Unilever PLC ADR (NYSE:UL) recently reported its second quarter earnings and discussed the following topics in its earnings conference call.
Harold Thompson – Deutsche Bank: I have just got two questions. The first one, clearly on gross margins; very impressive, up 120 basis point, and I think Jean-Marc you said that the work on Maxing the Mix has contributed to that performance. Without wanting to get carried away, how much has this Maxing the Mix contributed to that 120 basis point? Therefore, how should we think about the potential for that program to help Unilever going forward? The second one is more a pricing question. 2% pricing in the quarter, it keeps coming down. I guess the pass-through effect would mean we get close to zero by year end. What can you tell us on how pricing (stroke), I guess, input inflation would look like in the second half?
Paul Polman – CEO: I’ll get into the gross margin for one second and I’ll ask Jean-Marc to do the pricing part of this. On the gross margins, I appreciate that Maxing the Mix is obviously a key driver when you do 120 basis points, which so far seems to be ahead of other reported results. I’d also like to remind you and you probably are the first one to know that Harold that we already started our journey of gross margin improvement over the second semester of last year. So there seems to be more consistency coming in. As you see the delta of these improvements between ice cream and laundry, where we focused on and the rest of our business, it is also fair to say that Personal Care and Foods are actually increasing its gross margin as well. So they have not really been benefiting yet from this expansion of these low cost business models. So if you see 170 basis points, at least 100 to 120 basis points is low cost business models, but the rest is obviously the discipline of getting rid of your low profitable variants, the more profitable innovations. 75% of our innovations we now launched are margin accretive and these are efforts that have been done across the board. So we think it is well-implemented now with discipline across all the categories, but we also think there is more juice to come. On pricing, I’ll hand it over to Jean-Marc, but before that, let me just simply point out that we’ve always said, pricing will ease off a little bit. So that should not be a surprise to any of us, but I also hope that you have noticed that across the categories the volume component is actually picking up and that’s the most important thing for us. So it’s quality of growth that counts. I’ll hand it over to Jean-Marc.
Jean-Marc Huet – CFO: Sure, thanks Paul. So just for the second half, we don’t expect any further price increases in either Europe or North American if anything it could be slightly negative. I think that there will be pricing expected from the emerging markets given the currency devaluation that we’ve talked about, so the UPG of the second half will probably be a little less than the first half, just some color on the first half, UPG was at 2.3%, rollover was around 1.5%.
James Allison – Head of IR & M&A: I think we now have Celine Pannuti…
Celine Pannuti – JPMorgan: Two questions, the first one on what you mentioned for the America zone, on one hand, you mentioned that Brazil (indiscernible) the SAP rollout with volume in and as while you’ve seen a hit on U.S. sales because of some destocking, could you may be give a bit of color on the magnitude of those? I understand that maybe Latin America and Brazil, the issue could be a quarterly effect, but I was wondering in the U.S., one of your competitors has mentioned a slowdown in the mass market in Personal Care, so whether that could be something that will be more ongoing in the coming quarters? That’s my first question. Second question coming back on what you just said about, all the positive on gross margin and Maxing the Mix. Is there a way you could maybe help us to understand the balance of what you say a top line investment in an environment that is competitive versus all those goodies that you are making on the cost side? I remember at the full-year stage, I did ask you if you are happy with 30 basis points consensus? You said, yes, now your margin is up 40, shall we raise above that?
Paul Polman – CEO: Thanks, Celine. I appreciate that the – let me quickly write-down because they’re too good questions. If you first take the Americas, again I just want to be clear here, we’ve always had a slowdown in these economies and you actually see that happening. You just have to look at the numbers, macroeconomic numbers of Brazil as you mentioned, and you know what we’re talking about. Despite that we have double-digit growth in Brazil and under Fernando Fernandez do very well. We’ve launched TRESemme which is now the second biggest Hair Care brand. We see our Knorr brand behind the baking bags and the bouillons getting stronger. We see Magnum growing behind a very focused plan on ice cream and doing well there, thank you very much. Our laundry business I like to remind everybody, despite having to deal with competitors at 30% lower pricing or more still have the 70% share. That’s a share that you also found a few years back. So the competitive battles won as well. So we know what to do and Latin America will always have its ups and downs in some of the countries depending on the political situations or some of the other battles, but we are getting good returns and we continue to grow double-digit there. The America, North America, we agree with you. We’ve always said again, that North American market is basically flat. I’ve said that before and I also think that the growth that you are there seeing is not very well spread. We need growth that touches everybody in the population, and we like employment levels to go up, we like consumer confidence to go up across the population to do well. Personal Care markets are broadly flat. Interestingly, on Personal Care on the Kees Kruythoff’s capable leadership, we have grown the shares in all categories. We are now the number one in Hair Care from number three. We continue to grow share, we continue to grow share in deos, we continue to grow share in skin cleansing. So the strategy that we’ve put in place we’re happy about, at the same time if you’ve seen this that we have now nearly come to the end of streamlining our portfolio to make it more strategic and in line with the overall Company, because frankly we were a little bit all over the place. These big investments are now out of the system. The reason the volume is slightly down over the – the USD is slightly down over the first half is really because in the base we had the shipping launches for our Hair Care launches last year and one or two other things, we are less concerned about that. But having said, we need to continue to set the bar high in the U.S. and we have for plans to continue to do that. On gross margins, I’ll bring it back to Jean-Marc to give another perspective on that. So you can hear it from him, but indeed behind these gross margin results, it is fueled by innovations as I’ve now pointed out and you see increasingly the proof points of that from the discussions we’re having and the examples we show you and actually we are one of the few companies that continue to significantly step up its investments in A&P as well, to put our worth where it is and then we see the effectiveness of these investments going up. The reason I mentioned these every awards is not to say aren’t we good, but it is really a recognition from the outside world, what a change has happened in a company like this and the effectiveness of our spending is going up. So let me just pass on to Jean-Marc for the second part.
Jean-Marc Huet – CFO: I mean not appropriate at this point in time just to comment on consensus, but what I would say is the fact that in the second half of the year, on the one hand, there are prior year comparators which are little bit more difficult. On the other hand, we have to step up our discipline around overheads and this is in environment where we need to continue to invest in our business, be it in terms of product, support for our brands and the like. We have a good view given our forwards in terms of commodity impacts, which as you know are always between three to six months and the work that we are trying to do on Maxing the Mix, again, as Paul said, is structural. So we’re confident with the types of margin leverage that we’re trying to achieve, but most importantly is to walk chewing gum is to grow and drive margin at the same time.
James Allison – Head of IR & M&A: Jon Cox, Kepler Chevron…
Jon Cox – Kepler Chevron: Jon Cox with Kepler Chevron. I keep coming back to the – some of the questions have been asked before. In North America, the underlying sales growth appears to be negative 2% in Q2, if you strip out Q1. You seem to be saying that some one-offs in there you talk about the comparable, you talk about the phase out of ice cream. I wonder, if you can sort of quantify them at all, also to be saying that, that’s worst that over, you should start to go positive in the second half of the year. Is that correct? And then just on the second quarter, to come back to the commodities, key point, would you agree with the statement there in the first half, you didn’t get any benefits at all from what is generally an easier commodity environment and you should start to see those improvements come through in the second half of the year, and this will add to the 120 basis points improvement we’re already seeing with the Maxing the Mix and the low cost business model. As a result the gross margin improvement for this year is going to be above the 120 basis points?
Paul Polman – CEO: We continue the tradition, I’ll take the first one and the Jean-Marc the second one on the commodities, if you don’t mind. If you look at America itself, I just want to reiterate again. We are actually growing share and about 56% is the exactly number I’m looking at a sheet here of our business. So, it is healthy, but the market has slowed down a little bit and there is some effect of phasing that is in there. Looking forward, the U.S. will be a slow growth market in line with economy I don’t want to deny that. But I think we are well placed we don’t see any surprises and the actions we take, the investments we make in our industrial base or in our brands give me confidence that we will show that growth and we don’t get carried away by three months here. But our spreads and dressings business is growing. We are just celebrating the Hellman’s 100th Anniversary. We see good shares there. We have just launched the Lipton cups; we were late, no doubt about that, but that’s a big growing part of the market in beverages in the U.S. We are just entering as we talk. Vaseline that historically has been, frankly, a neglected brand in the U.S., if I may be stronger and firm. We have just launched the Spray & Go variant which is doing extremely well and the brand is moving back. Our (auto) PC business is growing. So we are starting to work now in the normal sequence of doing everything step-by-step. Our Knorr business and I’m convinced that that comes back as well. On ice cream, we’ve been having a little softness and that’s a big part of our U.S. business. Frankly, we’ve taken there a decision with our Maxing the Mix that we take – don’t sell the unprofitable variant anymore. We actually pared down our portfolio in ice cream and then obviously we’ve had the weather affects there, but we don’t want to complain about that since we can’t do anything about it anyway. So if I look at the U.S. going forward, if I look at the plans that Kees Kruythoff is putting in place, I am confident there that with the portfolio getting aligned with the Company, we see innovation programs that we have, the actions we’ve taken that we will be able to continue to perform well in what is indeed an increasingly competitive environment. We are growing our Hair Care, while some of our competitors basically are giving the products away. Don’t underestimate that and you see the same in deos. So we are not in the Maxing the Mix philosophy into buying brands – buying via promotional activity or lowering prices. This is quality what you get and that can only be to the long-term benefit of our shareholders. Let me have Jean-Marc go into detail a little bit on the commodity side.
Jean-Marc Huet – CFO: Yes, thank you, but please do not extrapolate the gross margin of 120 basis points. Firstly, remembers that gross margins were up 60 basis points in the second half of last year. So again, this Maxing the Mix program has been going on for quite a time now 12 to 18 months and so you do have more difficult comparables in the second half of the year. Lastly, we do expect commodity costs to be between low-to-mid single-digit and again, do not only look at the spot price, it’s the impact of the P&L. Do not underestimate the impact of foreign exchange, as well as duties and the like and that’s the reason why we stick with low-to-mid single-digit. So bottom line is, please don’t get carried away with the gross margin, but the improvements are structural…
James Allison – Head of IR & M&A: James Edwardes Jones, RBC Capital Markets.
James Edwardes Jones – RBC Capital Markets: Quick question on currencies. You referred Jean-Marc, the likelihood of emerging market price rise in the second half, given currency weakness. To what extent does the underlying weakness in emerging market economies moderate your desires to raise price in those market?
Jean-Marc Huet – CFO: Well, we’ve always had this question now James in Alfenas for the last five years that some people are continuing to be concerned on the emerging markets. We’ve been very transparently saying that these economies are slowing down. You’ve seen that in China and India and Brazil. We deal with that by launching new brands, in Brazil we just launched Cif and Domestos; we launched Dove in China, less than 12 months ago; we are launching lot of variants in Indonesia and the list goes on. So we compensate for that by stepping up our innovation pace, by working our costs and able to deal with that. There is no doubt, you just have to be realistic, there is no doubt that the weakening of these currencies over the last few months has been bigger and deeper than anybody has anticipated. If you look at the public opinion and the results that is publically available that you get probably more than we do. Nobody had estimated that, so we have to deal with it. The good thing is that having the strongest brands in these markets that allows you to deal with that better than our competitors and find the right balance. So that is what we do and that is what we get paid for and again you see in the emerging markets, the 10% growth. I also want to remind you James that on average for all of the emerging markets, there is not one market, I am looking at (share) market, actually because that’s not one market where we have more than 8% of our turnover now. So we are very well diversified company in that respect and whole discussion now about emerging market which is (60%) of the business, soon 80% of the population is becoming simplistic. The world is not anymore emerging market and D and D&E in many of – what we still have in these discussions as emerging markets, they have become very developed and very robust and we know how to deal with that and that is what you see in these results again.
James Edwardes Jones – RBC Capital Markets: I understand. Just (indiscernible) Paul, does the underlying weakness in a number of emerging market economies, does that make you less inclined to force through price increases, perhaps than you have in the past?