excellence through the five growth fundamentals and that we leverage our in-market agility to drive volume-led competitive growth alongside absolute underlying operating profit and cash. So thanks very much for listening. That's the end of the prepared remarks. And Richard, back to you.

Thanks, Alan. Right. We'll now move to questions. As a reminder, if you want to ask a question, please press star two. If you listen to the conference call on a speakerphone, please use the handset while you're asking your questions. And finally, please keep your questions to a maximum of two and as short questions as possible because we have a number of people. So I see our first question is from Warren Ackerman Barclays. Go ahead, Warren.

Morning, Alan, Graham, Richard. Hope you're welcome. Hope you can hear me. Two from me. First one is on competitiveness of Unilever. At a recent conference, you highlighted two pieces of evidence on competitiveness. One was winning back some share in the US hotspots, and the second one was brand penetration at 400 bps in Q1 versus Q4 in your top 65 sales. Can you update us on both of those? and maybe go a bit further and talk about market share generally. I was a bit surprised to hear it's only 50% given the good quarter. And then secondly on margins for Graham, down 100 bps on brand and marketing in the first half. Can you say a little bit, Graham, about what level of media deflation you are seeing and whether you'd expect margins in the second half to be down? given gross margins are going to be lower and BMI steps up in the second half. And did I hear right? 20% margin target is off the table, not just in the short term, but also in the medium term. Thank you.

Well, thanks very much, Warren. As you've directed, I'll take the first question and let Graham take the second one. So first, let me thank our listeners for indulging us with a slightly longer than usual set of introductory remarks. It is because we wanted to give you the decomposition of the business, given how varied it is. And second, in these crazy times, Warren, it's nice to see that some things remain a constant feature of the landscape. I'm glad to hear you getting in the first question. On competitiveness, let me just answer with data. So moving annual total at the end of December was that somewhere around 40% of our business was coming from businesses where we were growing penetration. That is now solidly above 50%. And that's a remarkable swing in a short period of time on a measure that's typically quite stubborn to move. And we know that penetration improvements precede volume share increases, and that volume share increases are a very good indicator of lasting value share increases through and beyond recessions. Secondly, on value shares, it's actually a very similar picture. So throughout most of last year, our market shares were bouncing around at around 40% of the business winning. Again, we're now over 50%. And actually, that doesn't vary very much between the top 62 category country sales that we are laser focused on and the total state. One mathematical anomaly that I laid down a marker for you on was skin cleansing, where, believe it or not, despite dramatically growing share in each of sanitizers, hand wash, body wash, and bar soaps, given our different market shares in those segments, so typically lower shares in hand hygiene higher shares in bars and body wash, coupled with the different growth rates, we actually didn't gain share in aggregate in total skin cleansing. And if we were to look at it subcategory by subcategory and aggregate that rather than at a total category level, the number would be much higher than 50%. But we decided not to change the basis of measurement. We thought that it would be more straightforward to keep repeating So training in the right direction and the reason why you're not seeing an even higher number is that sub-segment difference. I hope that answers the question clearly. Over to Graham on margins.

Yeah. Hi, Warren. Let me start with your question on BMI. I hope you got the message in the prepared remarks that in the second half we expect to be investing more BMI as the lockdowns start to ease. We've certainly kept some powder dry in managing the first half challenges, and we do expect a step up there. On the question of softening in media rates, yes, there has been a softening in media rates across markets. It's been very varied. It's ranged from nothing in some places to 40% in other places. And broadly, across the piece, it's been maybe in the range of 20%, 25%. And actually, If you think about our three and a half percent or so of turnover that we spend on media and you apply that across it, that accounts for at least some part of the benefit that we saw from BMI in the first half. So, yeah, that's the landscape on BMI. on brand and marketing investment. One other thing to say, actually, we do track, obviously, our share of voice over the period, and we were above 100 year to date. So that gives us some reassurance that we were investing in the right place, even though it was a very, very dynamic environment with dialbacks and areas of specific investment in specific places. On the question of overall margins, Up or down? You know, what can I say? I'll give you a comment on gross margin in particular. We were down 30 basis points, as you saw on the first half. We expect to see, we are seeing, we expect to see mid single digit commodity inflation. As we called out in the presentation, there are some meaningful ongoing on costs from COVID in gross margin. And there's some meaningful ongoing negative mix impacts from the places where we're seeing surges in demand and the places where we're seeing dial backs in demand. And we expect that those trends will continue. That's really all I'm going to say on margin, because as Alan was very clear on the call, yes, we are not giving any margin guidance for 2020, and we are not giving any margin guidance beyond 2020. We're managing the business focused on competitive volume-led growth. Absolute underlying operating profit delivery and converting that underlying operating profit into cash and where the margin will just be an outcome of that work.

Thank you, Warren. For our next question, can we go to Guillaume Delma now at UBS? Go ahead, Guillaume.

Good morning, gentlemen. I hope you can hear me OK. A couple of questions for me. The first one is on North America. You achieved, I think, one of your best quarterly or underlying sales growth there in more than a couple of decades. So how should we think about it? Is it down to a strong category growth rate in the quarter, or is it also reflective of significant share gains? And I guess any indications around a potential discrepancy between sell-in and sell-out in the first half of the year? And I guess what could be quite helpful would be also any indications around the exit rate in this region. And then my second question is on mix, which had an adverse impact on your gross margin. Are you already seeing some evidence of down trading in some part of the world and some part of your portfolio? Or at this stage, is this negative mix effect essentially the consequence of COVID-19 disproportionately affecting your higher gross margin distribution channels. Thank you.

Okay, Guillaume, why don't we stick with the pattern? Graham, I'll take the first one, you take the second one. On North America, yeah, let me try and be very simple. The exit rate remains strong. So there was no kind of fast start in the quarter and then tailing away. North America has remained more or less constant through the quarter. Secondly, there's no discrepancy between sell-in and sell-out. It's neither. I think we're well beyond us loading up the shelf and in anticipation of some sort of panic buying. If anything, we're struggling slightly to keep up with demand in North America, and service levels are slightly below where I'd like them to be, particularly buying in some subsegments. I think it's fair to say that our market shares in North America reflect a competitive performance. We've addressed the hot spots. We're doing well in ice cream. We're doing well in dressings. And actually, we're doing well in beauty and personal care competitiveness, although that market's not growing as quickly as the other parts. The reason why we're seeing such strong growth in North America is partly also related to mix. We have a very strong in-home foods business in North America, and our ice cream business in the U.S. is more driven by in-home than out-of-home. So we're seeing tremendous strength in hygiene, in skin cleansing, in in-home consumption of food, and that includes ice cream where there's not such a big out-of-home component. So, you know, short answer, I think it's us participating in strong category growth with competitive market shares. No mismatch between sell-in and sell-out. We're certainly not selling in ahead of sell-out. And the exit rate was more or less the same as the ongoing rate. On that, I'll hand over to Graham to share some perspectives on Mixed.

Well, Guillaume, there are many, many ways and axes through which you can look at mix. Of course, you can look at it through a divisional mix, a category mix, a country mix, or even at the level of SKU and PAC mix. I'll try and stay at the level of category mix, though. I'll give you an example. You know, growth in skin cleansing. uh which which has been you know um enormous uh versus the other parts of our bpc business our skin cleansing business has a lower relative gross margin within bpc uh but but a very very healthy uh you know bottom line uh operating margins so you see that show up in the mix another example is reduction in out of form ice cream which is a higher relative uh gross margin than uh than in-home ice cream. So it is driven at that fundamental level of where we're seeing surging demand and where we are seeing declines in demand or indeed channel closure. On the question of consumer pricing and recessionary consumer behaviour, of course it seems difficult I think that there's a global economic downturn. What we don't know is the depth and length of that. And we don't know which countries are going to be hit hardest as yet. And of course, when we had a recession, consumers are going to look for value. It's important to distinguish that from cheapness. You know, consumers are looking for value and affordability. And so the role of price, value and affordability is going to become very important. And we think we are good at reading and delivering affordability and value in Unilever. We don't tend to react by radical price slashing, but we think about the fundamental value equation in our brands, in our pack sizes, for example. That's a good example of it. Now, our value portfolio in Unilever is which we sort of describe as less than 80 average price index, is pretty well positioned. We've got about 20% of the Unilever portfolio in aggregate in the value segment, about 45% is in the mid-tiers, and about 35% is in premium. That's a good start. And, you know, a lot of branded players don't play at all in value. So it's a pretty good start for us. But we're not done yet. We have set up a number of targeted squads around the business, working to identify and plug gaps in the value portfolio market by market. particularly in low-unit price packs and lower-tier brands. Of course, that value portfolio has a different P&L profile. It typically has a lower gross margin, but it also has lower BMI requirements, and it does still contribute strongly to the bottom line and typically doesn't impact performance. you know, bottom line margin, etc. So I think we're well placed. We're starting to see the effects of trade down. We're planning for it and we're doing a lot of work within the business to make sure that we're ready for the recession ahead and we're strong with our value portfolio.

OK, thanks, Guillaume. Let's go straight to the next question, which is Alan Erskine from Credit Suisse. You're on, Alan.

Good morning. Can you hear me? Yes, Alan. Hello? Perfect. Okay. Perfect. Sorry. Okay. Most of my questions have been asked. Just two quick ones. One, Graham, can you just go through the other moving parts in the gross margin? Obviously, it's down 30, but you're saying 80 bps is down to mix and COVID, and there's also some fixed cost deleveraging within the gross margin. So what is the offsetting benefit? Is that lower raw material prices, higher pricing, less trade? Can you just give me some of the feel for that and maybe how that might play out in the second half? And then just a very quick question, just on two hotspots specifically, U.S. and China haircut. How did your shirts perform there in Q2? Thank you.

Okay, Graham, you crack on on gross margin decomp, and I'll talk about U.S. hair, China hair.

Yeah. Hi. Hi there, Alan. Yeah. So we had the you picked up the points on on negative mix and the on costs of operating our our factories, you know, safely through through the crisis. The other two moving parts are essentially, you know, what's happened in terms of raw material costs, input costs, et cetera. And what happened in pricing that was slightly positive. In the gross margin, in terms of how that, one other comment, actually, obviously, you know, in any given year, we have a number of strong savings programs in the supply chain. They have been slightly curtailed from the normal performance we would expect to see in peacetime, so to speak, because it requires, you know, things like factory changeover, line changeover. It requires innovation, change out to land some of those savings. And that's obviously been curtailed through the first half of the year as we've been focusing on the A and B SKUs, softening the demand signal, concentrating on the products with the greatest level of demand. So I'm afraid there are many, many moving parts within it. But at a fundamental level, just to go back, I think to the answer to Guillaume's question, I think we will see the main movements in gross margin being driven by the mix impact as we move into more of a value position portfolio over time. That's how I would summarise that.

Thanks, Graeme. So, Warren, US here, the market share, our market share there is down very slightly from And it's largely because of the portfolio mix. We're over indexed in styling in the US, which has seen radical reductions growing very slowly. I think it's down 30%. And so we're disproportionately hit by that. But we have a secret weapon, which is called suave. And we know that when downturns kick in, the biggest penetration beauty and personal care brand in all of the U.S. and we fully anticipate strong performance from that because of the great value that it offers. So the channel and value proposition on Suave will be great for the coming months. China is the opposite direction. I think Graham mentioned or somewhere we mentioned that China was growing mid-single digits. China hair is up two to three times that, growing market share, benefiting a little bit from re-pipelining after the China lockdown. But our China hair business is extremely strong, growing share and growing volumes and growing revenues.

Okay, thanks, Alan. Our next question is from James Target at Berenberg. We're going to let the call run on for about 10 minutes to try and get one or two more questioners in, but we can't do it for much longer than that. Over to you, James.

Oh, hi. Thank you. And I really appreciate all the subcategory and color. It's very helpful. Two questions. Just on the innovation pipeline, Alan, at the start you mentioned, talked about the rationalized approach, maybe sort of fewer bigger launches. Do you expect the total value of your innovation pipeline to fall or its contribution growth? Or is it just about focusing the efforts on bigger projects? And does that focus reduce your local competitiveness at all? After all, you were trying to sort of be more agile in responses to local competitors. And then secondly, just on food service and Prestige, I wonder if you could comment at all about the exit growth rates in the quarter you were seeing in those two channels. Thank you very much.

Okay. Graham, shall I crack at the first one? You can talk about food solutions and Prestige. Thanks, James. My question is, we believe focusing the portfolio of innovation will drive higher overall incremental turnover. It sounds ridiculous, but it is. As we try and constantly strike this balance between global and local, I do think that we got carried away on too long a tail of small innovation, trying to address every opportunity locally. Concentrating our resources behind fewer, bigger seems to have the impact of better growth. And we've got a role model for that, which is actually we have two role models for that. One is our home care business and the other is deodorants, which typically set the pace on having focused innovation agendas. It definitely does not compromise local relevance. And in a way, I wish I could call up a few slides that I used with our board yesterday to show how we were responding in skin cleansing, home and hygiene, and retail foods with new mixes that tap the zeitgeist. So we've got a huge array of hand wash products, not just antibacterial Lifebuoy, but skin caring in the form of Dove because everyone's hands are red raw from over washing. Great sensory hand washes from Luxe and so on. A huge assortment of hygiene initiatives in skin cleansing, actually, so sanitizers, but also professional hygiene solutions, which is growing really quickly. Then on the home and hygiene, alongside rolling out Domestos for a few markets, we've got Naturals Mixes, that we launched, for example, we're launching in some big emerging markets where people fear for chemicals and the money for the times that we're in right now. And I think in foods, we've been very focused on, let me describe it in three different ways. The first is affordable at-home eating solutions. We've got lots of interesting new products in that space. The second is... the continuing macro trend toward plant-based, which is where we've focused disproportionately. And the third is a solution specifically designed for e-commerce delivery. So it's not just chopping off the tail. That's the easy bit. It's actually retooling the innovation program to be relevant for the times that we're in. And that will definitely generate more incremental turnover, not less. Graham, maybe you can cover pre-conditioning prestations.

Yeah. Hi, James. So just let me just dimensionalize for everybody. Once again, the food service businesses, it's 5% of Unilever in total. 20% of the businesses in China, 25% of the business is in the EU and sorry, Europe, I should say. And 10% of the business is in the US. And it's important to give that mix because as we said in the presentation, you know, the, the, the growth rate very strongly impacted by the impact of lockdown and recovery, et cetera, across different geographies. Yes, there's been a very strong sequential improvement month on month, James, as the lockdowns have eased. We were down 70% in April in UFS, 60% in May, but only 38% in June. And I don't know whether you can extrapolate that trend or not, but that at least gives you a sense of the exit momentum as we came out of the second quarter. Prestige is a similar trend. Prestige was down 10%. in the quarter. Again, I think Q2 is the toughest quarter for the business there. Just to dimensionalize that, it's about a 600 million business. It is quite a U.S. business, actually. Two thirds of the business is in the States, about one third outside the States. And it sells through a channel structure. which is very dependent on health and beauty channels. So Sephora, Ulta, department stores, sales, etc. That's about two third of the sales or it was, I should say, because there's been a tremendous shift in demand in prestige from the bricks and mortar channels, which were which were closed during the second quarter onwards. into online, being some really strong growth in e-commerce sales in Prestige. And a number of the brands within the portfolio actually continued to grow. One of the biggest drivers of the decline in Prestige was our colour cosmetics business because, of course, Color cosmetics is something where the consumer typically wants to try the product, typically wants to be working with a physical experience. So our glass cosmetics was done quite significantly. But we understand the reasons for that. And overall, I think our prestige business is on a very improving trend as stores begin to open up again. I think we will be able to hold on to the shift that we've seen moving into e-com for the brands. And that is a very positive trend. And just one other thing to mention, you might have seen that in China, the regulations regarding animal testing are now being resolved. And so we are building some exciting plans, multi-year plans to start to bring more of our beautiful prestige portfolio into the big market of China.

OK, thank you, James. Graham, we've just moved your next meeting by 10 minutes, so you can take a few more questions. So the next question is from Martin DeBoo at Jefferies. Over to you, Martin.

Yes, morning, everyone. Two quick and unconnected ones from me. First of all, you didn't mention the West Africa business, I don't think, and I raise it because it was part of the sales warning in December. Where was that business, Nigeria-Ghana, trending in H1? And can I reconfirm, I think it's got a very easy comp in H2, hasn't it? That's the first question. Second question, on the T demerger, I get the hold on to India and Indonesia bit, but can you just talk a little bit about why you're holding on to the JV, the rationale for that, and what happens to the IP of the Lipton brand? Do you sell that and it gets licensed back into the JV? Just how does all that work? That's the second question. Okay.

Right. Thanks, Martin. I actually want to put a footnote on what Graham said about the relaxation of animal testing requirements in China. That didn't just happen. That happened because Unilever has been working with the Chinese FDA for a decade on making that amendment and persuading them that the alternative models to animal testing are reliable and safe. And we're very proud of that, and it will open up an opportunity for us. Now, Mark, to your question, West Africa is still not in good shape. Just as we start to get our inventory in balance, the overall markets are collapsing. That's maybe a bit dramatic, but they're certainly not strong. And so I think we'll see year-on-year growth in the second half in West Africa because of the dreadful comps last year. but I still don't think it's a business that's in really good shape. And we've got new leadership in there. We've got an opportunity to rebase, which we've done. We're getting our route to market systems, but it's in the most difficult circumstances. And so, yeah, mathematically, there'll be a year-on-year comparison improvement, but I don't want to start celebrating prematurely that we're out of the woods in West Africa. Graham, tea.

Yeah, I mean, the first thing to say, Martin, is our announcement is that we'll take two billion of the business, you know, excluding India, Indonesia and the joint venture with Pepsi. And we'll separate that and we'll take our time to work out what happens with that business, what the best way to have that business thrive. in the future is going to be, and as usual, will be highly guided by value creation and everything that we do. I just wanted to reassure everybody of that. When it comes to the joint venture with Pepsi, interestingly, from a market perspective, the ready to drink tea market is You know, two thirds of the global tea market is much, it's much bigger. It's nearly twice the size of the of the leaf tea market around the world. And it's been extremely successful joint venture between ourselves and Pepsi. You know, it's one of those joint ventures where each party brings unique experiences Unilever in terms of the brand experience. and marketing capability and Pepsi in terms of their expertise in bottling and distribution. And it has worked very, very well for a long period of time. And that principally is the reason why we've left that out of the conclusion of the strategic review. You're right to point out that it does present a change going forward, potentially, with regard to the Lipton brand, because if there is a different owner or a more separate operation of the Lipton brand, in hot tea uh or leaf tea rather then uh then there'll be you know some need for some form of uh you know split arrangement but um you know given the essential difference between the two categories of ready to drink tea and and leaf tea we're sure that that's very manageable so uh you know no real uh concerns there thanks martin um next question from uh alicia furry at investec go ahead lissia

Hi, good morning, everyone. I just wanted to ask about your expectations for an India rebound in H2 that you've kind of alluded to in the past. We saw Hindustan Unilever had some pretty strong results, relatively speaking, and you've got easy comps there too in H2. So just curious, anything you can say about India in the second half? And then secondly, You've mentioned consumers have embraced eco-friendly packaging, perhaps even more rapidly than before the crisis, during the crisis. I'm curious which areas of the business are seeing the greatest impact of this change, and has there been any effect on gross margins as a result of this?

Thanks very much, Alicia. Graham, which of these questions would you like to have a crack at? I'll take India, please, Alan.

Thought you might. Is that okay? Alicia, let me tackle the India question first. So just a few comments on the Indian market. As you know, the market was slowing from, you know, very strong rates of growth a couple of years ago. It was on a downward trajectory from a market growth perspective, you know, even before COVID hit us. I think the The markets were going about 6% in 2019, down to about 4% in March of 2020 and below 2% into the first quarter. And then the lockdown hit. depend on the status of lockdown in India, you know, state by state, locality by locality. I think that's going to be the main driver on what happens in India. But having said that, you know, that will be what it will be. What I can say is that our business in India is extremely competitive. We have more than 80% of the business winning market share right now, and we're seeing – share gains in the last three months reads 80% of our business in India is in the health, hygiene and nutrition space. So it's very well positioned. So I can't give you a sense of what might be because it will be determined by the progress of the virus and lockdowns. But what I can say is that our business in India is performing very well through the crisis. And as I said, it's very competitive and has a well-positioned portfolio going forwards.

Yeah, I'm going to pinch a bit more on India and just say I'm very worried about the disease conditions in India. And I think it's important that we think of India as winning. We talk about winning in many Indias. And that's how we'll be managing the business. I think there'll be parts of India at any given point in time that are kind of booming and there'll be other parts that are under lockdown and the government have shown their tremendous ability to respond at a state or city level to the disease conditions. And I think the combination of an agile government and an agile business will serve us very well from a competitive perspective. But it's anybody's guess what way the disease will move. As regards sustainable packaging, let me just say that our sustainable living brands continue to grow much faster than the rest of the portfolio. And there are headwinds and tailwinds on consumer adoption of sustainable packaging. The headwind is that eventually low oil prices will pass through to low virgin resin pricing. And that makes the differential between virgin resin and post-consumer use recycled material greater. We welcome the European legislation that starts to put costs against virgin material in order to give an advantage to recycled material. And we hope that that will accelerate the adoption of more sustainable packaging, particularly plastic packaging. As regards to your very specific question about detailed consumer growth or decline based on sustainability, that's so precise a data point in an environment where we're seeing gigantic swings. The honest answer is that I have no idea what impact it's having on sales in the short term, but we know that over time, sustainability drives growth and packaging is a very demonstrable part of sustainability. And all of our divisions have got big pieces of work going on, on moving towards less plastic, better plastic and no plastic options for the packaging.

Okay. Thanks, Alicia. Richard. go over to David Hayes at SockGen. If you could ask a question, David.

Thanks, Richard. Good morning, gentlemen. I hope you're well. One on the US sales, one on the margins. The US sales, just to come back to this discussion on exit rates and obviously the very impressive performance in the quarter. Is there still an element of pantry loading in that market? Obviously, there's pockets of uncertainty and surges in COVID rates. So I'm just trying to understand whether there is still kind of a dynamic within March and April that's just gone on for longer, or whether when you talk about that exit rate, you see this continuing at high single-digit growth into the third quarter. And if not, what kind of things change that? Why would it slow, given that exit rate? And then on the margin side, just the restructuring costs, not massively different to last year's first half. You talked about less closures and savings. So is there... Is there some COVID one-off cost that you're able to book as restructuring? Because it is effectively an organizational process change. And I guess related to the cost-saving side of it, should we expect quite a step up in cost-saving second half? As you say, you kind of come out of the sort of reactionary phase and now into more controlling the situation phase. Thanks so much.

Great. Thanks, David. I'll repeat the points on the US. Let me try and be even more direct. Our categories were not particularly impacted by pantry loading. You need to go talk to the paper guys about that. And we have seen sustained high levels of consumption. I think the question that we're trying to get our heads around on how quickly or how long that will carry on for, and we see no signs, quite frankly, of it slowing down at the moment, it comes back to two questions. How long will US consumers remain preoccupied with hygiene? We think probably for quite some time. And this says, how long will meals continue to be consumed at home at a differentially higher rate than normal versus consumed out of home? And again, I was in China at the time of the second wave of pandemics, the H1N1, the so-called . And we saw it took ages for the Chinese consumer to become comfortable going back to the level of restaurant eating that they exhibited prior to that wave. And I think we're kind of seeing that actually in the rest of the world. Bad news for our food solutions business, where we're planning on a slower recovery. Good news for our retail foods business. Given the mix that we have in the US, we're really benefiting from preoccupation on hygiene and in-home eating, much more so than the unusually large size of American pantries. That's not been a particular asset for us. Graham.

Hi, David. On restructuring, so you're quite right. We normally have a lower restructuring spend in the first half. Projects tend to get accelerated through the second half. And usually the second half phasing is a little bit more. We spent just around about 400 million on restructuring in the first half, which was pretty similar, as you said, to the first half last year. And for the full year, we think we'll come in maybe 900 million to a billion, something around that sort of range. That's less than we expected. So we have slowed down a number of restructuring projects through the first half as we focused on just you know managing the business going forward uh um so there'll be a delay there and that's reflected in that sort of outlook of maybe 900 to a billion on the on the impact of covid um no we haven't taken anything into restructuring um from covid so you saw in gross margin the impacts of makes the impacts of all the on costs in the factory that's all in the p l even the uh the commitments we made to support communities around the world with donations That's sitting in the P&L as well. We've just taken that all through the P&L. To the extent, though, that we have to reshape some parts of our business going forward, depending on the world that we face, thinking about the channels which are most impacted. you know, out of home ice cream and food service are examples. If we have to reshape those businesses for the longer term to put them back in a healthy position and to reflect the reality of the sort of future, then, you know, that would be done through the normal discipline process on restructuring business proposals. And that would be taken as restructuring. But there's nothing in there in the first half.

OK, thank you, David. Right. We've got time for one last quick question. John Ennis at Goldman Sachs, if you can make it one and make it very quick, we can squeeze it in.

Yeah. Hello. Good morning, everyone. Thanks for taking it. I'll give you to one on Latin America. The message on Latin at the start of the year was was was quite cautious relative to the performance you delivered. So I just wondered if you could quickly provide some color on how that region trended through the quarter last to get you to that flat performance. That's it from me. Thanks.

Can't hear you Alan.

I can see Alan. Can't hear you Alan. I'll give a headline and then I'll ask Graham to give a bit more body copy. Latin America has been quite a challenging story for us. It was, pardon me for getting a bit personal on this, but Ecuador was where we saw the first Unilever fatality from COVID. And Central America got absolutely smashed early on in the outbreak. I've been surprised at the resilience of Brazil and Argentina, where the business has continued to do well. We believe we're gaining competitively. And some of the innovation that we put in place on business model, like B2B route to market, is helping us. It won't be Mexico, Brazil, Argentina will not be growth markets, I don't think, for the next quarter. But I'll hand over to Graham to give a little bit more detail on that.

John, let me just size Latin America broadly by country for you. Brazil is about 40% of the region. For us, Argentina is less than 15. Now, Mexico is about 15, similar size. And Chile is single digits, high single digits. So that's the size of things. You know, really, the bit of an epicenter of the crisis in Latin America, four out of the top 10 countries, by number of COVID cases are actually in Latin America. It's Brazil, Chile, Peru and Mexico. So you can expect, I think, the peak of cases to be not yet reached. You'd expect to maybe reach that in Q3 or even Q4. Brazil, which in the second quarter for us was down by no single digits. We expect a very deep and prolonged recession there. um unemployment forecast is to reach 17 gdp minus 10 seeing a lot of devaluation uh so uh you know a tough uh situation to manage on the ground there as alan said we have an unbelievably strong business in brazil which has actually become stronger through the economic crisis of the last three years we've fundamentally changed our uh our route to market our uh with tremendous work done with our eB2B capability, Compra Agora, in Brazil. And that will put us in good stead. We've also taken a lot of activity through the economic crisis to position the portfolio with Tier 3, Tier 4 brands, etc. So it's value and recession ready, but it is going to be tough, particularly in Brazil, I think, over the course of the second half and beyond, because they're not yet at the peak of the crisis.

OK, thanks, Graham. Thanks for the question, John, for keeping it short. Right. We must stop there. I know there's been quite a number of people haven't been able to get their questions in. Please email the IR team and we'll arrange a time to to talk to you this morning. So please get in touch. Apart from that, thank you very much for listening and enjoy the rest of the day. Thanks. Bye bye.

This now concludes the call. Thank you all very much for attending. You may now disconnect your lines.