Unilever PLC (ULVR) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. My name is Nils Andersen, and I'm the Chairman of the Board of Directors of Unilever. It's a pleasure to welcome you here to the first of 2 virtual meetings that we are holding this afternoon on behalf of Unilever PLC. As you may be aware, as a result of the COVID-19 pandemic, the U.K. has passed legislation allowing shareholder meetings to be held by electronic means. Therefore, we announced on the 29th of September 2020, that today's meetings of PLC shareholders would take place by electronic means only. We've done this because we do not want to risk -- to take any risks with the well-being of our staff, our partners or you, our shareholders. I'm pleased that you've taken the time to join us, and I sincerely hope the pandemic will be under control soon. The time is now 2:30 p.m. U.K. time. And as the necessary quorum is present, I declare this meeting open. I'm acting as the Chairman of this meeting. There'll be 2 separate meetings today. This court meeting and then a general meeting of Unilever PLC. Both meetings relate to unification of the Unilever Group. And these meetings follow the shareholder meeting we held on NV on 21st of September 2020, at which NV shareholders voted overwhelmingly to approve the unification. The first meeting of Unilever PLC shareholders is the court meeting, which has been convened with the permission of the High Court of England and Wales. The court meeting is required because unification is proposed to be implemented by means of a cross-border merger, which requires the approval of you, PLC shareholders, and also the court. I've been appointed as Chairman of this court meeting by the court. The second meeting of Unilever PLC shareholders is a general meeting. The purpose of the general meeting is to approve the special resolution to provide for the implementation of the cross-border merger and other necessary actions to do so. The general meeting will take place following this meeting and on the same webcast. So there's no need to check in and check out again or check out and check in again. Please allow me first to introduce the following directors of the company who have joined today's meetings. First, Alan Jope, our Chief Executive Officer. Hi, Alan.

Good afternoon.

And Graeme Pitkethly, our Chief Financial Officer. Hello, Graeme.

Hi there.

Ritva Sotamaa, our Chief Legal Officer and Group Secretary, also joins the meetings. Before we start the formal business of this court meeting, Alan, our Chief Executive Officer, will provide you with some information in relation to unification. Following Alan's presentation, we will give you the preliminary voting results. Only votes submitted prior to 2:30 a.m. -- p.m. on the 10th of October 2020 have been taken into account to calculate the votes cast for this court meeting. Live voting during the court meeting is not possible. We would like to personally thank you for taking the time to engage with us on the proposal to unify Unilever's dual-headed structure under a single U.K. parent company. The Board conducted a comprehensive review before announcing our unification plans in June this year, and we firmly believe this proposal is in the long-term interest of Unilever and its many stakeholders. Modernizing our complex legal structure, which was established 90 years ago, will bring significant benefits such as greater strategic flexibility to grow shareholder value, providing the potential for accelerated portfolio change. The proposed changes will not impact the underlying economic interest of any shareholder. And for the first time, all shareholders will share exactly the same legal ownership, dividend, governance and capital distribution rights in a single parent company. The proposal does not change the operating business or the Board's strategy to drive long-term growth across the 3 divisions of Unilever. It will complement these efforts. The Board strongly believes this proposal will help create a simpler, stronger group that is better able to deliver long-term value for all our stakeholders. And I will now give the floor to Alan to provide you with some more information regarding unification. Over to you, Alan.

Well, thank you very much, Nils. And I would also like to extend my thanks for the level of stakeholder engagement that we've enjoyed over recent months on these proposals. I mean, listen carefully, I do believe more strongly than ever that unifying our 2 separate legal entities is in the long-term interest of Unilever and our stakeholders. Now this is the customary safe harbor statement that we show anytime we are making forward-looking statements about the business. The benefits of unification are, I believe, widely recognized. In order to drive long-term growth across our 3 divisions, we want and need to be able to accelerate portfolio change. Unifying our legal parent structure will give us greater strategic flexibility to do this, should we choose, through equity-based acquisitions and demergers. This would simply put us on a level playing field with our global competitors. Now this link between a simpler legal structure and greater strategic flexibility was underlying strongly following a full-scale review, which we began last year, of all of our brands and categories. And the recent strategic review of our Tea business assessed a full range of options, including a demerger as one route to separation. As we found when we came to dispose of our Spreads business in 2018, a demerger would be significantly more challenging under the current legal structure than under a single parent structure. Unification will also further strengthen Unilever's corporate governance. It will simplify the capital structure with 1 market capitalization and distributable reserves for dividends and share buybacks, 1 global pool of liquidity and 1 class of shares with identical rights. Our proposal to establish a single U.K. parent company, Unilever PLC, is the best practical option to achieve unification. As you know, in 2018, we withdrew a proposal to unify under a Dutch parent company because of concern from a significant minority of shareholders about the impact it would have on FTSE index inclusion. As a result, unifying under a Dutch parent company is not an option. We're very proud of our Anglo-Dutch heritage, and we have significantly strengthened our presence in the Netherlands in recent years. Unification will have no impact on our operations in the Netherlands, including the number of people we employ there. Furthermore, our Foods & Refreshment division, which makes up fully 40% of Unilever with brands like Knorr, Hellmann's, Magnum, Unox and The Vegetarian Butcher, will remain firmly based in Rotterdam under these plans. Indeed, as part of our unification proposal and subject to its successful implementation, we've agreed with the Dutch government to work together to create an even stronger and more dynamic Foods & Refreshment division in the Netherlands. One important platform for this will be our new Global Foods Innovation Center at Wageningen University, which we were very proud to open last December following an EUR 85 million investment. There will also be no significant changes to Unilever's footprint in the United Kingdom as a result of unification, either jobs or investment. Our Home Care and our Beauty & Personal Care divisions will continue to be headquartered in the U.K. So here's a simple explanation of the legal change. As part of a cross-border merger, Unilever NV will be merged into Unilever PLC, and NV shareholders will become shareholders in PLC. Unilever NV shareholders will receive 1 new Unilever PLC share in exchange for each Unilever NV share held. As Nils mentioned, shareholders will share exactly the same legal ownership, dividend, governance and capital distribution rights in a single parent company. All of the assets, liabilities and legal relationships of NV, including subsidiaries, will be acquired by PLC by operation of law. NV will cease to exist and all its shares will be canceled. PLC will become the sole parent company of the Unilever Group. There will be 1 market capitalization, 1 global pool of liquidity, 1 class of shares. But there's a lot that will not change. Let me emphasize that unification will not result in any change to Unilever's multi-stakeholder approach. This will remain at the heart of everything that we do. We are embedding sustainability into every part of Unilever's business through our new purpose-led, future-fit Unilever Compass strategy. We are determined to show that sustainable business drives superior financial performance and creates long-term value for all of our stakeholders. The most recent example of this commitment came in the last few weeks with the launch of our new Home Care strategy called Clean Future. By replacing 100% of the carbon derived from fossil fuels in our cleaning and laundry products with renewable or recycled carbon by 2030, that's just less than 10 years away, we intend not only to transform our business, but to help shift the whole industry. And this commitment came on top of similarly ambitious proposals that we've announced in the last 6 to 12 months in the areas of climate and nature and plastic packaging. Unilever is recognized as the global leader in sustainable business, and this will not be diminished in any way as a result of these changes we're proposing as part of unification. We also intend to go on maintaining the highest standards of corporate governance. Hence, Unilever will continue to apply its existing corporate governance principles following unification, including applying the U.K. corporate governance code. Unilever shares will still be listed and traded on the Amsterdam, London and New York Stock Exchanges. Unilever PLC will continue to have premium listing on the London Stock Exchange, and we expect to continue to be included in the FTSE UK Index Series. We've spoken with Euronext, and they've confirmed our expectations around Unilever PLC shares replacing NV shares in the AEX-Index. We also expect Unilever PLC shares to be included in the STOXX Europe 600 index and other relevant pan-European indices. Finally, we will continue to report our earnings and declare dividends in euros, with those dividends being paid in euros, pound sterling or U.S. dollars. And there will be no change to our policy of seeking to pay an attractive, growing and sustainable dividend. Let me conclude. These are certainly challenging and uncertain times, but that merely underscores the need for Unilever to a greater strategic flexibility. We have consulted widely and listened carefully, and we're confident that we have come forward with the most shareholder-friendly route to unify our legal structure. Above all, we strongly believe that this proposal will help to create a future-fit Unilever, which is stronger, better positioned for success, and we're able to deliver long-term value for all of our stakeholders. With that, back to you, Nils. Nils, I think you need to go off mute. Here we go.

I'm off mute. Thank you very much, Alan. In the notice of meeting and subsequent announcement, we invited shareholders to submit written questions by e-mail prior to this meeting regarding the unification proposals. And our intention was to use this point in the meeting to answer such questions. However, we didn't get any questions from you, shareholders, which means that we won't conduct a traditional question-and-answer session. I would like instead to invite Graeme Pitkethly to provide a brief update on 1 matter, which concerns a legislative proposal made by a member of the Dutch parliament. You may have seen our related announcement to shareholders on Friday. And Graeme, can you please -- can I please hand over to you to do this information on GroenLinks proposal?

Certainly, Nils, thank you. As you will be aware from our shareholders' circular and our prospectus, on the 10th of July 2020, a member of the Dutch Parliament for the opposition, GroenLinks party, published a draft bill seeking to impose an exit tax on companies leaving the Netherlands in certain circumstances. The GroenLinks party has now formally tabled a proposed exit tax bill in the Dutch Parliament. We are carefully reviewing that bill to assess any potential impacts on our proposal for unification. As we've said previously, the Board intends to proceed with the unification proposal provided that, in the Board's view, unification remains in the best interest of Unilever, its shareholders and other stakeholders as a whole, and the Board will update shareholders as appropriate. Back to you, Nils.

Thank you, Graeme. And we'll now move to the formal business of the court meeting. In order for the cross-border merger to be approved, the shareholder vote in favor requires a majority in number of shareholders present and voting, either in person or by proxy, at this court meeting, and representing not less than 75% in value of the shares voted by those shareholders. A pool will be taking -- a poll will be taken on the resolution. The court meeting is for shareholders as at the voting record time of 8:00 U.K. time on 10th of October 2020. Only such shareholders and proxies or corporate representatives of shareholders were entitled to vote in respect of this court meeting. The notice of the court meeting, which is set out in the Schedule 1 of the circular, was made available on our website on 10th of August 2020, and dispatched to shareholders of 10th of August 2020 as well. I propose the notice convenes the Board meeting -- that convening this court meeting be taken as read. The circular provides a full explanation of the cross-border merger and its effect on shareholders of the company. And I'll now formally propose the resolution, this 1, to approve the common draft terms of merger. I propose that the cross-border merger proposed to be made between the company and Unilever NV, and the term set out in the common draft terms of merger dated 7th of August 2020, a copy of which has been produced to this meeting, and I've just initialed and shown to you for the purposes of identification, be approved. I can confirm that for those completed proxy forms that have been validly lodged and which appoint the Chairman of the meeting as proxy, I'm casting those votes in, according with voting instructions set out in such proxy forms. We'll now show on the screen the results of the voting based on the votes that were submitted before the deadline of 2:30 p.m. on Saturday, 10th of October 2020. And as you will see the number of vote -- what is on the screen now is the number of votes cast for and against the resolution to approve the cross-border merger, including the common draft terms of merger. Based on the votes submitted as of the cut-off time of 2:30 on Saturday, 10th of October 2020, the final number of votes cast remains subject to completion of the relevant scrutineer processes, but the number of votes shown on the screen would result in the resolutions being passed. The final numbers of the poll will be announced via the London Stock Exchange and publicly posted on our website later on today. Ladies and gentlemen, that concludes the items of business for the court meeting, which is now closed. And as the time is after 2:45 p.m., we'll now proceed immediately to the general meeting. Ladies and gentlemen, it is now 2:50 p.m. U.K. time, and I welcome you to the second of 2 shareholder meetings today relating to the proposed unification of the Unilever Group. This is the general meeting, which is also taking place by electronic means only. The necessary quorum is present, and I declare this meeting open. And I'm, again, acting as the Chairman of this meeting. As I mentioned during the preceding court meeting, we invited shareholders who have questions related to unification to pre submit those questions in writing. But unfortunately, no such questions were received. This means that we'll move straight away to the formal business of the general meeting. And as I mentioned earlier, the purpose of this general meeting is to approve the special resolution to provide the implementation of the cross-border merger and certain other matters related to unification as set out in the notice of the general meeting. In order for the special resolution to be approved, it requires at least 75% of the votes cast to be in favor. A poll will be taken on the special resolution. The general meeting is for shareholders as at the voting record times of 8:00 p.m. on 10th of October 2020. Only shareholders and proxies or corporate representatives of shareholders were entitled to vote in respect of this general meeting. And live voting during this general meeting is not possible. The notice of the general meeting, which is set out in Schedule 2 of the circular, was made available on our website on 10th of August 2020, and dispatched to shareholders on 10th of August 2020. I propose that notice convening this general meeting be taken as read. The circular provides a full explanation of the special resolution and its effect on shareholders of the company. As the special resolution is set out in full in the notice of the general meeting, I'll not read it out here. However, in summary, the special resolution is: approves the common draft terms of merger, a copy of which has been produced to this meeting and I have initialed for the purposes of identification, and it authorizes the director of the company to take all such actions as they may consider necessary or to affect the cross-border merger; approves the repurchase by the company of its deferred shares, and authorizes the directors to allot new shares in the company in connection with the cross-border merger; and approves the adoption of the amended articles of association of the company that are appended to the common draft terms of merger, a copy of which I have initialed for the purposes of identification. I will now formally propose a special resolution as just summarized in its entirety as set out on Pages 80 and 81 of the circular. I can confirm that for those completed proxy forms that have been validly lodged and which appoint the Chairman of the meeting as proxy, I'm casting those votes in, according with the voting instructions set out in such proxy forms. Where completed proxy form has been validly lodged that does not give an instruction as on how to vote on this special resolution, I'm casting such votes in favor of the special resolution. We'll now show on the screen the result of the voting based on the votes that were submitted before the deadline of 2:45 p.m. on the 10th of October 2020. And on the screen, you'll now see the number of votes cast for, against and withheld with respect to the special resolution. The final number of the votes remain subject to this completion of the relevant scrutineer processes, but the number of votes shown on the screen would result in the special resolution being passed. The final result of the poll will be announced via the London Stock Exchange and on our website later on today. As I mentioned previously, the Board strongly believes that the proposal will help create a simpler, stronger company that is better to -- able to deliver long-term value for our shareholders. The Board and I are fully committed to Unilever's multi-stakeholder approach, purpose-led, future-fit Compass strategy. Unilever has been at the forefront of sustainable business for many years and has a strong track record of looking after people and planet. In the past few months, Unilever contributed EUR 100 million to help fight COVID-19 and protect the lives and livelihoods of the multiple stakeholders. In August, the GlobeScan/SustainAbility Survey recognized Unilever as the #1 corporate sustainability leader for the 10th year in a row. We're very proud of these achievements, but we know we still have a lot of work to do. Our mission is to deliver value to all stakeholders socially, environmentally and economically. This is consistent with our vision to be a leader or to be the leader in sustainable business globally. And this concludes our meeting today. I would like to thank you once again for your attendance. Thank you for joining us. Goodbye, and have a good day.