We are about to hand over to Unilever to begin the conference call. [Operator Instruction] We will now hand over to Graeme Pitkethly.

Good morning all and a very warm welcome to our third quarter trading update. I'd like to begin with the market context, then cover a brief review of our underlying sales growth overall and the drivers of that growth by category. Andrew will take us through the regional performance and our turnover development. And I'll then wrap up with a brief update on the three key initiatives that we are pursuing and some concluding remarks on our outlook for the remainder of the year. Before we go further though let me draw your attention to the usual disclaimer relating to forward looking statements and non-GAAP measures. So let's get going with the market context. Overall, it is fair to say that the economic fundamentals remain weak and volatile. Since the start of the year, we've been flagging that we expect market conditions in Latin America to worsen. And that's what we have been seeing. Just as in past cycles when currency is weaken the cost of living goes up faster than income and people either cut back on purchases or they down trade. Latin American markets are growing in local currencies through pricing. But consumer demand measured by market volume contracted by 10% in Brazil last quarter and fell by 7% in Argentina. In Asia, we've had a few quarters of very low price growth as commodity costs have been benign. This is now turning. Palm oil is up almost 70 percentage points over the last nine months and Brent crude is back over $50 per barrel. In categories like skin cleansing and laundry, this means a rebalancing of the growth mix with more pricing and less volume as the increases are put through. All these mean that for the moment aggregate market volumes in emerging countries are now slightly…

Thank you, Graeme. So let's start as usual with our largest region Asia, Amet, RUB. Underlying sales have growth by 5% in the first nine months with nearly 3% from volume. In the third quarter growth slowed to just under 4%. We continue to grow well in South East Asia mainly from volume. And in Africa and Turkey from price. Our market conditions have softened in India and as Graeme mentioned earlier, volumes in skin cleansing have suffered from price increases to recover rising commodity costs there. In China, sales were flat in the first half year but were slightly down in the third quarter. The market channel structure is shifting rapidly to e-commerce. Two years ago, this was just 3% of our sales, today it's over 10%. By cutting out intermediaries like wholesalers this shift results in a structural reduction in trade stock levels. And this is likely to continue for some time to come. On top of this laundry sales in China are down in the face of aggressive and we believe unsustainable price competition between two local brands. Moving across to Latin America. Here underlying sales grew nearly 13% in the first nine months. With pricing up 15% and volume down 2%. It's worth noting that price growth in Argentina continues and contribute around 100 basis points to total Unilever pricing. In the third quarter, volumes in Latin America were down 5%. This reflects both the very difficult market conditions that would expected and the strong comparator from selling ahead of price increases that led to nearly 5% volume growth in a third quarter last year. We have no doubt that the long-term potential of the region remains strong as ever. We continue to invest accordingly. And in fact in the third quarter that marked our reentry…

Thank you, Andrew. Let me give you just a brief update on each of the three key initiatives we are pursuing this year and next. These are designed to build agility and resilience into our business to underpin our 4G model of consistent, competitive, profitable and responsible growth. The first of these is net revenue management. In essence, this is a very detailed program of capability build to optimize pricing including promotional spend across individual SKUs and channels. So far it has been rollout to about 40% of our turnover and we expect to have covered 50% by the end of the year. As Andrew mentioned, it is a key capability build and mitigating the effects of price deflation in Europe and it is helping us get the most out of our portfolio elsewhere. The second program is the organizational change which we call Connected 4 Growth. As a reminder, this is design to keep us one step ahead in a world which is becoming at the same time both more global and more local. It will make the organization faster, simpler, more consumer and customer centric and future proof for the connected world. It would help us unlock trap capacity and reduce the wasted time and energy spends on managing interfaces within our marketing organization. The new organization will have fewer layers. More of resources would be deployed in global brand communities and local operations and less in staff roles. We completed the design phase in the third quarter and have now begun to implement the new organization and processes. We'll aim to have this much as we can done by the end of the year and try to complete it by the middle of next year. The third program is zero-based budgeting. In the first half of the…

[Operator Instructions] So our first question is from Celine Pannuti of JPMorgan. Celine, go ahead please.

Yes. Good morning. Well, my first question is rebounding on what you just talked about in terms of the market growth that has become more volatile. We've seen that volume under pressure in LatAm, and Asia weakening from here. Could you give us a broader number for what is the market growth at the moment, and whether we should be assuming that this kind of slower growth continues as well into 2017? That's my first question. And my second question is on the margin performance and the overall -- thanks for giving us some number on that. But I was wondering, in an environment where there is less growth, whether the investment as well are less and how you manage the balance of investment, return on your -- in terms of the growth performance.

Okay. Good morning, Celine. Thanks for the questions. And taking the market growth question first, I won't give you an aggregate view market growth because I think it is one of the least useful measures. What I'd like to do maybe just drill into few specific markets. I think that's probably a more helpful way of thinking about it. I mean overall as we said on the charts there, some places have softened as expected. So Latin America very much has -- is-- the markets are evolving in the way that we expected. And volume growth in aggregate across our market is flat. There is basically no volume growth -- there are no markets in aggregate right now. In the developed market just to talk about Europe from it, markets continue to decline is now close to a 2% decline and that is we know is driven by price deflation in many countries, volumes are slightly positive in the market there. In North America, it is a different story. Market growth picked up in the last 12 weeks driven by Refreshment and it is now over 2% with both price growth and mix growth and volumes there are slightly down. And Latin America, as we indicated we expected volumes to get worse before they get better. And that's very much what's happening. Pricing remains relatively strong in Latin America. And Brazil, deteriorating consumer demand, high single digit volume decline in Argentina with 50% price inflation in our categories. And there is a lag of course in both places to salary corrections which will catch up over time. And will cause volume to come back over time as we said in the charts there. But right now it drives down trading destocking and reduced consumptions which is what we are seeing.…

Just one question; could you remind us the percentage of business where you hold and gained share?

Yes. Again, that's another of those metrics we look at generally speaking to think about competitiveness. It remains over 50%. So many ways of looking at competitiveness and the chart we put out showed in each of the four categories we are growing ahead of market growth which is a great way of say that we are winning share and be competitive. But in aggregate more than 50% of our business is winning share.

The next question comes from Alain Oberhuber of MainFirst.

Good morning, Graeme, Andrew. I am Alain Oberhuber. I have one question regarding the spread business. Could you give us a little bit more insight when you expect situation in Europe to improve? And the second is North America, is it that the category is improving or did you gain more share in spreads than expected?

Thanks Alain. Good morning. So just to take the opportunity actually just to reiterate how we think about spreads. The market of course remains challenging. We got continued high single digit market declines in Europe and indeed in North America. I mean overdrives that reduce consumption historically low butter prices driven by things like embargo et cetera. So it is a tough set of circumstances. Now against that the spread performance overall continues to be on mid single digit, decline is mainly volume driven. And as we called out in the presentation the rate of decline in spread started to slow in North America. And so we would be cautious talking about categories and shares because they are large part of the category of course in North America. But there is a bit of improved execution on the ground. We've -- some of the investments that we made in our infrastructure in North America have started to go through so that it is fundamentally driven by improvements in our executional performance there in that market place. As we said in the call, we haven't yet seen the turnaround in Europe and I can only reiterate that I think the wins which are running the business now is better way to run this business. We are focused very much on preserving the value of the cash that BCS business provides to, it's got very, very strong margin as we said in the call. Those margins have increased as a consequence of the activities we've taken since we set the business up at the end of 2015 or mid 2015 to run it differently. Its core operating margin is well above the Unilever average and as I said continues to improve. So we haven't -- we think we are doing the right things. As many options to the future of the business and we won't speculate on that but we are very happy with the way in which the different way of operating is gone. We started to see improvements executionally in North America but not yet in Europe. And I wouldn't like to say when we would see that turnaround in Europe. The market circumstances remain very challenging although there is a little bit of a price differential we made up again with butter which -- it would be good to see because that would remove what is the historically extreme situation in terms of the value proposition of spreads as it exist today.

The next question comes from Warren Ackerman of Société Générale.

Good morning, Graeme. Good morning, Andrew. So Warren Ackerman with Société Générale. Two questions also. First one on Home Care. I mean Home Care has been your star category Graeme, volume somewhat concerning in Q3 down 1.2%, I think you quote out price skirmishes in the UK laundry and China. I think Chinese had unsustainable; can you elaborate a bit on that? And would it be fair to say that your market shares are under pressure in Home Care? What is your outlook for that category? And then second one on commodity cost. Obviously, you showed the chart that costs are going up, palm oil, Brent crude, butter prices. You've obviously got FX challenges as well so just sterling. I mean do you think you will be able to take pricing, I mean we've seen what's happened in the UK with Tesco when you try to take pricing. It is not only UK question, it is more a question of outside of Latin America as commodity prices go up and currency is -- some market remain challenging. Do you think this portfolio has pricing power I mean I get the point around mix but at some point pricing will need to go up and the push back is clearly quite aggressive at the moment. Thank you.

Good morning, Warren. If I may I am going to pass the Home Care question to Andrew because he did such a brilliant job running finance for Home Care for all these years. So he is actually better placed and all things about commodities well he does that.

Sure. Warren, as you know that in home care our priority that we set out a couple of years ago was clearly to make a step change improvement over time in margins. And as you know the half year we were getting close towards target of reaching double digit core operating margin in Home Care. And we've always said that as we go through that. The very strong growth well ahead of the Unilever average that we had been achieving. We would expect that to moderate. Still looking to grow ahead of the markets and indeed we are still growing ahead of our markets. Growth has come down a little bit, that said that's the big picture. I mean not that surprised by that. So for the year-to-date 5.6% underlying sales growth in Home Care with volume up 1.5% and as you said volumes weaker than that in the third quarter, three key factors within that apart from the overall general softness in consumer demand around the world. In Latin America, we are gaining share but we have face the same issues we do in other categories and this is big if for us in Latin America is the contraction in consumer demand given the fact is that Graeme described. And of course the tough comparator that we also talked about last year. In the UK, we mentioned aggressive price competition that happens from time to time. It has been relatively less of that in the last few years but we've had a new revised spate of increased proportions from competition there.

And good innovation in UK, very innovative market actually in laundry.

Yes, indeed. Yes, so products like Comfort Intense and a good range of innovations that help drive over the years both margin improvement and growth. In China, the two locals they are actually the number one and the number two player in China. And have been more many, many years. So this isn't something new, have been going through some very aggressive price promotion. As I said, we think that is unsustainable based on cost and margin et cetera. We'll have to see how that plays out over time. Overall, we are satisfied that we are growing ahead of the market backed by lot of good innovations.

Warren, if I can pick up your question on commodity cycles and pricing in general. I got few points to that I like to make here which are general and then one or two which are little bit more specific. First thing is just to reiterate for everybody that there is commodity cycles will come and go of course. But it really is the combination of commodity and currency that give rise to the cost landscape in an individual market. And as you know we are very focused on managing pricing close to our markets, we -- the pricing decisions are taken by our local teams and our front line operations where frontline focused in that regard because we think that the critical view of consumer affordability and making sure that we are being sensible when prices go up or prices go down is best done by the people who are in our teams and the front line of the business. Just to give you sense of the scale of that combination of currency and underlying commodity prices for this year. There has been about €600 million of foreign exchange impact on our commodity days during the course of this year. So far 75% in five countries alone, Argentina, Brazil, South Africa, Mexico and India. So that's about point one really. Second point is the changes in commodity cycle are common of course to everybody in the industry. So how do we think about pricing in that context? I just want to reiterate our philosophy on that. We manage our local level as I said based on consumer affordability. Now we are cost so lower that means we might reduce pricing or we might choose to invest in our brands. And where costs are higher we will need to recover…

So our next question comes from Eileen Khoo of Morgan Stanley. Eileen, go ahead please.

Good morning, gentlemen. I am Eileen Khoo from Morgan Stanley. Two quick questions. The first one is on Refreshment. I thought your performance is pretty impressive in view of the comp that you had had last year. Would you be able to break that down further for us in terms of ice creams versus tea growth? And also you talked a bit about the strong performance of the acquisitions you have done Talenti and T2, would you be able to talk about Grom as well and along with that if you have more plans to go into the out of home channel and what do you think is a stable, medium term run rate for Refreshment? And then the second question is just on your strategy to premiumize personal care. And would you be able to just remind us what percentage of your sales here as in premium as opposed to mass or low price and bigger picture do you see a risk for your portfolio with the trend of market fermentation and consumer somewhat perhaps moving away from mass brand? Thanks very much.

Good morning, Eileen. Thanks for the questions. And just I'll take the one on Refreshment and thanks for saying it is impressive. We were very pleased with the Refreshment performance this quarter. It was 4.5% despite that very strong comparator of 8.5 percentage points last year. So there is no doubt about that the very nice weather conditions in Europe through September and not extended summer certainly helped us against very strong performance in particularly ice cream last year. So, yes, we are very happy with it. Just to break things down a little bit and perhaps split out between ice cream and tea. The ice cream business particularly in Europe you should expect continuous to gain share and is doing well. Tea is growing at about 3% in the year-to-date so less than the average of Refreshment and we talked a lot of about the challenges we have there from a portfolio perspective, be it in the formats which are growing more quickly such as specialty teas, green teas and the more premium formats but rest assured our -- all of our effort there is in shifting our portfolio into the parts of the market place that are growing faster. There are pockets in the black tea market place. The UK is one I call out where there is an awful lot of promotional intensity in a very difficult market and a moment. So that is we in quite heavily in tea performance overall but through the rest of the business in the Middle East for example we are seeing our strategy tea starting to pull through nicely. Andrew, would you like to comment on Grom?

Yes. And first of all on Talenti and T2 which are both growing as we said and received very well. Those we've owned for three and two years. And so we are able to see the benefits of expanding distribution in both of those. In the case of Talenti is very much on the back of existing distribution base we have that we are able to leverage. In the case of T2, it is much more organic, it is much more opening new stores. Grom is much more recent so although I didn't mention it in the turnover reconciliation, Grom is the other contributor to the M&A. So it is been with us for less than two years, very recent. In general, our retail operations are part of both building our brands and also taking us into more premium spaces. So Grom again is very much a gelato business. It is very premium but too early to actually start reporting against growth. It is not in our underlying sales growth numbers yet. It is still in our M&A number. Turnover is around €25 million in Grom just to give you an idea of the size of the business.

I mean just to finish off your question there on that the premiumization of personal care. About a third of our portfolio sits above 120 price index meaning if the average of the market is 100 we've got about a third of our portfolio at a 120 plus and that is going faster. And that is a great way of trading consumers up and creating value in the category to the benefit of ourselves and to our customers and also to the benefit of our consumers. So it is very, very important and a real core part of our strategy and some of the innovations that we touched on in the chart, you saw us talking about Dove, Derma Spa with dermologica claims that sets 180 price premium, Dove Advance hair series sits in a price premium as well. So that sort of gentle premiumization by bringing in brand, using our innovation and our technology that allows us to ladder up is the way to do it. As I said, good for us, good for our customers and good for our consumers. There are others though in Zendium toothpaste, we've now got out in 16 countries not so premium example in personal care. And then of course moving further up to a different channel structure and a much more premium position. We've made the investments last year in Prestige, now they are all growing in line with the business cases as we said in the presentation. But just to reiterate the overall size of that market place just in the categories in which we play excluding color cosmetics and fragrances et cetera. I mean in skincare and hair care that's about € 40 billion market globally. And it is growing somewhere between 5% and 6%. So growing faster than the average of personal care. That's why we are attracted to it. Different channel structure, very, very strong brands in an attractive market place one that is frankly quite fragmented at in terms of the brands in the market place there is the opportunity to build scale to the portfolio and build scale to that business through further acquisition. But it is actually quite concentrated from a market perspective. I think the top five or six markets are about 70% of that overall market. So there are particular market dynamics in Prestige to make it attractive to us.

We have a next question please from Mitch Collett of Goldman Sachs.

Hi, there. Staying on Personal Care. You said that part of the slower growth in the third quarter was due to intense competition. Can you give us a bit of color on where that it is in terms of category, geography and maybe on channel? And then secondly, North American spreads has improved but the growth of the Foods business is got if anything fractionally worse, what is offsetting the improvement in North American spreads? Is it savoury? Thank you.

, :

Next question comes from Charles Pick of Numis.

Good morning. Thanks very much. Two questions please. On the underlying volume growth the minus 0.4% overall and the minus 5% for Latin America. Is there any sense whereby you can give an indication for you think the underlying position was align for the one offs that feature in Q3 of last year? And secondly, just a point of clarification, when is the Seventh Generation expected to be secured? And is there much scope for its product outside North America?

Hi, Charles. On the volume performance, so yes-- you called the two component parts minus 0.4 for the quarter. I mean we don't like contributing all of that to Latin America but there was an impact of that 5% came through. We call though Latin America as one of the features in the strong performance that we had in Q3 of last year. I don't really want to -- I don't really have underlying number because we don't view it that way which is probably the right thing because we don't run the business with the view to the one offs and other things. We certainly as I said aren't really looking at the volume in an individual quarter as something that of particular indicator for us. We though that we would see a volume reaction in Latin America we were expecting that, it has been strong. I should say that we do expect over time that there will be rising wage growth catching up with inflation that should happen, that a put a bit more spending power back into consumers. And we will see volume growth return into positive territory during the course of 2017 in Latin America that certainly something we would expect to see. And some generation is going to closing in Q4 most likely sometime during October then you won't see of course you're underlying sales growth measure any impact of that for another year thereafter. But we are looking forward to having a portfolio; it has been growing at 10% for the last 10 years. So it is 20 year old brand so we are very much looking forward to working there. It is based in Vermont actually so right next door to our own place at Ben & Jerry's. So quite a lot of physical and emotional parallels between our businesses. And I know Nitin and the team is really looking forward to working with the folks at Seventh Generation to really bring them as part of the Unilever family.

Right. And can you spend outside of North America?

Yes. The indications when we were looking at the business were that they have eminent credential to grow outside North America. That's obviously one of the things that we can bring. We bring our international footprint. We are generally speaking relatively conservative in how we think about that in international rollout isn't a trivial thing even where you've got the infrastructure et cetera. And there is the potential also to extend the category footprint of Seventh Generation, particular natural's positioning the fundamental strength of the brand based around this looking after the generations to come is very appealing, it is a very strong brand and we think we will be able to take into both new geographies but also into one or two additional categories.

Take two last questions. First from Chris Wickham of Whitman Howard.

Yes. Thank you. I just wanted to get on to the ZBB side of things. And I just wondering if could give us a bit more flesh in terms when you are benchmarking your approach to ZBB compared with others? And also to get a sense whether even though we are talking based on terms about cost whether or not there are any sacred cows or anything that which might be considered in terms of -- something that might inhibit your ability to recruit people. And then I was just wondering whether there does, inevitably, come a shift in thinking in terms of M&A, you have been very much driven about bolt-on acquisitions, very much looking at businesses which give you revenues synergies. Whether you get to a point where you think well actually because we are so strong on the cost side we can actually start acquiring businesses which are in related area but where the real value add of the acquisition would be cost extraction rather than portfolio fit.

Hi, Chris. Well, first on ZBB, few things to say about it, really I mean we think it has been very interesting to go through the various phases I described in the presentation of visibility value targeting and then implementation. And what we found is that the whole philosophy of ZBB actually fits Unilever pretty well. It is very fact based exercise, first of all, the things we find out through this process about what we spend and where we spend and then challenging ourselves on why we spend. So it gives you an excess of visibility that is very, very insightful and very, very useful and will have a lot of usage I should say going forward as well as we maintain that level of granularity and transparency about where we spend our money. The other thing it has been good for us, it is driven by experienced business leadership. So this idea that instead of looking vertically going through your business as a business leader, you take one of our senior as we call them cost segment owner, he is a senior leader in the business and give them responsibility for a cost horizontally across the entire company. And that creates a very constructive tension of challenge of about where we spend and why we spend that. But in terms of fitting in Unilever having some of our big leaders take on that leadership challenge and the ability to manage our cost horizontally across the entire business has been very, very powerful as well. And finally, it say we tend to run all of these businesses, consumer businesses or growth businesses therefore, you run growth models that tend to be incrementals or based on incrementals and relative. We are talking percentage points and basis points et cetera. And…

Okay. And our last question is from Fernand de Boer from Petercam. Kenneth

Yes. Good morning. It is Fernand de Boer from Petercam. One question. You mentioned the impact of the British pound on the sales level. But I think there is also a quite a positive impact on the margin side for the overhead cost. Could you quantify that little bit for the second half? I know it is trading call but give some idea.

Sure. We'll step out for our normal practice not to talk about ailments of the P&L and just give you that number. We think overall we've got about 10 basis points or so of positive impact from the net of all the things that are happening with currencies around our universe for the full year. Last year we obviously we had a tailwind from the strength of the British pound, this year there is a little bit -- sorry got a headwind from the strength of the British pound, this year we expect that reverse is until little bit of a tailwind but overall that's only a very, very small proportion of the moving parts of currencies that we have, reiterate that we expect top line to be impacted by about 5% for the full year little bit less on earnings maybe 4% or so on EPS. And overall that will mean that there will be a very small benefit from currencies in the round, Fernand, but it is much, much more actually than the impact of one particular currency. The impact as I said earlier of a particular currency is actually on our business in that particular market not the aggregate of where our cost set overall as a group.

Okay. We will bring to place to call there. I'll just hand back to Graeme for some closing remarks.

So thanks first of all for your questions. They were terrific. Let me just summarize the messages that Andrew and I wanted to get across to you in a few headlines. First one is that our third quarter performance very much leaves on track for a growth target for the year. Second one is that the category strategies have definitely working. We are delivering growth that's ahead of the market in all of our categories. And is more balanced than it has been in the past. And those category strategies are dating the innovation and also the M&A activity that keeps our portfolios evolving and getting better and better and better fit for the future. We are now in the implementation phase of the change programs. Three change programs and that will make us both more agile and underpin our objectives of consistent, competitive, profitable and responsible growth what we call a 4G growth. And that said, I'd like to thank you for joining us and for your questions. And hope you enjoy the rest of the day.

This conference has been recorded. Details of the replay can be found on Unilever's website and will be made available shortly. Thank you.