Unilever Earnings Call Nuggets: Impact of Easter, U.S. Market Conditions

On Thursday, Unilever PLC ADR (NYSE:UL) reported its first quarter earnings and discussed the following topics in its earnings conference call. Here’s what the C-suite revealed.

Impact of Easter

Celine Pannuti – JPMorgan: My two questions, first is on this impact of Easter and the (positive) that you mentioned, would it be possible for you to quantify that especially with regard to Europe? Or maybe in another way as well, could you tell us what is the underlying sell-out volume that you see for Unilever in Europe and what is the market volume like in your category? That’s my first question. My second question is for your outlook. Thank you for giving us the information on raw material guidance but I wanted to if you could reiterate that you see 4% to 5% growth in your category globally this year. I think this what you had indicated at the full year stage, full year ’11 stage. If that is still on? Then you have communicated to us the consensus expectation for H1 and H2. Consensus is looking for minus 10 basis point in H1, do you think this is in line with your comments you’ve just made on H2 weighted margin performance

Jean-Marc Huet – CFO: Celine, I think there are three questions actually here. Let me just try and take some one by one. You’ll remember we do not judge the performance of the business over such a short period. I mean one quarter is 90 days and this is exactly what we were saying this time last year, so please take that overall into account. That’s also the reason why we made the move last year to trading statements. You’ll know for most of other competitors that we are enjoying a leap year, you’ll also know about where Easter falls, and then specific to Unilever, you will remember that we had a week first quarter last year because of the mild winter. I don’t want to get into details on the European level or into any one-offs because we’re trying to move away from that and just talk about the business the way it stands. But if you were to take all those one-offs, I would say that they account for approximately 150 basis points on our overall top line. On your second question in terms of outlook, we expect the market growth for this year to grow around 4% to 5%. Market growth will moderate as price increases are lapped, but we think it’s in the mid single-digit range. Then thirdly on consensus expectations and as you look at this core operating margin improvement, which we want to be sustainable but modest because we’re investing in the business, you’re absolutely right, it is face to the second half of the year and where the average of consensus is probably where it should be.

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Celine Pannuti – JPMorgan: Just could you – on my first question, what is the current volume growth in your category in Europe, please, the market growth.

James Allison – Head of IR: Celine, this is James. We’re certainly not going to give you at a category level, but in the first quarter across the developed markets. We see overall market growth of something between 2% and 3%, volume component probably minus 1%. So, pricing making up about 4%. So, that’s how we see the overall developed markets.

U.S. Market Conditions

Michael Steib – Morgan Stanley: Just one question on the United States. James, you mentioned difficult market conditions in general. Could you give us a bit more detail please? Does that differ by category? Is the food business doing significantly worse than the HPC business, Personal Care? In positive territory, can you just give us a bit more color on the performance of the U.S. business?

James Allison – Head of IR: Sure, Michael. Couple of points once in awhile over the last three, six months there have been some positive signs overall when it comes to the economy, but let me tell you recovery is mixed and slow. The overall market grew not more than 2%, and in value with negative volume. So, this continues to be a difficult market and that’s also our assumption going forward. We just give you the sum by 13% of the population, 45 million Americans getting food stamps. I think that really brings home the overall macro context. While we are pleased with the overall performance of North America, if I look at the numbers it’s all been through price and there has been somewhat but slight negative volume. But let me just give you some context to that. In the overall market where in terms of volume that’s a decline at a lesser rate than the overall market, so we’re increasingly competitive. Now, there is a lot of work to do, but if I look from the categories, we’re seeing some good momentum specifically in the Personal Care. The overall market is challenging, but our performance is good. If you look at hair, where we’re launching Dove Style and Care, things are going well. We’re launching Clear, so we’re driving innovation. We’re investing in our Personal Care market sorry category is a vibrant one. If you look at our Foods, in ice cream, life is difficult out of home, but we’re driving innovations with what we’ve been doing in Magnum. If you look overall in Foods, it is an area of focus and one that we are taking very seriously. There are some parts that are doing very well in savoury like the others were, such as spreads, we’ve been quite aggressive last year with pricing and obviously while competitors have reacted, they haven’t to the same extent. So overall, difficult market Personal Care with momentum. Food, there are some signs of a good performance, but it’s an area of focus.

Michael Steib – Morgan Stanley: Food in particular, do you think this is largely a function of just the substantial price increase that the whole industry has taken last year?

Jean-Marc Huet – CFO: You will see that are specifically in our spreads business yes, but it’s a different story where I have to look at ice cream for example, where there are different pricing dynamics specifically out of home, but just taking spreads to your point yes.