UK (Commonwealth) _ In a fresh cost-cutting initiative, Unilever said on Tuesday that it will spin off its ice cream division, which is home to well-known brands like Magnum and Ben & Jerry’s, and eliminate 7,500 jobs.
The idea was well received by investors, who at one time drove shares of Unilever, one of the largest consumer products corporations in the world, up about 6%.
In addition to the ice cream business strategy, Unilever announced on Tuesday that it will intensify cost-cutting efforts with the goal of saving €800 million in the next three years. Suggested by LexUnilever PLC the ice cream scoop-out from Unilever can make you want to have another split. High-quality material the scheme will result in the elimination of about 7,500 jobs, the most of which will be “office-based.” About 128,000 individuals are employed by Unilever; the company did not specify which tasks or where the jobs will be eliminated.
The separation will start right away and be finished by the end of 2025, according to Unilever, a company listed in London. Though CEO Hein Schumacher stated during a discussion with media that he was “open to options” about where the ice cream company may list, the company is “in the process of moving to a separate head office in Amsterdam”.
Both Aviva, a stakeholder in Unilever, and Nelson Peltz’s fund, an activist investor and board member, praised the idea.
With an estimated valuation of €17 billion, Unilever leads the sector with a 20 percent market share in the ice cream business. Advisors stated that private equity firms could be interested in the ice cream business. One stated, “It’s an invitation with a fuse” for buyout investors. A number of Unilever’s previously split-off businesses were later bought by private equity firms.
Following the separation, Unilever stated that it hopes to achieve moderate margin improvement and mid-single-digit underlying sales growth. Approximately 16% of Unilever’s worldwide revenues are derived from the ice cream industry, and in certain nations, this percentage can reach up to 40%.
The company, which also owns the Dove soap, Marmite, and Hellmann’s condiment brands, unveiled a plan to cut expenses by about 800 million euros ($869 million) over the course of the following three years. Approximately 7,500 positions worldwide, primarily in offices, would be impacted by the proposed adjustments. During that time, total restructuring expenses are expected to be around 1.2% of total turnover.
Of the approximately 128,000 employees of Unilever, 5.9% will be impacted by the layoffs. Schumacher stated, “We’re searching throughout the organization, including our head office, corporate center, business group coordination points, and business units in countries.” However, he did not go into detail about which areas will be most affected by job losses.
The action is a significant declaration from Schumacher, who took over as CEO in July and announced steps to streamline the company in order to regain investor trust after acknowledging that Unilever had underperformed in recent years. The group’s brand portfolio grew to over 400 under his predecessor Alan Jope, who faced criticism for diverting management’s attention from the company’s top performers.
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The underperformance caught the eye of billionaire activist investor Peltz, who has a track record of upending consumer goods businesses and was elected to the Unilever board in 2022 through his Trian investment vehicle. According to LSEG statistics, the fund holds a 1.45% investment. On Tuesday, the fund informed Reuters that it supports Unilever’s strategic plans that were unveiled today.
According to a statement from Trian, Nelson Peltz is eager to carry out his collaboration with the other members of Unilever’s Board as the business implements plans aimed at boosting stakeholder value over the long run.
According to Richard Saldanha, portfolio manager at Aviva, which is Unilever’s 17th-largest stakeholder with a 0.5% holding, “we think strategically this makes sense” because the ice cream industry has been highly unpredictable and dilutive from a margin viewpoint.
The ice cream division has been a drag on the company overall for some time, so this is great news for shareholders. The share price should react appropriately this morning, according to Jack Martin, portfolio manager at Oberon Investments, which holds a minor interest in Unilever.
