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Executives

Jean-Marc Huët – CFO

James Allison – Head, IR

Analysts

Celine Pannuti – JP Morgan

Michael Steib – Morgan Stanley

Harold Thompson – Deutsche Bank

Marco Gulpers – ING Bank

Martin Deboo – Investec

David Hayes – Nomura

Jeremy Fialko – Redburn Partners

Robert Waldschmidt – Merrill Lynch

Unilever Plc (UN) Q1 2012 Earnings Call April 26, 2012 3:00 AM ET

Jean-Marc Huët

Good morning, everybody and welcome to Unilever’s First Quarterly Presentation of 2012. For those of you who participated in the Unilever Sustainable Living Plan Update earlier this week, thanks a lot for giving us two slots in your busy diary.

I’ll come back to the importance of our Sustainable Living Plan later in the call. You’ll also have noticed the improvements in disclosure, which we have implemented this quarter, very much in line with what we promised and I hope that this is being helpful to you.

I will begin this morning by reviewing our overall performance in the first quarter and the category highlights. James will then review our geographical performance and report on the progress we have made in integrating our important acquisitions. I’ll then conclude with some thoughts on the outlook for the year. So let’s get going.

First of all, I draw your attention to the usual disclaimer relating to forward-looking statements and non-GAAP measures. Okay, good performance in a challenging environment. Underlying sales growth was 8.4% in Q1, broad based with a good balance between volume and price. Our sales are up in developed and emerging markets, and we grew in all categories with positive volumes in each.

Strong performance in Personal Care and emerging markets, those were the key drivers behind our growth; so overall, a pleasing start, albeit against a weak prior-year comparator in Europe. And as you all know, impacted by some positive one-offs which affected all competitors.

Turnover for the quarter was €12.1 billion, that’s up 11.9%. Volume growth contributed 3.5% and price at 4.7%, and that mainly reflects the carryover effect of price increases taken last year. In a period when pricing has been high, our positive volumes demonstrate the strength of our brands and the impact of our much improved innovation programs, although we have a long way to go.

Net acquisitions contributed 2.7% and this reflects the consolidation of Alberto Culver, which, as you know, we completed in May last year, and Concern Kalina more recently, the leading local Russian personal care business that we acquired in December. FX was positive at 0.5%.

Emerging markets now accounts for 56% of our turnover in the first quarter. Underlying sales growth at 11.9% and healthy volume at around 5% plus. And this growth was widespread. Underlying sales growth in the so called BRIC countries at 13%, but other markets importantly also played their part, countries such as Indonesia, Vietnam and various markets in North Africa, but also the Middle East.

As you know, we are well positioned in emerging markets. For well over the last 20 years, our volume growth has averaged around 5%. And we’ve delivered in good as well as bad times. In the last four quarters, our underlying sales growth has been in double-digit territory. Our Q1 results, we believe, are just another data point that suggests that emerging markets will drive Unilever’s growth for many years to come. However, as much as we are confident about our ability to outperform markets, there are many indicators that suggest that the global macroeconomic environment will remain very difficult.

While the growth prospects for consumer demand remain healthy in emerging markets, the fundamentals in developed markets continue to be weak. Consumer sentiment in Europe continues to suffer and this has been going on for a while. Disposable incomes are being squeezed and households are reining in their budgets, spending less and making whatever they have go farther.

In the US where economic indicators perhaps are more mixed, we still see 45 million people claiming benefits via food stamps. Despite these challenging market conditions, which we expect will continue, we are in a good position as Unilever. Our brands cater for the everyday needs of billions of consumers. We have iconic brands that consumers trust and that offer outstanding value for money with great innovations. This is why we are confident that we will continue over time to outperform our markets.

Now let me talk through some of the highlights of our category performance. Personal Care momentum continues. Again, we performed ahead of the market, with underlying sales growth in the quarter of over 10%, 6% coming from volume. Our hair care business continues to do well as the overall portfolio is really starting to work. For example, Dove Damage Repair and Clear, a standout performance. But they’ve also been complemented by the rollout of Axe Hair in Europe.

We’ve also launched TRESemmé in Brazil, where now our overall hair care market share is growing. But this is a highly competitive category. In parts of the world, where competitors are under pressure, we still see this at times translated into price.

We also had great results in skin cleansing, where Dove again grew strongly, benefiting from the continued success of Dove Nutrium shower gels and the rollout of Dove Men+Care, which is now in more than 40 markets. It’s an example of bigger, better, faster innovations. But we also had Lux and Lifebuoy also contributing strongly.

Turning to deodorants, another solid quarter, double-digit growth in Latin America, Africa and North Asia extending our worldwide leadership position.

If we just look at the innovations, staying with Personal Care, we’re bringing innovations to the market. We’ve just launched the new Dove Hairstyling range in the US, as an example. We’re also confident about Lifebuoy’s very recent introduction of Clini-Care 10. This is the clinical efficiency range that’s being launched in India. It’s based on a technology that provides germ kill and skin protection that is 10 times better than other soap bars, creating a clear, competitive advantage. This is a technology which we will leverage across other categories.

The re-launch of Rexona for men and for women, highlighting the benefits of motion-sensed technology, performed well, and we continue our successful rollout of Rexona Maximum Protection, as well as Axe Anarchy, the latest innovation from Axe with variants for him and for her.

Let me just turn to Clear for a minute. Clear is our fastest-growing brand. It’s our advanced anti-dandruff hair care range, which is about to be launched, as an example, in the US market after it’s now being customized to meet the needs of the North American consumer. Its product proposition is to stop dandruff at source, a claim which is backed up by clinical evidence.

Together with a strong communication program, it strengthens our competitive offering in this hugely important market. It’s worth noting that Clear is our fastest-growing brand and is present now in 36 countries.

Turning to Foods. Our growth was 5.9%, and this is encouraging. Price was the principal component of growth, and this reflects mainly the carryover effect of price increases taken last year. In Savoury specifically, market development is a key driver behind our growth, with continued success of Knorr baking bags and the extension of jelly bouillon technology.

Spreads growth was supported by pricing and continues to benefit from the rollout of new and improved products. In the UK, here, we now use the cool-blend technology for our Flora margarine. These results in a creamier-tasting product that is lower in saturated fat than batter, but also – than butter, excuse me, but also better for the environment because it allows us to significantly reduce our CO2 emissions. So, consumer enjoys a tastier spread combined with excellent nutritional values, and we make a positive contribution to the Unilever Sustainable Living Plan.

We continue to find new market development opportunities in Savoury. We’ve launched Knorr Rice Mate in the Philippines, a product that improves the taste of our freshly cooked rice. In Southeast Asia alone, rice is cooked 50 billion times every year. And the penetration of cooking aids in this category is absolutely minimal. So this underlines how many opportunities there are for us. And in the chart, you can see two examples from Saudi Arabia and Mexico, and we see many more opportunities to help consumers add great taste to everyday dishes.

Turning now to Home Care, a good balanced growth between volume and price, underlying sales growth at 10%, volume at 4.7%. Value shares up, driven by innovation, new and better communication as well as product quality improvements. The growth was broad based. European laundry business is growing very nicely in flat markets. Emerging markets achieving double-digit growth, which really highlights our strong competitive positioning in this area of the world. We saw very good performance specifically in India, Indonesia as well as Turkey.

We continue to launch Home Care products, which offer additional benefits to the consumer, whilst delivering a so important Sustainable Living Plan. Cif PowerPro Naturals launched in Italy are highly effective cleaners, but based on naturally derived ingredients. OMO, another example with our built-in pre-treaters, enables the removal of stubborn stains even in a quick wash cycle and this is a product that we’ve now re-launched in Brazil.

But we’re also continuing to expand into white spaces. Examples are Cif into China, Domestos into Argentina, Pakistan, as well as Sri Lanka. Surf is still doing, is continuing to do it very well. And it’s now present in 46 countries, new markets such as the Netherlands, Malaysia as well as Thailand.

Let’s turn now to Refreshment. Ice cream driving growth in this category. Underlying sales growth of 7.4% supported by pricing actions taken in the US and in early Easter. Also, those of you here and in Northern Europe, you may just remember that in March this year life was sunny, life was warm, not foretelling the Siberian April, which has followed and continues. Our Magnum brand continues to drive growth and we’re building on the successful introduction into the US, Indonesia, Malaysia, and now the Philippines.

Beverages, however, remains subdued. In Brazil, we saw weak volumes in soy drinks, specifically following significant price increases. In Russia, however, the re-launch of Lipton is showing encouraging results and we are just commencing shipments of our new Lipton Tea & Honey to the US market. So there are signs of progress. It’s made, Tea & Honey, from real tea leaves, sweetened with honey and enhanced with natural fruit flavors. First customer feedback is positive.

Following the success of the Magnum parent brand in the US last year, we’re now introducing Magnum Minis in this area. Turning to Europe, we’re introducing Magnum Infinity as well as Cornetto Devils & Angels. Please try them both and let me know what you think. They’re very good. But these are just a few examples of our innovations. But I hope that you can now see how white space expansion, market development, and the rollout of new technologies are underpinning our growth.

So now, let me just hand over to James, and he’ll give you some more details on our geographical performance before commenting on the integration of acquisitions.

James Allison

Thank you, Jean-Marc, and good morning, everybody out there. We delivered continued strong performance across Asia, Africa, Middle East, Turkey, and RUB with all clusters reporting volume and price growth. Our underlying sales growth of 11.2% was driven in particular by excellent performance in our Personal Care and Laundry businesses.

The Asian and African clusters delivered strong double-digit growth with countries such as Indonesia, India, Vietnam and Saudi Arabia contributing strongly. We also had strong momentum in individual markets in the Middle East and in Turkey. Our performance in Russia has improved and we are pleased with the early progress of Kalina in this market.

The Americas region reported growth of nearly 8% with continued strong momentum in Latin America where sales were up by 11%. In Latin America, Personal Care was the key driver of growth with Hair Care and Deodorants in particular, performing strongly. The new Dove Hair Damage Repair range and our Clear brand delivered strong results and the launch of TRESemmé into Brazil has started promisingly; already it has achieved the number one position with our top two customers.

Underlying sales growth in North America was up by 5%, and although volume growth was marginally negative, this reflects the continued difficult market conditions. We continue to perform well in Personal Care and Dressings in particular.

Our recently launched simple range of Skin Care products is delivering on its objectives. We’ve launched the range of Dove Hair Styling products and as already mentioned by Jean-Marc, our Clear Hair Care range will hit shelves in May, supplementing the Unilever range of Hair Care products in by far the biggest market worldwide.

While ice cream take-home sales continue to suffer from intense competition, Magnum has started very well and will now be supported by the launch of Magnum Minis as previously highlighted.

Turning then to Europe, let me remind you of what we said repeatedly this time last year. Don’t judge our performance over a 90-day period, look at it over six months. The same is equally true this year. Europe’s underlying sales growth of 5.1% has benefited from easy comparisons and an early Easter. The economic outlook is not improving. Earlier this week, we all heard about the impending prospect of the Eurozone slide into an even deeper recession and yesterday’s news of the UK into a double-dip recession. However, there is no doubt that our European business is getting stronger and more competitive. Even in economically depressed markets, we managed to grow our sales in each of our categories with particularly strong performances in Hair Care, Laundry, Ice Cream and Dressings.

Axe Hair, now in 12 countries has started well. In Deodorants, Axe Anarchy, with strong activation amongst Axe’s 10 million Facebook fans, is already outselling Axe Excite, the number two variant. And we’re planning to introduce it into more than 60 markets before the end of 2012. And in the Spreads category, our liquid margarines continue to perform well and are being rolled out into more markets. Excuse me.

A key driver supporting the improvement of Unilever’s portfolio is M&A. The operational integration of last year’s acquisitions of Alberto Culver and Kalina is progressing well. After many years of disposal, Unilever is building the capability to successfully integrate acquisitions and to nourish acquired brands. With Alberto Culver, the biggest of our acquisitions, we’ve enhanced Unilever’s presence in attractive high-growth categories and are using our scale, reach, and technology to further strengthen Alberto Culver brands in existing as well as new markets. Eleven months into the integration, we’ve achieved the objectives we’d set for ourselves.

First and foremost, our objective was to enable the brands to grow at least as fast as they did before the acquisition. In the US, not only has TRESemmé done well, but its presence in our portfolio has energized our overall hair care franchise. Fulfilling our commitment to take Alberto Culver brands into new markets, we launched TRESemmé in Brazil less than six months after the acquisition was completed and early signs are very encouraging. TRESemmé has now been rolled out nationally in Thailand, and as mentioned a moment ago, we’ve also taken the Simple brand strong in the UK skin category into the US. At the same time, we have managed to retain around 70% of the key talent of Alberto Culver.

Turning to Kalina, I’m very pleased to report that we have completed the Mandatory Tender Offer process, and we now own 99.5% of the company. The remainder will be added in the next few months. Whilst it’s early days to talk about performance, it has started very well indeed.

We’re also pleased to report that Sara Lee’s three main brands Duschdas, Radox, and Neutral are contributing well to category growth and the integration of the Colombian detergents business is well on track. Across the three major deals, Alberto Culver, Sara Lee, and Kalina, we expect cost synergies of between 15% and 20% of the retained turnover, much higher than in the initial business case and all enabled by a much improved integration process. And with that, let me now pass you back to Jean-Marc.

Raoul Jean-Marc Sidney Huët, Chief Financial Officer & Executive Director

Thanks a lot, James. Let me just spend a moment on the Unilever Sustainable Living Plan, and let me just reflect on its importance, the importance of sustainability to our business. The Unilever Sustainable Living Plan is at the heart of our strategy, which is to double the size of our business, whilst reducing our environmental footprint. In our view, this will be the only acceptable way to deliver long-term growth.

To be successful we need to decouple our growth from our environmental footprint and improve our positive social impacts. Our approach, we believe, is unique in that unlike others, this is our business model, spanning all brands, all categories, all geographies, and taking responsibility across the total value chain from the sourcing of raw materials all the way through to the use of our products in the home.

Earlier this week, we reported on the progress that we have made against the Unilever Sustainable Living Plan targets. We’ve made a good start. We’ve implemented numerous changes in how we source, produce, and how we make sure that our products improve people’s lives. For example, last year, we sourced 24% of agricultural products sustainably and we now have committed that by the end of this year, we will source all palm oil from sustainable sources. All the electricity we use in Europe is now purchased from renewable sources. And to date, we’ve reached nearly 50 million people with the Lifebuoy hand washing program.

And finally, since 2005, we have provided access to safe drinking water to 35 million people through Pureit, our water purifier which is available and has been for a while in India, but also now in Brazil, Mexico, and Indonesia.

As we embed the Unilever Sustainable Living Plan in the business, we’re uncovering new insights and opportunities to drive growth and to reduce costs. Let me give you an example. Dry shampoo, which we already market in the US and here in the UK as a convenience product, could have a much, much wider application as we seek to help consumers reduce their water consumption. It becomes increasingly clear. The brands that put sustainability at the center of their propositions such as Lifebuoy or Small & Mighty grow faster than the average, and we’re starting to get recognition for the efforts that we’re putting into this.

Let me conclude. Our priorities remain unchanged. It’s been a good start to the year in an environment that continues to be very, very challenging. Let me just remind you, consumer confidence is low in many markets and disposable incomes increasingly squeezed. Competition in emerging markets continues to be tough and intense. However, we do also remain confident in our ability to continue to outperform the market.

I am personally confident that we now have the visibility and the agility in our business model to respond appropriately to what will always be volatile commodity markets. We’ll update more on commodities in more detail at our first half results.

But as things stand today, we expect commodity cost inflation for the full year to be slightly higher than the mid-single digit increase we indicated at the beginning of the year. This is mainly a function of the increase in crude oil-related prices as well as vegetable oils. And as we indicated with our Q4 results, the impact of higher costs will be weighted towards the first half of the year. So in summary, volatility continues.

Set against this, we’re again on track to deliver another year of substantial savings. Together with some incremental pricing in emerging markets, we continue to target a modest core operating margin expansion for 2012, and this weighted to the second half.

So again, please make no mistake, no change to the outlook we gave you three months ago. We plan to increase our investments, such as A&P spending, which will grow at least in line with sales growth. And we will further invest behind quality improvements. Our long-term focus continues to be on the achievement of volume growth ahead of our markets, strong cash flow and modest but steady core operating margin expansion. We are confident in our progress, and while we are far from being complacent, we look forward to another strong year for Unilever, as we make another step closer to the virtuous circle of growth.

As you will likely have read in the press release, we are announcing today an increase in the quarterly euro dividend of 8% to €0.243 per share. And with that, let’s move to questions.

Question-and-Answer Session

Operator

Thank you, Mr. Huët. (Operator Instructions) Our first question is from Celine Pannuti from JP Morgan. Please go ahead.

Celine Pannuti – JP Morgan

Good morning. It’s Celine from 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.

And 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 is what you had indicated at the full-year stage, full-year 2011 stage. If that is still on?

And you have communicated to us the consensus expectation for H1 and H2. Consensus is looking for minus 10 basis points in H1. Do you think this is in line with your comment you just made on H2-weighted margin performance? Thank you.

Jean-Marc Huët

Good morning, Celine, and thank you. I think there are three questions actually here. Let me just try and take them 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 from also other competitors that we’re enjoying a leap year. You’ll also know about where Easter falls. And then specific to Unilever, you will remember that we had a weak first quarter last year because of the mild winter. I don’t want to get into details on a 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.

And 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 phased to the second half of the year and where the average of consensus is probably where it should be.

Celine Pannuti – JP Morgan

Okay, thank you. Just – could you, on my first question, what is the current volume growth in your category in Europe, please? The market growth?

James Allison

So, Celine, this is James. So we’re certainly not going to give you that at a kind of 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.

Celine Pannuti – JP Morgan

Perfect, thank you.

Operator

Thank you for your question there. Our next question comes from Michael Steib from Morgan Stanley. Please go ahead.

Michael Steib – Morgan Stanley

Good morning, 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, did they differ by category, is the Food business doing significantly worse than the H&C business, Personal Care in positive territory? Can you just give us a bit more color on the performance of the US business, please?

James Allison

Sure, Michael, good morning, couple of points. Once in a while over the last three, six months, there’ve 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% in value with negative volume. So this continues to be a difficult market and that’s also our assumption going forward. We just gave you the sound bite, 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 has been somewhat but slight negative volume. But let me just give you some context to that. In the overall market, in terms of volume, that’s a decline at a lesser rate than the overall market, so we’re increasingly competitive.

Now, there’s a lot of work to do. But if I look from the categories, we’re seeing some good momentum, specifically in 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 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’re taking very seriously. There are some parts that are doing very well in Savoury and in the likes of others where, 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 good performance, but it’s an area of focus.

Michael Steib – Morgan Stanley

Okay. In Food in particular, do you think this is largely a function of just the potential price increases that the whole industry has taken last year?

James Allison

Well, you’ll see that specifically in our Spreads business, yes. But it’s a different story were I 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.

Michael Steib – Morgan Stanley

Okay. Thank you very much.

Operator

Thank you for your question there. Our next question comes from Harold Thompson from Deutsche Bank. Please go ahead.

Harold Thompson – Deutsche Bank

Good morning, everyone. Just two questions. You mentioned that you’ve slightly increased your input cost guidance. And in relation to that on pricing, at the start of this year, you said that the rollover impact of pricing would be about 2%, and there might be a bit more, kind of in-year pricing on top of that. So maybe you could update what your pricing guidance is for this year.

The second one is you have kind of been slightly more cautious on – I guess, on the outlook of emerging market growth. Clearly, you were tops in organic growth in Q1 in absolute terms, extremely strong. I’m sure this will slow down. So I guess, how should we think about that?

And finally, maybe I’m not old and wise enough, but is this your best quarter in how many years? Now, I’ve looked at my model for the past six or seven years and I can’t find a bigger number. Do you actually know how, is this your best quarter in decade or whatever? Thank you.

Jean-Marc Huët

Hi, Harold. Good morning. Let me just take three or four of these. On the last point, it’s a good quarter, but I’m just going to push back and just say it’s a good start to the year. We don’t over-emphasize quarters. I think you can ask that question again either at the first half or at the end of the year, and then it’s a more pertinent discussion. So I’d prefer not draw in to the point of quarter.

But we are happy with the growth because it is broad based, and there is a good mix of price and volume, but we’re also telling you that it’s only a 90-day period of time.

On your third question, just if I can go from the last to the first, on emerging markets. Yes, emerging markets have performed well in the first quarter. But yes we are also mindful that we are seeing in different areas, be it China, a moderation of growth. We’re also seeing that, by the way, in our GDP forecast for Turkey, as well as other countries. And so, we are mindful of the overall backdrop and we are a consumer business.

Having said that, I think you’d agree that 56% of our business in emerging markets really does differentiate Unilever and it’s not just the 56%. It’s the depth and it’s the breadth of the markets within which we operate.

On your second point on pricing, we remain in that ballpark of around 2% carryover and we’re actually very careful about pricing in year this year. If you just think about the consumer and what the consumer can or can’t take, they are in bad shape and so we want to be very sensitive on what levers we do or don’t pull. So, pricing really is going to be driven by carryover and by definition that will moderate over the quarters to come.

On your first point on input costs, the volatility is pretty intense. Now, if you look at our commodity cost base, versus perhaps some of our competitors, we have an important exposure to crude oil and to vegetable oils. And if you look at soy, tallow, any of those vegetable oils, and if you look at crude oil, specifically Brent, you will see that they remain stubbornly high as well as volatile. Now the most important part is even if today we say that commodity costs are a little higher than mid-single digit, A, that can change up or down, but B, we’re trying to drive a model that’s agile that can take that into account.

So again, we’ll give a more detailed outlook on where we stand in terms of commodity costs at the first half of this year.

Harold Thompson – Deutsche Bank

Okay. Thank you very much.

Operator

Thank you for your question there. Our next question comes from Marco Gulpers from ING. Please go ahead.

Marco Gulpers – ING Bank

Yes, good morning all. I’ve got two questions. The first and especially focusing on Europe, could you update us on the two divisions in culinary and tea, please. And the second question is on, I’ve noticed the European pricing trend to decelerate quarter-on-quarter more quicker than we were expecting. Could you clarify what the main reason for this sharp pricing drop is in Europe? Thank you.

Jean-Marc Huët

Let me just make an overall comment and then I’ll pass onto James on some of the specifics with tea, culinary in Europe. Overall, as we are looking at the business, most is carryover, so we’ll see our underlying price growth moderate as we go through the quarters. But remember that we took a lot of our pricing in the first half of last year and in the second half of last year, we took some but much less so. And that will very much dictate how our underlying price growth evolves quarter-by-quarter over the next four quarters or so.

So that’s on an overall level. Perhaps, James, you can add with relation to Europe to the extent that we’re willing to do so.

James Allison

So, hi, Marco. So, in culinary performance is very good actually, very pleased with it gaining share not just in Europe but further afield behind a lot of the innovations that we’ve spoken about before, jelly bouillons, extensions into gravies and some of the things that you heard about in terms of rice mixes and so on. So very pleased with our performance in Culinary.

Tea, on the other hand, is less good. And particularly in the UK market in the first quarter, we didn’t participate in some of the deep promotions that were taking place. And as a result of that, we lost a bit of volume and share. So, tea is something, not just in Europe, but elsewhere we need to step up again, a little more.

Jean-Marc Huët

I think that overall in Europe, really judge us at the first half of the year. It’ll be more of a representation. Unfortunately, I do once in a while have to speak about the weather and where the weather is today and the impact on ice cream sales and the like. So much better, be it through comparables and the like to look at six months.

Marco Gulpers – ING Bank

All right, thank you, guys.

Operator

Thank you for question there. Our next question comes from Martin Deboo from Investec. Please go ahead.

Martin Deboo – Investec

Gentlemen, good morning. James, I just wanted to pick up on the synergy achievement in the acquisitions. I mean, that looks like a very good number to me by the norms of the industry. And you emphasized that 15% to 20% was ahead of the acquisition cases. I’m sort of interested in a bit more color on that, why do you think you’ve been as successful as you have in getting the synergies? And should it – would I be right to infer from this that you’re getting a slicker M&A integration model going, or is it just particular circumstances around Kalina and Alberto?

James Allison

Yeah, Martin, let me take that one. Yeah, I – to be honest, I think that Unilever has always been good at getting cost synergies out of acquisitions. So, our track record is really pretty good there. It’s been less good actually in terms of some of the other important aspects of acquisitions like having the acquired brands flourish, for example, which we now think is very, very important.

So I think the 15% to 20% is good and I think that that reflects the fact that we’re very focused on it and that we’ve got very good people managing the projects and we’re doing that very well. But that’s not materially different to Unilever’s capability in the past.

What I would say about acquisitions is that the more you do of them, the better you get at them. And we went for, of course, for a long time after the Bestfoods acquisition where we didn’t buy anything. We’ve got very good at disposals but we weren’t buying anything. Now, we started to acquire more, we get better and better at it, Martin. And so we are very pleased about the synergy numbers, but we’re even more pleased about how these businesses are performing in terms of growth.

Martin Deboo – Investec

Okay. Thanks for that, well done. Thanks.

Operator

Thank you for your question there. Our next question comes from David Hayes from Nomura. Please go ahead.

David Hayes – Nomura

Good morning, all. Hi. Yeah. Just firstly on the white space momentum. It feels like, that that’s accelerating. But I just wonder whether you can comment on whether that is the case, or whether it’s just kind of a constant run rate or whether there’s any kind of measure of that effectively. And I guess related to that in terms of the brand support; was the period that we’ve just seen kind of a push in terms of brand development into new geographies? And was there more significant A&P behind that? And is that kind of some sort of phasing that we’ll see through the year?

And then secondly, I guess related in terms of the margin guidance. Obviously, no change in terms of effectively kind of a modest uplift for the year. You mentioned again as before that A&P will be up in line or perhaps more than sales. You’ve also got raw materials being a little bit more than you thought before. Just in terms of hitting that margin number, I’m just wondering whether you’re going to get the offset. Do you think pricing and top line will be a little bit better than you thought before which offsets the raw materials or is there a little bit more cost saving that comes out of that, that kind of cancels that and then you get to the same point? I just wonder what the moving parts are. Thank you.

Jean-Marc Huët

Okay. Thank you, David. Couple of points. There’s a constancy to what we’re trying to do. None of our planning cycles, none of our investments are actually planned on a quarterly basis. And so, again, what we’re trying to do is work hard each and every day, each and every year. So there’s no specifics to any investments on a quarterly basis.

On your last point in terms of margin guidance, I just want to underline that it’s going to be moderate. If ever there were any upside, by the way, we’d reinvest back into the business. We’re focused on sustainability and consistent performance. You’re absolutely right. There are different moving parts and it’s our responsibility to manage those moving parts and make sure that we just drive growth above the head of the markets, strong cash flow and a sustainable yet modest core operating margin expansion.

David Hayes – Nomura

Okay. Thanks very much. Thank you.

Operator

Thank you for your question there. Our next question comes from Jeremy Fialko from Redburn. Please go ahead.

Jeremy Fialko – Redburn Partners

Good morning. Couple of quick points of clarification from me. First one, just in terms of the sequential pricing, so essentially your sequential pricing was pretty much flat from kind of Q4 last year to Q1 this year. But there’s no way that you’ve actually put any price reduction through at this stage. And then the second question, if could you just clarify your outperformance versus the market. I think last year, you took value share, your volume shares were broadly flat. If you can just sort of tell us how you think those two things evolve during quarter. Thank you.

Jean-Marc Huët

Hi, Jeremy. Good morning. Just on shares, be it value or volume to a larger extent value over the last 12 months we’re increasingly competitive. Let me put it this way rather than just comment on three months, which again is 90 days, but increasingly competitive. In terms of pricing, at this point in time, we’re not planning on any important pricing reductions. What is important is this is dynamic and so, we will act accordingly. We are more determined in different strategic markets and the like. And so this is a moving target. Overall, however, where we are, we’re not expecting for this year, important price reductions. Can change though.

Jeremy Fialko – Redburn Partners

Okay. Thanks.

Operator

Thank you for your question there. Our next question comes from Robert Waldschmidt from Bank of America Merrill Lynch. Please go ahead.

Robert Waldschmidt – Merrill Lynch

Good morning, guys, just a question on A&P, just to start. You’ve mentioned that it’s going to go up at least in line with sales. Granted that you’ve been telling us all along you’re working on efficiency, so I’m guessing consumer-facing media must be going up a fair bit here. Within also the A&P, can you quantify what the split is in terms – or at least, can you give us directional steering in terms of what the split is in terms of promotions versus advertising and how the competitive landscape is in terms of promotional environment? Has it come down, are we seeing some relief there? Thank you.

Jean-Marc Huët

Sure. Thanks for the question. I mean, on competitive landscape, let me just remind you, competition is intense, and there are certain categories like hair, where we have actually, recently seen some aggressive stances by competitors in terms of promotions. So that will continue, although we do see a little bit more responsibility in the overall marketplace.

In terms of your first question on A&P split, it doesn’t change radically from one day to the next. It’s usually two-thirds, one-third, 60/40 something like that, and that will continue. You’re very right to highlight how we’re trying to drive consumer-facing media. That’s something that we’ve been very focused on over the last 12 to 18 months and that will continue so that we can get a bigger bang for our buck.

Jean-Marc Huët

So perhaps, given where we are right now, I’d like to just summarize very briefly. Thank you very much for your questions this morning. This has been a good start to the year. Our outlook remains unchanged given all the details that I’ve given you. I hope you can appreciate that, and our long-term focus remains exactly the same, which is volume growth ahead of the markets, strong cash flow and a sustainable yet moderate core operating margin expansion.

With that, thank you very much for your attention and we’ll see you in August. Bye-bye.

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