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To Save Expenses, Unilever Will Split Off Its Ice Cream Division And Eliminate 7,500 Jobs

To Save Expenses, Unilever Will Split Off Its Ice Cream Division And Eliminate 7,500 Jobs
In a fresh cost-cutting initiative, Unilever announced on Tuesday that it would 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 goods corporations in the world, up about 6%.
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 could list, the company is "in the process of moving to a separate head office in Amsterdam".
Both Aviva, a shareholder in Unilever, and Nelson Peltz's fund, an activist investor and board member, praised the idea.
Following the split, Unilever stated that it hopes to achieve modest margin improvement and mid-single-digit underlying sales growth. Approximately 16% of Unilever's worldwide sales 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.
The regions that would be most affected by job losses were not specified by Schumacher, who stated, "We are looking across the organisation, so in our head office, corporate centre, as well as in business group coordination points, as well as in business units in countries."
The action is a significant declaration from Schumacher, who took over as CEO in July and announced steps to simplify 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.
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 data, the fund has a 1.45% investment. On Tuesday, it informed Reuters that it "supports the strategic initiatives announced today by Unilever."
"Nelson Peltz looks forward to continuing to work with the other members of Unilever's Board as the company executes on initiatives to increase long-term stakeholder value," Trian stated in a statement.
By 1100 GMT, Unilever's shares had increased by 3% after nearly 6% in early trading. Within the last year, the stock has decreased by 5.8%.
"(Ice cream) has been quite a volatile business and has also been dilutive from a margin standpoint, so we think strategically this makes sense,” said Richard Saldanha, portfolio manager at Aviva, which is Unilever's 17th biggest shareholder with a 0.5% stake.
"Great news for shareholders regarding the ice cream division as it has been a drag on the business as a whole for some time, share price should respond accordingly this morning," Jack Martin, portfolio manager at Oberon Investments, which owns a small Unilever stake.
Schumacher announced in October that the firm would not make any significant or game-changing acquisitions, would instead concentrate on strengthening its gross margin, and would concentrate on 30 core brands that account for 70% of its revenues.
Last month, Schumacher stated to Reuters that he would not hesitate to reduce Unilever's personnel.
"We have a big agenda," Schumacher said on Tuesday. "This is going to be a very busy period for the next 18 months or so."

Christopher J. Mitchell

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