LDN - Business

Unilever to spin off ice cream business, cut 7,500 jobs for cost savings

[March 19, 2024] By Richa Naidu and Eva Mathews

(Reuters) - Unilever said on Tuesday it would spin off its ice cream unit, home to popular brands such as Magnum and Ben & Jerry's, and cut 7,500 jobs in a new cost-savings program.

Investors cheered the plan, sending Unilever shares up more than 5% in early trading.

The spinoff will begin immediately and is expected to complete by the end of 2025, London-listed Unilever said. The ice cream business is "in the process of moving to a separate head office in Amsterdam" but CEO Hein Schumacher said on a call with journalists that he was "open to options" regarding where it could list.

Unilever aims to deliver mid-single-digit underlying sales growth and modest margin improvement after the split, it said. The ice cream business accounts for about 16% of Unilever's global sales, and in some countries contributes a third or 40%.

The consumer goods group also launched a program to save costs of around 800 million euros ($869 million) over the next three years. The proposed changes would impact around 7,500 jobs globally, mostly office-based, with total restructuring costs anticipated to be around 1.2% of overall turnover during the period.

The cuts will affect about 5.9% of Unilever's workforce of about 128,000  people.

"We are looking across the organization, so in our head office, corporate centre, as well as in business group coordination points, as well as in business units in countries," Schumacher said.

Unilever's shares jumped 5.4% in early trading. The stock has dropped 5.8% over the past year.

The move is a big statement from Schumacher, who became CEO in July and in October laid out plans to win back investor confidence by simplifying the business after admitting Unilever had underperformed in recent years. His predecessor Alan Jope was criticized for allowing the group's brand portfolio to grow to about 400, leaving management distracted from its best performers.

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Ben & Jerry's, a brand of Unilever, is seen on display in a store in Manhattan, New York City, U.S., March 24, 2022. REUTERS/Andrew Kelly/files

"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," Oberon Investments portfolio manager Jack Martin said.

"Obviously sad whenever that many people lose their jobs but (CEO) Hein Schumacher has been under pressure to deliver a better performance for the group since being appointed, so it is not hugely surprising to see changes."

In October, Schumacher said the company would focus on 30 key brands which account for 70% of its sales, work on improving its gross margin and not undertake any major or transformational acquisitions.

Schumacher told Reuters last month that he would not shy away from streamlining Unilever's workforce.

"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."

($1 = 0.9206 euros)

(Reporting by Eva Mathews in Bengaluru and Richa Naidu in London; Editing by Louise Heavens, Kirsten Donovan, Bernadette Baum and Susan Fenton)

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