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UNILEVER PLC

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After rocky start to year, Unilever axes 1,500 managers

01/25/2022 | 04:22am EDT
Illustration of Unilever logo

* To create five product-focused divisions

* Long-planned revamp comes after failed bid for GSK unit

* Comes amid news of stakebuilding by activist investor

LONDON, Jan 25 (Reuters) - Unilever will cut about 1,500 management jobs and reshape its business to focus on five main product areas as it tries to boost growth after a failed acquisition and with an activist investor to appease.

The maker of Dove soap and Magnum ice cream, which employs about 149,000 people worldwide, said on Tuesday it would focus on beauty and wellbeing, personal care, home care, nutrition, and ice cream.

The move, which Unilever said had been in the works for a year, echoes the reshaping by rival Procter & Gamble (P&G) three years ago https://www.reuters.com/article/us-procter-gamble-strategy-idUKKCN1ND37M - which at the time also had activist investor Nelson Peltz's Trian Partners as a shareholder.

"Moving to five category-focused business groups will enable us to be more responsive to consumer and channel trends, with crystal-clear accountability for delivery," Unilever CEO Alan Jope said.

Unilever, whose shares have fallen by about a quarter from their record high in 2019, last week effectively abandoned https://www.reuters.com/business/retail-consumer/unilever-says-it-will-not-increase-50-bln-pound-offer-gsk-consumer-business-2022-01-19 plans to buy GlaxoSmithKline's (GSK) consumer healthcare business for 50 billion pounds ($67 billion).

Its proposal, rejected by GSK, was widely criticized by investors as being a costly and risky distraction from dealing with pressing challenges to the business, such as surging inflation in emerging markets and weakness in healthy foods.

Days later, reports https://www.reuters.com/business/retail-consumer/unilever-shares-gain-after-activist-investor-peltz-builds-stake-2022-01-24 emerged that Peltz's Trian Partners had built a stake in Unilever, though Trian has not confirmed this.

At P&G, Trian sought to improve the Tide detergent maker's shrinking market share, low organic sales growth, aging brands, bureaucracy and excessive structural costs, among other things. Peltz also pushed for P&G's decision to restructure its business into fewer units - similar to Unilever's new plan.

Since Trian first invested in P&G, the company's stock price nearly doubled, and bankers and lawyers who have worked with Peltz expect he may bring the playbook https://www.reuters.com/article/trian-unilever-playbook/focus-trian-expected-to-revive-its-pg-playbook-with-unilever-idINL1N2U427M that worked at P&G to Unilever.

However, there may be no quick fix.

"Unilever operates in different product categories so it is unclear if this same strategy is enough to get growth back and over what time scale. Typically this takes years rather than months," Tineke Frikkee, fund manager at Unilever investor Waverton Investment Management, said.

POOR PERFORMANCE

Unilever, which is expected next month report a decline in full-year net income, has struggled through the pandemic https://www.reuters.com/business/retail-consumer/unilever-margins-spotlight-inflation-surges-2021-10-20 with rising raw material, labor and transport costs. Its exposure to certain foods and emerging markets - where inflation is rising sharply - has also put it at a disadvantage versus rivals P&G and Nestle.

As Unilever continues to lag, investors have grown frustrated. On Thursday, British fund manager Terry Smith criticized the company in a letter to his Fundsmith LLP investors, calling the lost GSK deal a "near death experience" and urging management to focus on strengthening performance.

"Unilever management's response to its poor performance has been to utter meaningless platitudes to which it has now attempted to add major M&A activity," Smith wrote.

GlobalData analyst Ramsey Baghdadi said Unilever should focus on strengthening its current product ranges and reaching new customers, instead of diversifying into other sectors such as healthcare - as seen in the GSK bid.

Unilever, which traces its roots to a small soap business in 1880s Britain, said it did not expect factory workers to be impacted by its restructuring. There will be 15% fewer senior management roles and 5% fewer junior management roles, however.

"While today’s news may not be directly connected to the company’s failed GSK offer, the timing is unfortunate," Sean Moran, restructuring specialist at law firm Shakespeare Martineau, said. "When confidence in a business is low, drastic decisions must often be made."

(Reporting by Richa Naidu in London and Pushkala Aripaka in Bengaluru Editing by Mark Potter)


© Reuters 2022
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MONDELEZ INTERNATIONAL, INC. 1.39% 62.04 Delayed Quote.-6.44%
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PEPSICO, INC. 2.09% 165.6 Delayed Quote.-4.67%
PROCTER & GAMBLE COMPANY 2.30% 145.05 Delayed Quote.-11.33%
UNILEVER PLC 0.50% 3534 Delayed Quote.-10.30%
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Financials
Sales 2022 57 621 M 60 788 M 60 788 M
Net income 2022 5 639 M 5 949 M 5 949 M
Net Debt 2022 23 916 M 25 231 M 25 231 M
P/E ratio 2022 19,8x
Yield 2022 4,09%
Capitalization 106 B 112 B 112 B
EV / Sales 2022 2,25x
EV / Sales 2023 2,17x
Nbr of Employees 148 012
Free-Float 95,5%
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Mean consensus HOLD
Number of Analysts 20
Last Close Price 41,55 €
Average target price 47,16 €
Spread / Average Target 13,5%
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Managers and Directors
Alan Jope Chief Executive Officer & Executive Director
Graeme David Pitkethly Chief Financial Officer & Executive Director
Nils Smedegaard Andersen Chairman
Richard Slater Chief Research & Development Officer
Nitin Paranjpe Chief Operating, Transformation & People Officer
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