We are about to hand over to Unilever to begin the conference call. [Operator Instructions]. To ensure all participants receive a high quality audio experience please ensure you’re calling from a landline telephone and not a mobile phone. Please avoid using a speaker phone to ask your question, please use the telephone handset to minimize background noise. If you experience bad quality audio then please try redialing. We will now hand over to Graeme Pitkethly.

Good morning everybody and a warm welcome to our first quarter trading update. Thanks for joining us at a slightly later time than usual; we will back to 8 AM UK time from next quarter. I will begin with the market context and a brief review of our growth performance. Andrew will then take us through the categories and the regions and I will conclude with an update on three big initiatives; net revenue management, new functional models which is the next stage in our organizational transformation, and zero-based budgeting. Before we go further let me draw your attention to the usual disclaimer regarding forward-looking statements and non-GAAP measures so let’s get going. We've had a good start to the year with another quarter of consistent and competitive growth ahead of our markets. In January, we said that we were prepared for the business environment to become even more challenging and that has proved to be the case. In Europe, markets continue to decline with stable volumes but falling prices; while in North America growth in our categories has eased back to only around 1%. In Brazil and Argentina, market volumes are contracting as consumers struggle with rising unemployment and the high local inflation brought on by currency adjustment. Falling real wages are also holding back demand in commodity exporting countries like Russia, South Africa and in the Gulf. The economies in China, India and Southeast Asia are holding a better but even here grown in consumer demand remains relatively subdued against historic trained levels. Looking on aggregate and taking a broad global average, market volumes in our categories are flat and pricing is around historic norms. But within these aggregates we continue to see some strongly diverging trends. Many consumers are up-trading to higher value items for at least…

Thank you Graeme. And as usual we’ll start with our largest category, personal care; here our priorities are to continue growing the core while building more premium segments. Underlying sales grew 5.8% mostly from volume. This is back to being ahead Unilever average in line with our strategy. Growth and premiumization of being driven by innovation. In the US the new dry spray format is going from strength to strength with the launch of another 10 variants in the first quarter. They continue to drive overall category growth with more and more consumer switching to this more appealing and higher margin segment and they're helping us further widen our market leadership. At the same time, we're rolling out a range of antibacterial deodorants under the Rexona brand offering 10 times odor protection. After good results in Latin America, we just introduced them to 15 new markets with another new 15 planned for the second quarter. Axe has become a major global upgrade. The new campaign Find Your Magic appeals for more mature and more sophisticated audience and broadens the emphasis across a range of male grooming products. Though for the men listening, if you haven't seen the advertising or tried the new product that’s just coming out, I encourage you to do so even if like me you're slightly older and thought that your Axe or Lynx days were behind you. In hair, we’ve launched a new system which is literally revolutionary. TRESemmé Volume is a reversed two-step process with the conditioner applied first and the shampoo applied in the second step. This keeps the hair residue free, which means its lighter and has more volumes. Turning to foods, our priority is to accelerate growth while maintaining a strong margin and cash flow that this category generates. In the first-quarter…

Thank you Andrew. At our Investor event a few months ago we set out three key initiatives to underpin sustained value creation in the coming years. Now well these are still in their very early stages, I thought it would be helpful to give you a brief update on each of them. The first is net revenue management. The essence of NRM is understanding consumer's perception of product value and aligning product price, placement and availability. I've called this before the art of pricing but we could also call it part of the billion basics of consumer goods. And to some extent we’re in catch up mode with the leading practitioners here, for example in the drinks industry. On the chart, you can see a very simple realized example using the Brilhante our whiteness laundry brand in Brazil. In this case, we have increased the relative price of our 1 kg and 3 kg packs and reduced slightly the price of the 2kg pack. Since making the change, all three packs have gained share. Of course we simplified this example to illustrate the point and in fact there is a very detailed set of analysis across all SKUs and multiple channels. We’ll look at key price points that trigger purchase and the drivers of actual and perceived consumer value. This results in differentiated pricing and promotional plans for each pack and channel. The program has been rolled out globally in waves and by the end of 2016; we’re looking to have cover 40% of our turnover with NRM. We typically into realize our own 1% incremental turnover either in price or volume in the priority country or category sale. We expect NRM to help to underpin consistent share gain and underlying sales growth in the 3% to 5% range despite…

Thank you, Graeme. So our first question is from James Targett of Berenberg.

Good morning, everyone. Two questions for me. Firstly just on the UK business. You mentioned there were some weaker pricing, and I think personal care in particular. Are there any other areas which were driving the slowdown in UK in the first quarter and maybe if you could give some color on the magnitude of the sales decline there? And then secondly, on the new functional models you highlighted, could you just - sorry, just quickly recap maybe the timeframe for implementation and initial benefit trend, should we think about this more as being a revenue driven project or cost driven in terms of the benefit? Thanks.

Hi, James, good morning. First of all, in the UK, the market was particularly tough as an environment, but in Q1 we did see good volume growth and some value share gains, but that was all offset by price deflation. I don’t want to go specifically based on one quarter into details of the UK’s performance, but it’s a continuation of a very, very competitive marketplace across all categories. You’re aware of the consumer changes in the UK, very value conscious, continued growth of discounters, but above all very competitive on a high level of the promotional intensity, which was particularly sharp in the first quarter. On your question on new functional models and the implementation of it, as I said in the presentation there, we are currently in the design place, Peter Ter-Kulve has set up an organizational transformation office and he will be working the detail with all categories, with the four categories on principally an integrated marketing design that we will work, not for the short-term, very much what takes us into the next 5 to 10 years of growth. Very much focused on growth, very much focused on being more global and more local, being able to be more agile, sharper translation of local insight into global clients, being faster and being more connected to the consumer at a time when the consumer is fundamentally much, much more convicted through digital and through channels, et cetera.

Next question comes from Warren Ackerman of Societe Generale. Warren, please go ahead.

Good morning, Graeme. Andrew, Warren here. So two questions as well. First one is on pricing. I think if my calculation is right, ex-LatAm pricing overall was negative in the quarter. So how much of the $0.15 pricing in LatAm was high for inflation countries versus say Brazil and Mexico. And Graeme, what’s your view on pricing going forward. Do you think recent strong rebound in EM currencies means that LatAm pricing decelerates from here? And then secondly on China, can you say where the growth was in the quarter? I think you’re saying the same, all the growth is online, would you say the - what would you say the e-commerce market is growing overall in China versus the modern trade? And do you feel you and your peers have been maybe behind the curve and how rapidly the market had shifted to online? Thank you.

Hi, Warren, good morning. First of all, on pricing. Your math is correct. If you take the pricing growth of 2% that we had in the first quarter and you take the Latin American element about out, it’s slightly negative overall. But I do want to emphasize the very, very varied landscape with regard to pricing around the world. So just take emerging markets, let’s take Latin America, which is 25% of the emerging markets, that’s the case. None of the markets are hyper-inflationary by the way, but we are seeing very, very strong price increases. We took price increases of 10% for example in Brazil. And as we expected, we are now seeing volumes come off a very challenged consumer, a fair bit of down trading. The good news is that second and third to your brands were continuing to hold on to the consumer within our categories, and we are continuing to innovate on those markets, Dove Baby and laundry service et cetera. So the fundamentals are still there. And as you’re well aware, we have lot of experience in handling these markets and handling the safer pricing volatility and over the long-term, tend to come out of that a little bit stronger. Just to go to the other 75% of our emerging markets and let’s take South Asia and Southeast Asia as examples, and that group, as Andrew said, I think in the presentation, we are seeing price growth of only around 1%, which is the lowest that’s been in five years and they are - that’s where we expect to see things get back to a normalization over time and doing as we get through the course of the year. Turning to pricing outlook overall, we think it will continue to be negative in Europe. We think we will probably be sort of flat, flattish to protect us down in North America. It will continue to be high in Latin America, and we’re below historic average, as I said, in Africa, Asia and Turkey, but we expect that to start to normalize. Andrew?

Second question on China, so I’ll take that. In China, in the first quarter, we had mid-single digit growth, all from volume, that is as you say, being strongly driven by e-commerce and market for e-commerce is growing around 50%. We are growing substantially ahead of that around 80%. Currently around 7% of our business is in e-commerce. It could well be 10% by the end of the year that’s what we are aiming for. We just I think by the nature of our categories, yes, we probably were a little behind some others in developing our e-commerce capabilities. We now have more than 100 people there, so catching up very rapidly, and the partnerships of Alibaba and our relationship with JD.com that we mentioned are helping us.

Thank you guys.

Thanks, Warren.

Thanks. Our next question is from Harold Thompson of Deutsche Bank.

Good morning everyone. Just two questions. On your net revenue management, just want to make sure I heard properly what you said. You’re saying that you expect to cover 40% of your turnover by year-end and you typically see a 1% uplift in value or volume contribution from that. So do you expect that program to benefit you or boost your growth for possibly two years and then roll over? Would you expect that to be a non-growing benefit for the group medium to long-term? My second question slightly relates to what sort of been discussed on pricing. You said that Russia volume wise was kind of slightly better or back to positive growth. Is that basically a function of the price now having rolled over and therefore the volume is recovering a bit or is the volume simply doing better on ongoing high pricing? Thank you.

Good morning, Harold. On NRM, yes, we have set ourselves an objective of covering 40% of our turnover, but it’s very much done at a category in country. So the point I would emphasize about net revenue management, although it’s a global program with various colors and various philosophies and types of analysis that happens relatively consistently. It’s essentially an on the ground in country by sale local program. And what happens when you run the analysis and done the thinking, done the facilitation, as you end up with the series of potential actions that get taken. And then there is a decision to be made about whether those actions are implemented or not. So it’s not automatic, and I don’t want to imply the 40% of our turnover, we have 1% uplift going forward. That tends to be the size of the opportunity that we see across price and volume, but it faces an over time. And I should also point out that it - when you do the analysis, you tend to come up with a good list of ideas and then whilst that gets embedded in order to continue that, you have to refill the hopper with new analysis, new insight on channels, new insight on value opportunities that exists. So it’s not a mathematical science, it’s much more a capability that’s being reintroduced back into the business with a lot more granularity. It’s very close actually to what we are talking about with global and local - combination of global, what kind of categories on new packs for example and new sizes, new price positions, but the insights tend to be extremely local. So it’s a good example of global and local. And I will - your question on Russia volume, yes, Russian volume came back after a strong, strong amount of pricing that was taken before. The improved performance I think it’s largely going to sustain branded marketing investment. We have continued to invest in the Russian marketplace. We have been particularly strong in personal care. As you know, our portfolio which I think that is 50% personal care in Russia with strong local brands has benefit to this. So I think that’s where the volume comes from. I’ll ask Andrew if he has got any other.

Yes, just to say that it was characterized, Russia really by the very sharp currency volatility that we had through the course of last year and of course that continues. So we took a lot of pricing fairly early on last year and we saw some significantly negative volumes. We have since then made adjustments. The currency has moved back a little bit, we’ve made adjustments to our price positions across our portfolio, including using our local brands and that has certainly helped us move back into volume growth and particularly strong growth in personal care. But we do remain cautious, it does remain a fragile market.

And Andrew, would you say in other markets, you have seen pretty big price increases kind of similar patterns would probably repeat themselves as currency stabilized, pricing rolls over that volumes just gradually improve in those markets?

I wouldn’t like to draw specific conclusions about Russia based on past experience elsewhere. I think as I say, it remains fairly volatile in fragile market. We don’t look to see those volume growths continue, but I think it’s early days yet. So our next question is from Martin Deboo of Jefferies. Martin, please go ahead.

Yes, morning everybody. I want to come back for the three core change programs, and the mean - first of all, I think it’s very impressive what you’re doing there. But my question is around implementation risk and organizational workload and how you’re managing that? I mean, I guess if I’m sort of middle level marketing manager in Vietnam or somewhere, I’m being able to rework my pricing and promotional plans while my role is being redefined, and suddenly I am being asked to pay for my own photocopying by some sort of ZBB guy. So it seems like if it’s not well managed, it’s a recipe for organizational distraction. So I just value Graeme, probably your take on that and how confident you are that you can manage these three big programs while not taking your eye off the growth and margin goal I guess.

Good morning, Martin. I mean, you make a very good point of course. The question of organizational capacity and sustaining our consistent delivery and the momentum that we have in challenging markets has to remain at the absolute fore. And couple of comments, first of all, the very reason why in the new functional models, the organizational transformation, we put Peter into a very, very key role essentially is to do exactly that. He is there to run air traffic control, he is there to make sure that we are integrated the way we think about things, to make sure that the end-to-end alignment of the business through R&D, supply chain, through the marketing organization into the sales organization with the functions of finance and HR, the whole thing is integrated and make sense and it’s sequenced in a way that is proper. And importantly there is a lot that doesn’t change. As we said earlier, the 8/4 structure doesn’t change, the fact that we manage deliver performance on a geographic level doesn’t change. The way in which we target the business doesn’t change. So there is a lot doesn’t change in addition to making this more integrated organization come together. On NRM, I touched on that a little bit, Martin in the presentation. There is an element of back to basics and relearning what we already knew around net revenue management. If you are, as you said, the brand manager in Vietnam, you’re probably thinking well, this is a sort of reiteration on the basic principles of good 6P [ph] marketing. It is nothing particularly new about net revenue management, it’s more re-energization and a refocus of the organization on the fundamentals of channel architecture, pricing, similarly with core of the core as we call it, looking at penetration…

Our next question is from Celine Pannuti from JPMorgan.

Yes, good morning. My first question is on North America. Can you share the sellout with us and can you as well be bit more explicit on your performance in terms of your HPC versus food in that market and how your market is tracking? In fact, can we get the margin growth rate for in fact US and Europe since we added? My second question is on your sequencing of the different program you mentioned and you mentioned that you are going to upsell the cost as you go along, I just would like to understand whether the costs are going to be laid bare first and then we get the saving or whether there is a bit of a matching between the two and in that is there anything we should slide on H1 versus H2 margin? Thank you.

Good morning, Celine. Obviously North America, and I will let Andrew have a bit of a think about the sequencing of cost versus benefits for the programs, if I may. First of all, your question about sellout, we do continue to see a little bit of trade destocking in North America. Sellout continues about 2%. Our selling is about flat, so that’s our main litmus test of the impact that exists there. To get into the balance between what’s winning and what isn’t so much rather than HPC in foods and personal care, we are seeing pretty - we are continuing to see share gain driven by deos and hair, but we are down in skin and oral. And overall share gain in North America has been driven by refreshments and PC. Foods is declining a little bit as you said driven by spreads. I don’t want to get into the detail on a quarterly update of really with spreads by geography. That’s probably too higher level of detail. Andrew?

Yes, in terms of the operating margin development, we are not guiding on the phasing of margin development, but you should of course expect that we are expecting to see the first benefits from zero based budgeting in the second half of this year onwards, new function models will progressively start as we implement to deliver some savings as well. It’s worth remembering that those savings to some extent just the next like refilling the hopper if you like, our savings programs have delivered strong savings already. So we’ve already been incurring restructuring costs that we already have in savings. But I think the level of restructuring cost will be a little bit higher as well, but equally the savings maybe as well. But we are frankly looking for this to continue to the level of the sort of margin improvement that we’ve seen delivering for the last three years which is 30 to 40 basis points. So that’s the sort of margin improvement I think you should assume including the absorption of restructuring costs associated with these programs.

Thank you.

Thanks, Celine.

And the next question is from Alain Oberhuber of Mainfirst. Alain, go ahead.

Good morning, gentlemen. Alain Oberhuber with Mainfirst. I have two questions. The first is regarding the spreads. It is getting pretty volatile, positive, negative. Could you give us a little bit on outlook, what you expect for the business, when we could expect bottoming out for US specific spreads business or for the category itself? And secondly coming back to Celine’s questions regarding the margins, so could we expect in H1 slightly lower margins than previously expected because of the more investments we see particularly for ZBB?

Good morning, Alain. Let me take the second one first to actually just build on what Andrew said in response to Celine’s question as it’s fresh in the memory. No, we don’t expect that the investment phase by ZBB in the first half will cause any different phasing of margin delivery. I think, as Andrew said, historical rate of 30 to 40 basis points is what we seek to maintain. With many moving parts within that, as we realize savings, as we make choices about where we invest those savings, it could be behind growth and increasing the competitive margins. It could be somewhere in the bottom line, it could be some invested in the investments we will have to make in order to give access to the savings both in ZBB and then the new functional model. So we expect to manage a lot of moving parts, but look at the totality of our delivery and how our overall operating margin delivery just continue at the steady rate that has been at historically. Turning to spreads, when we expect that would bottom out when spreads market first of all remains very challenging. It’s the same in the first quarter. Really it was as we exited 2015 which is continued market decline in both Europe and North America and volume declines in particular because and we talked a little bit, this reduced consumption of bread, reduced spreading and falling brussel prices. And what that means in terms of our own performance is still mid-single-digit declines which are mostly driven by volume. I should say that that’s important when you think about our foods performance. That’s incorporated in the 1.9%, it was delivered by foods in the quarter. Our savory business and our dressings business have had a very strong quarter and so not to unpick things too much, but I think it’s important to recognize the strength that our performance within foods if we think beyond spreads. And otherwise, with spreads, we are continuing to pursue the strategy and we are spending quite a lot of time with Nicola and actually we’ve had a very strong baton passed from Sean focusing on the brands and the strategy for the business to Nicola focusing on the operational execution of those plans and that’s the phase that we are at the moment as we go forward. As you know, the business continues at this very strong margin contribution to Unilever and generates a lot of cash. And most fundamentally what we are focused on doing is executing the plans and preserving the value of the cash that the business generates and the interest of shareholders. That’s what’s on our mind.

The next question is from Javier Escalante of Consumer Edge.

Good morning, Graeme, Andrew. My question is around just by the commentary about where you mentioned that it could be the spread as the polarization of the emerging market. Consumers, some of them trading up, some of them trading down, so if you can help us understand, we thought that that was something that it was mostly developed market. So if you can help us understand which countries you are seeing these or in which categories this polarization is taking place. Are you seeing, for instance, more price sensitivity say in food or in household products relative to personal care? If you can give us more color understanding that the aggregate of these countries is very complex. And the other thing is that if you explain - I mean I was a little bit confused about what is a takeaway with regards to emerging markets, because it seems to me that you are expecting some of them to get worse, so if there is any particular one-timer that somehow flatter the volume in Q1 as, say, a trade destocking in Brazil or something like that if you can give us any sense whether the volumes in these quarters somehow were flatter and then you are expecting this stuff to roll off or is this more macro conditions that you expect to worsen? Thank you.

Thanks, Javier. Good morning. Let me take the second one first again. No, there isn’t anything I can think of that has been a one-time flattering of volumes or any particular destocking, any particular channel shake-out events across the emerging markets. Just generally what we see is that those markets are more volatile. There is no polarization. I like the expression that used in - at the start of the question. But we have seen this before, perhaps we have not seen the same degree of polarization, the same degree of volatility, but we are confident that we know how to manage our way through these markets. And I think Latin American, where take Brazil and Argentina which are particularly acute at the moment, we know how to focus first of all on the consumer. By having local management teams who are empowered to make pricing decisions and think about consumers trading up and down within categories in those markets, we focus first on the consumer, relevance of our pricing, making sure that we are competitive. We continue to invest behind the brands, we stay in for the long term and typically we come out stronger. I mean, you can never be entirely sure that history will repeat itself, but if you take the example of Argentina, 15 years ago, the last time there was a major devaluation event there, our business certainly came out stronger as a consequence of that philosophy of management and leadership in the market as we manage through the choppiness. On your question about polarization and specifically it’s hard to give you a specific example on a particular country about trading up and down, but I do think that what we see in taking European marketplace of a very value conscious consumer are looking to…

Okay, we just have one more question from Eileen Khoo of Morgan Stanley. Eileen, please go ahead.

Good morning, gentlemen. Thanks for taking my call. I just want to just follow up. Actually the first one is about LatAm pricing. I am just trying to understand your pricing here has been very strong for a number of years now, in fact accelerated this quarter to over 15% and I know you said, Graeme, that none of your markets are hyperinflationary, but obviously 15% is quite high and Brazil is 10% and that’s by far your biggest market. What are the other markets that are moving the needle for you and how should we think about the volume pricing equation here in the coming quarters? And then the second one is just on refreshments. I mean all the commentary is pretty positive as you’ve obviously got great innovations et cetera in ice cream, but at least versus our and the market expectations, the 3.8% like-for-like seem to be below what we were expecting. Is there any particular reason there? Was it because of LatAm summer et cetera? Is there any color you can give around that? Thanks very much.

Hi, Eileen, thanks for the questions. On Latin American pricing, it has been strong in Brazil and Argentina. We talked a fair about the specific actions that we have taken. Markets where we lead and markets where again focusing on the consumer, focusing on affordability, the combination of commodity bounce around, but washed away - more than washed away by currency devaluation has been on the ground inflation and which had to be very consumer centric in a way that we have taken those prices increases, but we have taken a lot of price increase. Now, the contribution that Latin American pricing has had overall to Unilever hasn’t really changed. Yes, it contributed most of the global pricing in 2014 and ‘15 and it was all of the global pricing in 2016 if you choose to just carve it out in that sense, but that hasn’t really changed much over the course of the last two or three years. In terms of what we expect looking forwards from a volume perspective, in Brazil, we’ve got negative volumes in an ever deepening recession and we expect that will continue. Innovations, we are doing quite well. We are growing penetration, we are growing distribution. As I mentioned earlier, we are making sure that ass consumers down trade, the tier 2 and tier 3 brands like Surf or Brilhante, they are trading down within our portfolio. Argentina, another challenging economic reset, we have seen volume growth actually in the first quarter. We continue to invest behind the brands where we do think that consumer demand will contract in the remainder of the year. Andrew, do you want to comment on the refreshment?

Yes, on refreshment, if you know, we’ve had a couple of good years Eileen, with 5% plus growth. I would always say, don’t read too much into any one quarter and I think that’s particularly the case in a business like refreshment which is more seasonal.

Yeah, just a flat Q3, we had a very good - as we go through the balance of the year.

Okay. We will bring the call to a close there. As ever, myself and Ansgar, we are happy to take any further questions when we get back to our desks and so with that, Graeme, if you want to say anything beyond that.

Yeah, just thanks from Andrew and myself for your time today. I know it has been a busy morning for everybody. Sum up with a few words. We are on track to delivery another year of competitive top line growth. We think that that would be in the range of 3% to 5%. If we think about the momentum we have in the business, we think our business is still continuing to grow at about the 4% rate. There were a few - there was an extra trading day that movements in east, there were base things. We haven’t deconstructed that. We don’t think it’s at a particularly rigid and tight, but there will be some impact without doubt we just haven’t been precise with it. But we remain on track to deliver - we will continue with steady margin improvement. I hope you got our message. On the initiatives we are taking we think position us well to deliver long term value creation into the future. And with that, I hope you enjoy the rest of your day. Thanks very much.