Unilever PLC (LON:ULVR.L) has reported a substantial increase in its financial performance for the first half of the year, with underlying sales growth of 4.1% and a significant expansion in gross margin to 45.7%. The company's underlying operating profit surged by 17.1% to €6.1 billion, backed by a 4% increase in volumes from its Power Brands. Despite these gains, Unilever's Ice Cream business experienced a challenging quarter.
The company has announced plans to separate this unit and focus on productivity improvements. Additionally, Unilever is committed to its sustainability efforts and anticipates underlying sales growth of 3% to 5% for the full year 2024.
Key Takeaways
- Underlying sales growth of 4.1% in H1, with a 2.6% increase in volume.
- Gross margin expanded by 420 basis points to 45.7%.
- Underlying operating profit rose by 17.1% to €6.1 billion.
- Power Brands saw a 5.7% increase in underlying sales.
- €700 million additional investment in brand and marketing.
- Plans to separate the Ice Cream business due to a disappointing quarter.
- Unilever to maintain negative working capital and expects CapEx around 3% of turnover.
- Quarterly interim dividend increased by 3%; share buyback program of up to €1.5 billion announced.
- Growth Action Plan in place to deliver faster high-quality growth and embed a sharper performance culture.
Company Outlook
- Unilever forecasts underlying sales growth for 2024 to be within 3% to 5%.
- Gross margin expected to remain above 44% for the full year.
- Continued focus on Growth Action Plan to streamline business and achieve consistent performance.
Bearish Highlights
- Ice Cream business had a disappointing quarter influenced by market factors and poor weather.
- Challenges in the US beauty category and slowdown in China noted.
- Anticipation of increased competitive marketing spending and inflation in key commodities.
Bullish Highlights
- Positive volume growth in four out of five business groups in Q2.
- Significant gross margin improvement driven by volume leverage, positive mix, and procurement initiatives.
- Increased investment in brand and marketing to enhance Power Brands.
- Optimism regarding emerging markets and ongoing investment in North America.
Misses
- No specific breakdown provided between volume and mix in financial numbers.
- Ice Cream business underperformance in Europe, North America, and China.
Q&A Highlights
- Unilever's approach to brand performance now considers marketing, distribution, and price holistically.
- 75% of UAG brand's contribution comes from volume, with 25% from mix.
- €800 million savings plan underway, with only 5-10% implemented so far.
- Premiumization of Personal Care brands is progressing despite a slowdown in the luxury market.
Unilever's H1 results showcase a company adapting to market challenges while capitalizing on its strengths. The focus on Power Brands, increased marketing investments, and the restructuring of the Ice Cream business reflect a strategic response to current market conditions. The company's emphasis on sustainability and the implementation of cost-saving measures demonstrate a commitment to long-term growth and shareholder value. Unilever's proactive measures in innovation and productivity, along with its cautious yet optimistic outlook, present a picture of a business poised to navigate the complexities of the global market.
InvestingPro Insights
Unilever's robust first-half performance is further illuminated by current InvestingPro data and insights. With a market capitalization of $149.68 billion, the company stands as a heavyweight in the Personal Care Products industry, which aligns with the InvestingPro Tips highlighting Unilever's status as a prominent player in its field. Additionally, the company's P/E ratio of 21.08 and an adjusted P/E for the last twelve months as of Q2 2024 at 20.66 reflect a market valuation that considers its consistent profitability and stable earnings.
InvestingPro Data metrics indicate a slight revenue contraction of 0.96% over the last twelve months as of Q2 2024, yet the company has managed to achieve a gross profit margin of 42.9%, underscoring its ability to maintain profitability amidst challenging market conditions. Furthermore, with a dividend yield of 3.05% and a track record of 33 consecutive years of dividend payments, as mentioned in InvestingPro Tips, Unilever demonstrates its commitment to returning value to shareholders.
InvestingPro Tips also reveal that Unilever operates with a moderate level of debt and has been trading near its 52-week high, which suggests investor confidence in the company's strategy and execution. Additionally, while analysts predict profitability for the year, the tip regarding short-term obligations exceeding liquid assets may warrant attention from investors considering the company's financial health.
For readers interested in deeper analysis and additional insights, InvestingPro offers more tips on Unilever, which can be accessed at https://www.investing.com/pro/UL. Use coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, and discover the 5 additional InvestingPro Tips that could further inform your investment decisions.
Full transcript - Unilever ADR (UL) Q2 2024:
Hein Schumacher: Good morning, and welcome to Unilever's Half One Results Announcement. We expect prepared remarks today to take about 25 minutes, leaving around 30 minutes for Q&A. All of today's webcast is available live, transcribed on the screen. And in a moment, I will hand over to Fernando, to take you through the details of the results. I will then return to give a brief update on the Growth Action Plan and some of our key priorities as we move into the second half of the year. After that, we will take questions. First, though, let me set out some of the performance highlights from the first half as I see them. Our focus has been and remains on delivering high-quality sales growth and expanding gross margin, and thereby enabling a step-up in investment behind our brands. With that in mind, we made progress over the first half. Our underlying sales grew 4.1%. Volume growth was broad-based and accelerated to 2.6%, with four of five business groups delivering positive volumes in quarter two. Growth was led by our Power Brands, with underlying sales growth of 5.7% and volumes up 4%. Focusing on these 30 brands is a core part of our plans, and so we are encouraged by the progress here. Gross margin expansion was strong, up 420 basis points to 45.7%. We recorded lower material costs, which helped, but we are also on track to achieve net cost productivity through tight cost control in our operations. Both these impacts supported the gross margin development in the first half. This allowed for nearly €700 million in extra brand and marketing investment, which went behind an increasingly strong and focused innovation program. Gross margin expansion also resulted in accelerated profit growth. Underlying operating profit increased 17.1% to €6.1 billion, with underlying operating margin up 250 basis points to 19.6%. Over the last quarter, we have continued to implement our growth action plan at pace. As well as stepping up financial performance, the plan also incorporates sustainability leadership in our four priority areas, climate, plastics, nature and livelihoods. And we made progress against all of these in the first half. On climate, our Scope 3 emissions targets for 2030 were validated by the Science-Based Targets Initiative, or SBTI, and we are making steady progress towards delivery. On nature, a series of newly agreed regenerative agriculture projects is expected to bring an incremental hectarage of 335,000 this year, keeping us on track towards our goal of one million hectares. On plastics, working with USAID, we were behind the launch of a new public-private collaboration, the Circle Alliance, to scale solutions for reducing plastics and tackling waste. And on livelihoods, over 20% of our procurement spend is now with suppliers who have signed our Living Wage Pledge, putting us on track to reach 50% by 2026. We have also been working to progress the two important announcements we made in March, separating Ice Cream and improving our productivity. There is lots to do, but the simple message today is, we are on track with both. As we go through the presentation, we will review the numbers for the first half and the progress against our priorities in more detail. And whilst I do believe we have made progress against our stated ambitions, I am the first to acknowledge that we still have a lot to do to implement the changes that are needed to achieve a level of consistent performance. On competitiveness, for example, even though we do see some green shoots in the latest readings, we know this will take time and that it must remain an area of absolute focus. In addition to that, and as we said last quarter, we are making key changes in our Ice Cream business, with initial focus on North America and in Europe, to drive sustainably better performance. For the first half, this has led to better service to our customers, better pricing and better competitiveness. But despite that, however, the business still had a disappointing quarter. And while market factors helped to explain a lot of this, the performance reinforces the importance of continuing to make these operational improvements. We will do just that. We will now go deeper on the results themselves, so I hand over to Fernando to take you through.
Fernando Fernandez: Thank you, Hein. Underlying sales growth in the first half was 4.1%, with second quarter at 3.9%, both with a strong volume contribution. We delivered our third consecutive quarter of positive, improving volume growth. Underlying volume growth was 2.9% in quarter two, up from 2.2% in quarter one and 1.8% in quarter four of 2023. As expected, given the reversal in commodity cycle during the last year, price growth has significantly slowed down to 1% in the last quarter. Let's take now a closer look by business group. Beauty & Wellbeing delivered a strong first half, with underlying sales growth of 7.1%, underpinned by 5.5% volume growth. This is the third consecutive quarter in which Beauty & Wellbeing volume has been above 5%. The strong performance has been anchored in our Beauty & Wellbeing Power Brands that deliver double-digit growth. Sunsilk and Dove fueled haircare growth, while Vaseline and Pond’s were strong contributors in skincare. For the 14 consecutive quarter, our combined Health and Wellbeing and Prestige Beauty businesses delivered double-digit growth. Health and Wellbeing was particularly strong in this quarter, while Prestige Beauty felt the impact of a slowdown in the beauty market in the U.S. Personal Care grew 5.6%, with a good balance between volume and price growth. Dove, Unilever's largest brand, achieved double-digit growth across its female and male franchises, on the back of strong innovation across both deodorants and skin cleansing, like the premium range of serum-infused body washes in the U.S. Deodorants, once again, delivered double-digit growth, with strong contributions from the multi-year innovation platforms of Rexona and Axe on top of that. Although tempered by market challenges in Indonesia, deflation in India, and subdued performance of our anti-bacterial brand Lifebuoy, skin cleansings still delivered positive volume and price growth. Oral Care continued to grow mid-single-digit, with positive volume and price, led by Close Up and Pepsodent. Home Care grew 3.3%, with volume up strongly at 4.6%. The impact of commodities deflation in the basket of home care materials led to negative price of 1.3% in several emerging markets, particularly in laundry powders. Fabric cleaning grew low single-digit, and home and hygiene grew strongly high single-digit, with very positive contributions from Europe in both. Our premium innovations in Europe, like Persil Wonder Wash, Comfort Elixir, and Domestos Power Foam, are all off to a promising start, and we are reinforcing our investment plans to accelerate momentum even more. Nutrition returned to positive volume growth in quarter two, which helped to deliver 3.2% underlying sales growth in the first half. Growth was driven by our Power Brands, including Knorr and Hellmann's, which represent two-thirds of nutrition turnover and grew a combined 5.2%. Both brands delivered positive volume growth, with Knorr leveraging local top dishes for its cooking aids offering and Hellmann successfully expanding its flavor mayonnaise ranges. Once again, Unilever Food Solutions delivered strong performance, with high single-digit growth led by its China operation on the back of a successful digital B2B selling program. Ice Cream grew 0.6%, with price growth of 1.6%, partially offset by negative volume. We are disappointed with the Ice Cream performance that has been clearly below our ambition. Despite the operational progress we have made in areas like customer service, competitive pricing, and execution of our innovation, these operational improvements have reflected in improved competitiveness in the U.S. and several of our European markets. However, performance has been seriously affected by shortfalls in China, where we faced both tougher market conditions and competitive pressure, and shortfalls in Europe, where poor weather negatively weighed on the start of the summer season. We are responding to the challenges in China with the shift of our portfolio to premium and with distribution expansion into provinces where we foresee high consumption potential. In Europe, we keep tightening our operational grip while innovating in our biggest and more premium brand, with the launch of three new variants of Magnum, Pleasure Express. We run the business entirely through the lens of our five business groups. However, we believe it is important to provide also some color on performance in our different geographies. During the first half of the year, we delivered broad-based volume and price growth, with positive contributions from all regions. We show strong performance in developed markets, reflecting the return to volume growth in Europe and our continuous solid performance in North America, despite the weakening of consumer sentiment there. Stronger innovation pipeline and increased level of brand investments are evidence of our commitment to accelerate performance in these important hard currency markets. In Latin America, one of Unilever's strongholds, performance remains strong, with 7% volume growth in the first half and a positive, if even more subdued, contribution from pricing to total USG of 8.8%. We expect consumption slowdown in Argentina, but the strength of our brands and operations in Latin America region make us confident about our prospects there. In Asia-Pacific Africa, our biggest region, important to highlight the sequential improvement of our business in India. Our volume growth in India accelerated to 3.8% in quarter two, as we consolidated the shared gains achieved over the last three years. Growth in Southeast Asia also sequentially improved in quarter two, despite the sales decline in Indonesia. Our longstanding issues in Indonesia have been exacerbated by the reaction of groups of consumers against multinational brands in response to the geopolitical situation in the Middle East. Fixing Indonesia will require significant portfolio initiatives and the reset of our route-to-market strategy. It will take time, and we do not expect to see significant benefit of operational changes in 2024. Last but not least, Africa and the Middle East deliver another period of strong performance, with double-digit underlying sales growth and both positive volume and positive price. Let me return now to the performance at the group level. Turnover for the first half was €31.1 billion, up 2.3% versus the previous year. Underlying sales growth of 4.1% was the main contributor. Net impact of acquisitions and disposals was negative 0.7%. Acquisitions added 0.5%, driven by Yasso and K18, both performing in line with acquisition business cases. This was more than offset by a disposal impact of minus 1.2%, driven by Suave, Dollar Shape Club and One Month of Elida Beauty, which sale was completed on the 1st of June 2024. Currency had an adverse impact in the half of minus 1.1%, which was a considerably smaller impact than the one in 2023, when the euro strengthened against most currencies. During the first half of 2024, we expanded our gross margin by 420 basis points to 45.7%, building upon the improvement of 330 basis points achieved in the second half of 2023. We continued to make progress in transforming Unilever into a structurally higher gross margin business, by driving volume leverage, positive mix, transformational procurement initiatives, and net productivity gains in production and logistic costs. In the first half of 2024, we also saw the combined benefit of deflation in some components of our commodity basket and the pricing carryover from a period of higher commodity inflation. This strong gross margin expansion gave us flexibility to both increase investments in our brands and expand underlying operating margin. We increased brand and marketing investment by 180 basis points to 15.1% of turnover, an increase of almost €700 million, behind a much more focused innovation program and behind our 30 Power Brands, in which we have allocated 85% of the incremental investment. Our underlying operating profit was €6.1 billion, up 17.1%. The underlying operating margin improved 250 basis points to 19.6%, on the back of the strong gross margin expansion plus a tight control of overheads. Underlying earnings per share were €1.62, up 16.3%. Our operational performance, the combination of self-gross and strong margin expansion, contributed 20.4% to underlying EPS growth. An increase in finance costs had an adverse effect of minus 1%. As expected, higher interest rates impacted the cost of servicing our debt, while interest income and interest credit from pensions were lower than in the prior year. Net finance costs as a percentage of average net debt were 2.9% in the first half, and we now expect net finance costs to be around 3% of average net debt for the full year. Tax was a drag of 3.2% on underlying EPS as our underlying effective tax rate increased to 26%. This was driven primarily by lower benefits from tax settlements and other one-off items. We expect our underlying tax rate to remain at around 26% for the full year. The impact of our shared buyback program made a contribution of 1%. Negative currency effect in EPS was similar to the one experienced at turnover level at around 1% and explains the difference between constant underlying EPS growth at 17.3% and current at 16.3%. Our free cash flow in the first half was €2.2 billion, down €300 million versus previous year. The increase in operating profit was more than offset by a higher seasonal outflow in working capital, a step up in capital expenditure and higher income tax paid against the prior year comparator that benefited from some refunds in India. For the full year, we will work towards maintaining the levels of negative working capital with which we operated in recent years. We continue to expect capital expenditure at around 3% of turnover in the full year. As a result of the strong first half performance, the Unilever Board has decided to increase the quarterly interim dividend by 3%, the first increase since quarter four 2020. In February of this year, we announced a shared buyback program of up to €1.5 billion, to be conducted during 2024. The first tranche of €850 million commenced in May and is expected to complete on or before 30 August 2024. Turning now to the outlook for the remainder of the year, we continue to expect underlying sales growth for 2024 to be within our multi-year range of 3% to 5%, with the majority of growth coming from volume. We expect underlying operating margin for the full year to be at least 18%, with increasing investment behind our brands. Year-on-year margin progression in the second half is expected to be smaller than the one in the first half, given the stronger comparators and some increases in replenishment costs of our key materials, given the moderate return of commodity inflation. With that, over to you Hein.
Hein Schumacher: Thank you, Fernando. I want to come back to the Growth Action Plan, or GAP, which we see as key to improving our performance and restoring competitiveness. In the nine months since it was launched, we have been implementing the plan at pace across all 10 action areas. As a reminder, those action areas fall under three broad priorities. One, to deliver faster high-quality growth. Two, to create a more streamlined and productive business. And three, to embed within Unilever a sharper performance culture. During previous results announcements, we have gone a little deeper on progress in specific areas. And today, I want to touch on two areas that are key to driving faster growth. I also want to say something further about productivity. On faster growth, we've been clear that this will come primarily from an increased focus on our Power Brands. In practice, this means stepping up investment. And you see that with today's announcement and with the details Fernando shared earlier. BMI is up 180 basis points, with 85% of the incremental increase going behind Power Brands. But increased focus also means ensuring these brands are unmissably superior and that we scale innovations more effectively. The two elements are closely linked, of course. Let me take them in turn, starting with unmissable superiority. The concept here is as clear as it is compelling, namely that brands need to win, not just on product superiority, but across multiple drivers of consumer preference. In our case, that means winning on product, but also on packaging, proposition, promotion, place and price. The causal link between improvements in these six Ps and stronger brand performance is clear. We have validated it now in more than 119 strategic sales. That process involved taking 21 proven drivers of market shares, everything from better quality perception to average price index to measuring the breadth and depth of distributed assortment, and then deploying these input metrics across the six Ps using both market and proprietary data. The insights are very powerful, and with this improved understanding of what drives market share changes, and by monitoring developments continuously over time, we are able to move with speed and precision and taking the actions needed. Making our brands unmissably superior like this is a necessary, but not the only condition for faster growth. We also need to get better at scaling our innovations. We have the brand strength and the R&D capabilities needed to do this. Our focus, therefore, has been on leveraging these strengths more effectively, specifically working on the big science and technology platforms that span our portfolio, like biotechnology, to ensure that we land innovations that are not only bigger in themselves, but that drive category growth. Also here, we are making progress. The first half saw a number of examples of market-making innovations across all business groups, with common themes around meeting consumer needs, premiumization, and differentiated technology. You see just some of them on the screen here. Persil Wonder Wash, as Fernando mentioned already, is a particularly good example. One, it's technology-based. The product is developed with our patented Pro-S technology. Two, it's differentiated. This is the first ever detergent for short-cycle washes. And three, it's scalable. Already launched and doing well in the UK, France, and China, the product is on track to be rolled out across other key markets over the next 18 months. Of course, we have a lot still to do and it will take time for the benefits to come through. But based on the work we have done to date, I'm confident of meeting our ambition of doubling the average size of our innovations overall and driving a select number of top innovation projects to over €100 million in 2025 and beyond. We will come back to progress across all elements of the Growth Action Plan later in the year, but I wanted to touch on these two areas today because of their importance in driving our overriding priority of faster, higher quality growth. In March, we announced two significant measures to accelerate the Growth Action Plan and strengthen Unilever's position further over the long term. First, the launch of a company-wide productivity drive. We are currently consulting on the details of the changes we want to make with employee representatives. However, I'm confident that the proposals will more than offset the operational dissynergies arising from the separation of Ice Cream. More significantly, these measures will help to simplify Unilever. They will foster quicker decision making, higher levels of accountability, and they will put operational power more directly in the hands of those in frontline roles. As such, we see them as an important part of the Cultural Change Program we have embarked on, which also includes other measures we've taken, such as strengthening the link between performance and reward. The other part of the announcement in March concerned the separation of Ice Cream. We remain convinced that this is in the best long-term interest of both Unilever and Ice Cream. So there is a huge amount of work ongoing, including the legal entity setup, designing the standalone operating model, preparing the carve-out financials, and so forth. This work is on track and we are confident that separation will be complete by the end of 2025. And with that, let me sum up. There is a lot to do, but we can point to progress over the first half of this year. For one, the Growth Action Plan is now firmly established across the business. The benefits are building steadily, not least in the performance of our Power Brands and the expansion of gross margin. And two, we are on track in progressing the two measures we've announced to accelerate the Growth Action Plan and strengthen Unilever over the long term. The Comprehensive Productivity Program and the separation of Ice Cream. Taken together, we are confident that these steps will help to transform Unilever overtime into a consistently higher-performing business. Thank you for your attention. We look forward now to taking your questions.
Operator: Good morning. Many thanks for joining the call. [Operator Instructions] When it is your turn to ask a question, your name will be called out. And finally, please keep your question to a maximum of two.
Gemma S.: Thank you very much for joining the call. Our first question comes from Celine at JPMorgan. Celine, please do go ahead.
Celine Pannuti: Good morning. Thank you for taking my question. Maybe my first question is on the outlook for growth. You mentioned a 3% to 5%. You mentioned earlier that you expect volume to drive most of that. Are you still expecting volume growth to accelerate in the second half versus the Q2 level of 2.9%? And if so, can you talk about where this acceleration is coming from? Because I think Fernando, in your remark, you mentioned that Argentina will be I think Indonesia as well will take time, and the comp is also more difficult for volume in the second half. That's my first question. And then my second question, obviously, a strong beat in gross margin and EBIT in H1. You're probably going to be around above 44% gross margin for the full year. Could you elaborate about the potential for gross margin level going forward? And in terms of the EBIT margin at more than 18%, how much more upside do you see given the strength in the business and the productivity you are putting in place in the midterm? Thank you.
Hein Schumacher: Thank you, Celine, for the question. It's Hein, appreciated. What we'll do is I'll start with the first question on volume, and Fernando will take the question on the gross margin, on EBIT margin. On volume, we have talked about our full year in the guidance 3% to 5%. We've talked about it being volume-led and volume to be the majority of our growth. And if you look at quarter two, that's exactly what's happening. And we expect if you sort of take the first half year in terms of the percentage split, we expect roughly similar in the second half. And as we already said, we are sticking to our full year guidance. So I would just take it as volume-led with no material changes in the split between volume and price as it stands today. Fernando, on the margins?
Fernando Fernandez: Yes, good morning, Celine. We are really very pleased with the development of our margins. Since Hein's arrival, I feel we have been very, very clear about our ambition to restore gross margin at pre-COVID levels and to structurally increase our gross margin. And when we talk about a structural increase in our gross margin, we mentioned four key drivers, volume leverage, positive mix, interventions in the value chain of some of our key materials, and finally, a higher allocation of capital expenditure to margin expansion initiatives that would allow us to really significantly increase productivity in production and logistic cost. And we have been really making significant progress in all these drivers. And this is reflected in the 420 basis points of expansion in the gross margin of the first half. And surely you remember that we increased around 330 in the second half of last year. I want to recognize also that during the first half, we benefited from a more favorable scenario of commodities, and that has had an impact also. I feel the expansion of gross margin, we allocated around 40% of that to increase our brand and marketing investment, and 60% has gone into the bottom line. And when it comes to full year delivery, we have set up a floor of 18% underlying operating margin. At this stage, we want to remain cautious, given three developments that we see in different areas. We see some increase in the level of competitive marketing spending, particularly in markets like U.S. and India, and this can demand a higher BMI in the next future. We see a return of moderate inflation to some key commodities of our big log materials. I can mention aluminum, palm, benzene, or cocoa. And we see some deterioration in the last few weeks on some emerging market currencies, even if for the full year, we see negative currency effect to be much smaller than in previous years. In summary, we are very, very happy with the progress we are achieving in making Unilever a structurally higher margin business. We expect most gross margin improvement going forward after having achieved pre-COVID levels. And we remain cautious for the second half of the year, given the need of keeping investing behind our brands and the issues I have mentioned in terms of currency and materials inflation.
Gemma S.: Our next question comes from Olivier at Goldman Sachs. Go ahead.
Jean-Olivier Nicolai: Hi, good morning. I've got two questions, please. First of all, on U.S. beauty, you mentioned that you were seeing the U.S. beauty category slowing down, particularly in skincare. Why do you think is the underlying reason there? And do you think it's structural? And how do you think it can change the trajectory for Paula's Choice? That's the first question. And then just on the marketing investment increase strongly to 15.1% of net sales. When do you expect the business winning market share metrics to improve? Or is it just brought down in H1 because of a weak performance in Ice Cream? Thank you.
Hein Schumacher: Thanks, Olivier. Let me first talk about North America and the somewhat slowdown and the Prestige Beauty side. That's indeed what we're seeing. And notably in Sephora and Ulta, those type of change. By the way, we also see it in China. We don't think it's structural. And I should also point to there's still different performance by brands. So some brands continue to beat the trend. And obviously, some brands are sort of more going with the trend. So what we do is we stick to it. We believe we have strong brands. We have strong presence in the channels that I talked about. Quite a few of our brands, as you know, are digitally native. So we're capable of investing more behind them and control that. So we feel that it's a very positive part of our business, and we will continue to invest. And we don't believe that it's really structural. It may last for a bit, but we don't see long-term prospects in that sense changing. When you think of the market shares, market shares, as we said last year, we're measuring that on an MAT basis or when we communicate about it. We don’t expect -- we didn't expect major change in the first half, but indications over the last 12 weeks, so let's call it the last three months MAT measurements, we are seeing green shoots. And that gives us confidence that in the second half of the year, which is also consistent with what we've said in October, that we start to see improvements. We don't expect, by the way, for the full year to come into a significant positive territory, but we do see an improving trajectory in competitiveness. It is important that, as we've said a few times, when we look at market share development, it is approximately 70% of our portfolio is covered. 30% is not in that measure.
Gemma S.: Our next question comes from James Edward Jones at RBC. Go ahead, James.
James Edward Jones: Thank you very much. Morning all. It's not your sector, I know, Hein, but Carlsberg (CSE:CARLb) is acquiring Britvic, a predominantly UK company, in preference to allocating capital to emerging markets. Do you see any reason to be concerned about the medium to longer term trajectory for emerging markets?
Hein Schumacher: Thanks for the question. If you look at it over the last couple of years, we have consistently invested capital in North America, behind our Prestige Beauty business in particular, and behind our Health and Wellbeing business. Since the time that I've been here and together with Fernando, I mean, we've made some clear investment decisions there as well. We've acquired Yasso, we've acquired K18, and we believe that both of these brands fit us very well. The way we look at it is, first of all, we're looking for brands that have the ability to scale across the globe. And North American brands tend to have that opportunity to scale across a large geography, the U.S., and then Internationalize as well. So, that we think, is very attractive. Of course, it helps us on the hard currency side as well, which is important for us, and I think we've mentioned this a few times. But if the right opportunities would, of course, come along in geographies that are very important to us, think of India, for example, we will, of course, take a hard look. But I would call out those criteria. It should be strategically in the categories in which we play, or in the channels in which we play, should be capable to scale up, and should be in the geographies where we put our priority.
Fernando Fernandez: Let me add Hein, the fundamentals that make emerging markets attractive remain there. When you look at population growth, when you look at the emergence of the middle class, when you look at rapid urbanization, they are all there. We continue very optimistic about our prospects in emerging markets, where we have very, very strong positions in all the biggest markets. I feel in 16 of the top 20 world's fastest-growing economies, Unilever is a leading player. So we continue seeing emerging markets as a key pillar for our strategy.
Gemma S.: Our next question comes from Tom Sykes at Deutsche Bank. Go ahead, Tom.
Thomas Sykes: Yes, thank you. Morning. Firstly, just exploring the six Ps a bit. By the end of the year, what percentage of your portfolio will have some kind of renewal in it, either innovation or packaging change? I think you've highlighted packaging before as an area of particular gain for you. So what would that be by the end of the year? And what would your view be on how that should be on an annual basis compared to history? And then just on your productivity and capacity utilization, I think you previously released in annual report. So you've got about 280 factories, about a 1000 third-party supplier sites, you use about 80 or so are dedicated to Unilever. What does that infrastructure look like in three years’ time? Thanks.
Hein Schumacher: Thanks, Tom, for the question. Let me first talk about unmissable brand superiority. So, you know, first of all, we believe that towards the end of the year, we will, I mean, in terms of the methodology, roughly two-thirds to 70% of the portfolio will -- we're looking at unmissable brand superiority as the sort of the primary benchmark for taking actions. And of course, to see, you know, if our actions lead to the right results. When you ask what is the, what are we changing to what percentage of the portfolio will see change in terms of innovation and packaging? Well, I mean, if you look at unmissable brand superiority, we're looking at indeed six Ps. And of course, when we see gaps to where we need to be or where the consumer wants us to take action, of course, we take action. And the first results, I mean, you know, we've tested it, we're rolling it out now. And when there is always something to improve, you know, so I would say essentially on the whole assortment, we will continue to take actions, whether it's price, whether it's proposition, whether it's place or whether it's an innovation. So I think that's sort of a dynamic thing. And we will continue to do that. When it comes to innovation. There, we have made a bit of a change. I mean, we have two goals. First of all, we want to make sure that the average size of our innovations in totality would double this year. That means doing fewer, bigger and better. The second thing that we've talked about on innovations is that we're very keen that we will grow a select set. Roughly, you have to think about somewhere between 10 and 12 to platforms of more than 100 million. And that's very important to make these bigger bets that we can scale across the globe. And we're on track on achieving that.
Fernando Fernandez: I can cover the questions in our supply chain. We are happy with the current setup of our supply chain, but we are investing fundamentally in increasing productivity. As I mentioned before, we are allocating around more than 50% of our CapEx now to margin expansion initiatives that will fuel our gross margin development. And we have a good balance between our own manufacturing and 3Ps and co-packers. I think co-packers are fundamentally used in categories where it is required decentralized manufacturing due to the low value density of our products. A clear example, for example, is India Home Care, or where the level of innovation is very, very high. It requires a lot of changeovers. Let's take as an example of that Prestige Beauty. So we have around €11 billion of net book value of assets. We believe that with a consistent volume growth of around 2%, around 30% of our CapEx will be allocated to capacity increase or innovation activities. And as I mentioned before, between 50% and 60%, it will be allocated to margin expansion initiatives.
Gemma S.: Our next question comes from Jeff Stent at BNP. Go ahead, Jeff.
Jeffrey Stent: Thank you, Gemma. And good morning. Two questions, if I may. The first one is Heiko Schieper has now had a few months to get his feet under the nutrition desk. I'm just wondering if you could share on behalf of Heiko what his thoughts are for what he wants to do with nutrition. And the second question is, could you just shed a bit more granularity on Ice Cream and what actions are really being taken across Europe, North America and China? Thank you.
Hein Schumacher: Thanks, Jeff. First of all, on nutrition, and indeed Heiko has, as you said, feet under the desk, but he made a good and a flying start. So very happy that Heiko is on board. What he's done is obviously he's looked at the business, travelled around, made sure that he got very familiar with our operations. His first observations are that we have actually a very healthy and a very sound nutrition business. It is quite concentrated and it focuses on condiments. It focuses on cooking aids. It focuses on food solutions. And we have a strong functional nutrition business or healthy nutrition business in India with its domestic brands. So those are sort of the four, you know, the four pillars that he identified where he's keen to grow and where he's keen to make the difference. If you look at the first three pillars, so condiments, cooking aids and food solutions, the similarity between them is that, you know, one brand in each of those verticals, in cooking aids, that's Knorr, which is the second biggest brand of the company. In condiments, it's Hellmann's. And actually food solutions is the combination of two. But these key brands, these two brands are the vast majority of nutrition sales and we're keen to grow them. And that's exactly what we did, by the way, in the first half. So these two brands, together they grew 5.2%, which was ahead of the company average and very close to the overall, the top 30 Power Brand story. So, you know, he's very much aligned with that. He's keen to streamline the nutrition business further, making sure that we scale those brands and that we roll out the strong innovations there.
Fernando Fernandez: I can take the Ice Cream part if you want, Hein. We know that the Ice Cream after a very poor year, last year, you know, there were many elements to fix in our operations and we have done, we have implemented actions in several areas. You know, our service has improved significantly. We have restored competitiveness in our pricing strategy and our promotion strategy, particularly in U.S. and Europe. And we believe the level of execution in point of sale of our innovation is much better than the one last year. And as a result, we are seeing our competitiveness, our shares, both in U.S. and in several of our markets in Europe to get better. This being said, there are much more work to do in fixing some of our execution and operations. We are working on that. The disappointing performance has been fundamentally driven by what I would call a very weak performance in China, where the market conditions has been tougher and where we have been under competitive pressure and many actions are being taken in order to premiumize our portfolio and expand distribution in the regions in which we see more consumption growth potential. And of course, some bad conditions of weather in Europe, but the weather sometimes plays good, sometimes plays bad. We will not hide ourselves behind that. So many, many actions in place. We expect sequential improvement quarter on quarter in Ice Cream. And our intention is to really put this business in a very good footing prior to a separation that, as we have mentioned before, it will be completed by the end of 2025.
Gemma S.: Our next question comes from Guillaume at UBS. Go ahead, Guillaume.
Guillaume Delmas: Thanks, Gemma. Morning, Hein, Fernando. Two questions for me, please. The first one is on pricing. I mean, not Unilever specific, but we are seeing a rapid normalization of pricing. In your case, it's particularly visible in Europe and North America in the quarter with a marked sequential deceleration. So I'm wondering here what the outlook is for pricing. I mean, would you expect a further softening over the coming quarters? And particularly, could we return to negative pricing in developed markets, as it's been the case in the past? And generally, do you see major changes in consumer behavior? I mean, be it around trading down, buying more on promo, or still some fast adoption of private label? And then my second question is on the key growth engines of Health and Wellbeing and Prestige Beauty. I mean, just wondering if you could provide some color on what's happening on Health and Wellbeing, because continued strong performance, you start to roll out some of your brands internationally outside of the U.S. So wondering how this is going? And on Prestige Beauty, does the muted development of the Chinese beauty market change a little bit your plan for the rollout of your brands there? Thank you.
Hein Schumacher: Thanks, Guillaume. Let me tackle them one by one. I think there's various questions here. But first of on pricing. We have indeed seen lower pricing in the first half of the year and as well as in Q2. But it was quite regional for us. You know, we had negative pricing in South Asia and in Southeast Asia in some categories. So where we have seen real commodity deflationary impacts, we've adjusted pricing accordingly to also, of course, give back to the consumers where that's needed and to focus on our competitiveness and ensuring a volume-led growth story that we've talked about. So we've been really very close to pricing and making sure that we stick very -- stick close to what we want to achieve. If you look forward, we expect inflation to go back to more normalized levels. Now, you have to think somewhere in the, you know, globally, and I'm not talking particular commodities, but, you know, think of a level of somewhere between 2% and 3%. And that means that I would say over time towards the end of the year and possibly in the beginning of next year, we would need to start preparing for slightly higher pricing levels, but not close, of course, to the levels that we've seen in 2021 and 2022 in times of the very heavy inflation. So I think, you know, we're now seeing sort of that negative pricing in pockets. I think that will rebound a bit based on moderate inflation in our key commodities overall. When you look at consumer behavior, look, there is additional, there is somewhat heightened promotional activity in Europe. So if you look at the market, there we're seeing more promotional activity in Europe. U.S. is actually pretty constant. And for us, we have participated in that, but not to a significant extent. So we didn't promote much more than the market did. And in fact, we scaled here and there, we scaled down a little bit. And I think the European consumer, as we said, of course, they some look for value. We've also seen increased market share of private label brands in Europe over the last years, and that continued somewhat in the first half of 2024. But I believe that going forward and in a more normalized inflationary environment, things will settle there a bit. On Health and Wellbeing, on Prestige Beauty, just a few words, but asking Fernando to add, we are indeed internationalizing our Health and Wellbeing brands. We introduced Liquid IV in Canada. We did that in the UK. We did it in Australia and in a few other European countries that will take a little bit because Liquid IV grew in the U.S. over a period of seven years to what it is today. So it will take a bit of time for Europe as well. And on Prestige Beauty, it's a similar story. I mean, if you look at the brands, we have actually rolled them out in some other markets, but our exposure on Prestige Beauty in China is very limited. So let me be quite clear. We've actually introduced Auli the health and wellbeing brand in China. That's going pretty well for us, but the Prestige Beauty exposure to China is very low.
Fernando Fernandez: Yes, I feel Guillaume regarding some -- what is behind the success of our Health and Wellbeing business and our Prestige business. You know, we have built a portfolio of what we believe are very, very strong brand equities, digitally native brands, brands that are authentic and lifestyle brands. We are riding the wellness trend in areas like hydration or hair fall, for example. And, you know, we believe that this is an advantage portfolio, the one that we have built in the U.S. and that we are rolling out internationally. Just about China, I feel Hein has mentioned that we have a very focused internationalization plan for our Health and Wellbeing and Prestige business. In China, two key brands for us are Hourglass and Auli. Both are doing very, very well in a market that is muted, I would say, in terms of the growth rate today. But we are very, very selective where we send our brands. In the case of China, we are absolutely focused in the high end of Prestige Beauty and in a brand like Auli that is really riding in the female health trend.
Gemma S.: Our next question is from Bruno Bernstein. Go ahead, Bruno.
Bruno Monteyne: Hi, good morning. My first question is on product superiority. Hein, you sort of mentioned brands need to win. Indeed, clearly your competitiveness data, you know, was at the low 30, so you're actually not winning most of the time. And obviously, it can be a timing element, but I'm also remembering Hein, your predecessor, who was talking about, you know, the high levels of product superiority. So I'm trying to understand the mismatch between, on the one hand, product superiority saying your products are winning, market share data isn't saying you're winning. Is this an element of you having redefined product superiority and therefore this will, you know, get better? It's an improved measure. Is it a matter of timing? We just need to wait a bit longer for that to come true? Or, you know, how long would you have to wait before you start out and whether product superiority is the right way to measure it? My second question is on volumes. I mean, from my understanding, you have price mix in there as well. I think from my sort of estimates, most of it is price mix. Can you just quantify how big the mix component is out of your volume measure for the quarter? Thank you.
Hein Schumacher: Thanks, Bruno. I'll take the first question and asking Fernando to take the second question on mix. I mean, yes, we have made a, we have made quite a change on looking at our brands. So you're absolutely right to use the right words. I mean, we looked previously, we did look at product superiority as the most important metric. And product superiority is about a functional benefit. Does the product, what it's supposed to do. What we introduced in October is a framework called unmissable brand superiority. And that looks much more holistic at our brand performance, but always through the eyes of the consumer. So not just product superiority, that's part of it, but also the proposition. So is the marketing campaign and is it clear, is it working and is it clear what the brand stands for? It looks at place. So is it distributed in the right way? And does it have the right varieties on the shelf? It looks at price. Does the price, is the price actually the price back architecture? Is that at a good place versus competition? And I can go on. So we look at it much more holistic. We're looking at in total 21 metrics behind these 6P's. And we are very convinced that by looking more holistically and therefore improving the execution power in the entire organization, that that is the recipe for success. Now, if you look at competitiveness, you're right. Competitiveness on an MAT basis, as I explained, and that's what we expected. This is not something that you turn easily, certainly not on a global scale. We're encouraged by some recent improvements that we've seen in the last quarter. And we're all focused on making improvements in the second half of the year, which we believe are likely to materialize.
Fernando Fernandez: On UAG, Bruno, we usually don't disclose the breakdown between volume and mix, but given the fact that we are really printing numbers in volumes that are very strong, I will give you the number for the quarter two. 75% of the contribution of UAG comes from volume and 25% from mix.
Gemma S.: Our next question comes from Jeremy at HSBC.
Unidentified Analyst: Hi, morning. Jeremy HSBC here. So a couple of questions for me. The first one is just following up on the previous question on health or wellness. Can you tell us what the health the wellness business specifically grew at in the quarter and a half and also what kind of what the scale of that business is on sort of half year basis? And the second one is on China. I'm just not commenting to you, but it seems as though that market has really become very, very difficult in the course. So can you talk a little bit about what you're seeing in the consumer there and whether you think that this is going to remain the case over the balance of the year or whether there is any hope that the market could start to improve in the second half? Kind of what your current assumptions are for that market. Thanks.
Hein Schumacher: Thanks, Jeremy. Let me first talk first talk about health and wellness. I mean, we are -- what we're saying is the combination of our health and wellness business, as well as the Prestige Beauty business. We grew double digit and in its combination, we don't disclose the individual ones. But I mean, we were quite clear that Prestige Beauty was muted. We talked about shopping behavior and consumer behavior in the U.S., particularly behind luxury. And we are seeing that. But and Fernando explained it, I think before we are we are very excited about the -- our Health and Wellbeing brands, Liquid IV, Nutrafol. And they more than compensated for that. So the combination still strong for us and more than 5% of our turnover in the in the company. If you look at China, China, indeed, muted and market growth in China is truly on the on the low side. We believe that that is not going to be obviously forever. But we believe that it will take quite a bit before that rebounces. Rather than talking sort of about the China dynamics, because there's so many and I'm sure you have a very clear view about it yourself. I would like to talk a bit about our business. You know, if you look at China, as I said, we don't have massive exposure to the Prestige or to the luxury side of things. We are the market leader in hair care with our clear brand. That's pretty mainstream. I mean, it's sort of on the upper side of mainstream. Dirt is good in our home care business, still really developing. And we just introduced Wonder Wash. We also introducing in China. But if you think of and if you think of nutrition, it's primarily a food solutions business. And we don't see major changes in terms of restaurant visits by the China consumer, at least not in the type of restaurants that we supply to. So I feel pretty good. I mean, yeah, I feel pretty good about our China business. It's not a fast growth story, but it is clearly holding and we will continue to invest behind the brands as we have done before. So on an in an organic way, we will continue to invest, we will continue to bring innovation to the China market. And selectively, we will introduce some of our prestige and health and wellness brands there.
Fernando Fernandez: Yes, health and wellness is around €2.5 billion for the year. Nutrafol, Liquid IV are in the top 25 brands of the company now.
Gemma S.: Our next question comes from David at Jefferies. Go ahead, David.
David Hayes: Thanks. Good morning all. Two for me, one on margin broadly and then one specific question on cost saving. So just on the margin more broadly, you obviously substantially increased BMI and R&D, but this commitment to 18% margin or over 18% margin this year, then over 19% for what you said earlier. Is there a risk that you should be doing more to spend back on BMI and R&D even now to try and arrest or improve these trends that you struggle with on market share and volumes for a few years now? And then how are you making that decision on short-term pressure to deliver versus a long-term focus? How have you made that decision in the first half and then with your plans in the second half? And I guess just to push on that, I say margin-wise beyond this year, obviously the company was looking at over 20% margin back in the Kraft Heinz (NASDAQ:KHC) approach days of 2017. Is that when you look back on it, the right ambition for this company? Was that the right thing? But it was just challenged to get there, but that's where this company could end up. And then the second question, much shorter, is just on the savings levels in the first half. What was that number net-wise, productivity-wise? Was it all in cost of goods sold? And is it all pre the €800 million program that you talked about in the last release? Thanks so much.
Hein Schumacher: Thanks a lot. I'll take the first part of the question. Fernando takes the second part of the question. I mean, very importantly, we have -- we're shying away from an operating margin target. I think I was really keen to change that in October. So we're talking, we talked about underlying operating profit growth and initially in our guidance. And, you know, that's really what we want to stick to. So, it's super important that we talk about profit growth and not about an operating margin target for the reason that you talked about. We were seeing good gross margin expansion, but we're keen to continue to invest behind our brands. And I think, that's something that is a bit of a journey. You know, we increased 180 basis points already in the first half. We're now at 15.1% of turnover. And that represented an increase of €700 million. So quite substantially. And yes, for the second half, as Fernando has explained before, we do see opportunities to spend -- to increase our spend. But it has to go behind strong plans. We're not looking for a particular brand and marketing investments percentage as turnover. We don't have a target percentage there. We want to look at, hey, where do we have momentum? Where do we have strong plans? And then we will continue to invest behind it. So we're not afraid at all to spend, but we're not spending for the sake of spending. I guess that's the message that we want to give. And we're not looking at a particular underlying operating margin target or guidance that we want to give today.
Fernando Fernandez: Yes. As a reminder, 40% of the gross margin expansion was allocated to increase investment in our brands. So in the first half, and as Hein said, we do it behind 85% in our Power Brands, incremental spending. We do it behind a very focused innovation plan on productivity. We announced in mid-March an €800 million plan of savings in general overheads and supply chain overheads. The plan is in motion. Regi Ecclissato, our Head of Supply Chain, and myself are leading this plan together. We have several, several pillars on that. The clear geographical and technological segmentation, radical standardization of process, leverage and amplification of our cost of our operational hubs. We have eight around the world there. During the first half, we have made some progress, but basically I would say of the €800 million, you can say that only 5% to 10% it has been implemented until now. We have kickoff consultation process in Europe on July the 10th. We are working in cooperation with the European Works Council on that, and we are doing really good progress. You will see the benefits of productivity really coming more in 2025 than during this year. And beyond that, of course.
Gemma S.: Next question is from Sarah Simon at Morgan Stanley. Go ahead, Sarah.
Sarah Simon: Hi. Sorry, I have a couple of questions. On Personal Care, you previously alluded to the desire to premiumize, and you said that you weren't sure whether the existing brands are the right place to do that. Given the sort of slowdown in Prestige Beauty, are you still focused on premiumization in Personal Care? And if so, can you give us an update on what you're thinking? And then on China, B2B generally is more of a lagging business than B2C. So I'm just wondering if there is any risk on that nutrition in terms of the services business and thoughts on that. And then finally, just in terms of we're thinking about zero to 100, on the net productivity in the cost of goods sold, where would you say you are as of H1 in terms of that zero to 100 range? Thanks.
Hein Schumacher: Thanks, Sarah. I'll take the first two questions and Fernando will talk about net productivity. When it comes to the desire to premiumize, yes, that continues to be there. As I said before, we are seeing some slowdown in premium luxury in the U.S. as well as in China, but we don't believe that is in itself is structural. I think the consumer in the U.S. we see a strong demand, actually in a segment that we would call mustiest. So that is between that premium luxury and mainstream. So the consumer is still really looking for brands that provide that bit of extra, you know, that bit of extra in terms of experience, in terms of convenience and particularly in the personal care and in the beauty categories. So yes, when you look at our innovation, so we just entered the market with a whole body deodorant that's more under the Dove brand. So that is more in that segment. Shea Moisture, a very important hair care brand for us in North America is more in that segment. So -- and we are premiumizing and we're premiumizing there. We also upgraded our treatments and styling range on the TRESemme brand in a bit more premium way. So yes, we look for that premiumization. But of course, with our brands, you do that gradually. And when the right opportunity comes along, we will also look inorganically. So we believe long term that trend is very important. North American market, Europe and for the short term, as we talked about China a few times, probably not so much. That's a good bridge, I think, to the nutrition question that you asked. Yes, usually B2B is lagging. That is correct. I think if I look at the delivery of our products, think of cooking aids to restaurants, more mainstream restaurants. We're not yet seeing that slowdown. Our food solutions business is still high single digit up in China. And yes, look, even over the last couple of weeks, we're not seeing a major change in that behavior. But we stay, of course, very close to it for sure. Fernando?
Fernando Fernandez: Yes, when it comes to net productivity and our cost of goods sold, you know, I believe that there are two fundamental components that we have mentioned many, many, many times. One is the interventions that we are doing in the value chain of some of our key materials. I mentioned before the example of surfactants, for example, in the U.S., in which we are really integrating vertically there to ensure that we don't have any kind of material disadvantage versus key competitors in PC and beauty liquids. But there are many other streams of work in value chains of materials in which we are working. When it comes to production costs and logistic costs, as I mentioned before, we are allocating more than 50% of our CapEx to this kind of initiatives. If you think in a logical, I would say payback period of three to four years, you know, you can make your mouth about what is the kind of ambition we have in terms of gross margin improvement in this kind of area. I know I will not give you now a percentage of where we are in terms of delivery versus our plans. We look at this as a continuum and we will try to do it quarter in, quarter out.
Gemma S.: Our final question comes from Fulvio at Berenberg. Go ahead, Fulvio.
Fulvio Cazzol: Yes, good morning and thank you for taking my questions. I've got just a couple of quick ones. The first one is on the gross margin development. I was just wondering if you can share some comments on how this progressed for the Power Brands, given that these are the products that have been receiving more of the incremental allocation of investment. And then my second question is on Europe. I mean, Europe has been stronger than expected for you guys, but also some of your peers. Can you maybe just give us a quick outline of your expectations for the European consumer as we look ahead? Thank you.
Hein Schumacher: Thank you, Fulvio, for the question. I'll start with Europe and Fernando will take the gross margin question on the power brand. Look, I think what we're seeing in Europe is the consumer is responding well to significant innovation. We have introduced in Europe, as we talked, we've introduced Wonder Wash, but we've also introduced new deodorant varieties. In fact, our new flavored mayonnaise ranges in Europe are responding very well. So I think the European consumer, after a couple of years with high inflation and being more cash strapped and, of course, migrating to private label, I think there is genuine more appetite for meaningful and strong innovation behind our brands. And that is exactly what we're doing. I obviously can't talk about -- I won't talk about what peers are doing, but overall, Europe has been pretty stable for us in the last couple of months. And the growth that we're seeing in Europe is primarily behind the innovations that I talked about. Fernando, on the gross margin and the Power Brands.
Fernando Fernandez: Yes, the gross margin progression of Power Brands has been very, very similar to the one of the rest of the portfolio. But just to remind you that our Power Brands operate at, I would say, 400 to 500 basis points higher gross margin than the rest of the portfolio.
Hein Schumacher: Thank you, Fernando. And thanks, everyone, for joining our call. I think it's important for us that we have focused so far on delivery, high quality sales growth, and we are focused on the expansion of our gross margin. That is very much at the heart of our growth action plan. And that enables a step up in the investment behind our brands to improve our competitiveness. And, you know, we did make progress on those ambitions in the first half, and this continues to be our focus in the second half, very much guided by the plan that we laid out to you last year in October. We believe that the benefits are building steadily, and we are confident that these steps will help to transform our company over time into a more consistent and in a higher performing business. As you know, we look forward to updating you on the progress through the rest of the year. But for now, we wish you a very good day. Thanks all for dialing in.
Operator: Thanks for joining and have a good day.
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