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Unilever Announces Spinoff of Ice Cream Business, Proposes 7,500 Job Cuts to Drive Cost Savings

by Alice

March 19 (Reuters) – Unilever (ULVR.L) revealed on Tuesday its decision to spin off its ice cream unit, housing renowned brands like Magnum and Ben & Jerry’s, and implement a cost-saving initiative involving 7,500 job reductions.

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Investors welcomed the announcement, propelling shares in Unilever, a global consumer goods giant, up by nearly 6% at one stage.

The spinoff process is set to commence immediately, with completion expected by the end of 2025, as per Unilever’s statement. The ice cream division is currently transitioning to a separate headquarters in Amsterdam, although CEO Hein Schumacher indicated flexibility regarding potential listing venues during a call with journalists.

This strategic maneuver garnered approval from activist investor Nelson Peltz’s fund and Unilever shareholder Aviva.

Unilever aims to achieve mid-single-digit underlying sales growth and marginal margin enhancements post-spinoff. The ice cream segment contributes approximately 16% to Unilever’s global sales, with some regions attributing up to a third or 40% of sales.

Additionally, the company launched a cost-saving initiative targeting around 800 million euros ($869 million) over the next three years. The proposed restructuring is anticipated to affect about 7,500 jobs globally, primarily in office roles, with projected costs representing approximately 1.2% of total turnover during the stated period.

Schumacher elaborated on the scope of restructuring efforts, stating, “We are looking across the organization, so in our head office, corporate center, as well as in business group coordination points, as well as in business units in countries,” while refraining from specifying regions most impacted by job cuts.

This move underscores Schumacher’s strategic vision following his appointment as CEO in July, aligning with his previous commitment to streamline operations and address underperformance. Under his predecessor Alan Jope, Unilever’s brand portfolio expanded to approximately 400, leading to concerns of managerial diversion from core assets.

Billionaire activist investor Nelson Peltz’s engagement with Unilever, facilitated through his Trian investment vehicle, reflects a broader trend of shareholder activism in consumer goods companies. Trian, owning a 1.45% stake according to LSEG data, expressed support for Unilever’s strategic initiatives, emphasizing long-term stakeholder value enhancement.

Unilever’s stock surged nearly 6% in early trading, later stabilizing with a 3% increase by 1100 GMT. Over the past year, the stock has experienced a 5.8% decline.

Analysts like Richard Saldanha, portfolio manager at Aviva, view the move favorably, citing the ice cream division’s historical volatility and margin dilution. Similarly, Jack Martin, portfolio manager at Oberon Investments, anticipates a positive market response, acknowledging the division’s prior drag on overall business performance.

In October, Schumacher outlined Unilever’s strategic shift towards focusing on 30 key brands responsible for 70% of sales, prioritizing gross margin improvement over major acquisitions.

Regarding the workforce streamlining, Schumacher affirmed, “We have a big agenda,” foreseeing a busy period over the next 18 months.

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