Unilever CEO Rejects Splitting Speculation

07 Apr 2017 --- Following yesterday’s announcement that Unilever has completed a strategic review of the Group after the failed takeover bid from Kraft Heinz and the fact that it will now sell off its spreads business, speculation is mounting about what the future holds for the Anglo-Dutch consumer goods company.

The review is prompting questions about what else the broad restructuring might mean for Unilever and who will come in to buy the spread business.

In terms of its physical presence and legal structure - with Unilever’s current headquarters in Rotterdam and London - this is one aspect that has previously been talked about in relation to Brexit, but again now following the completion of the detailed and comprehensive review. 

In the lead up to yesterday’s announcement, analysts have also been speculating about the possibility of Unilever potentially fracturing into two separate companies, a move that has been rejected by CEO Paul Polman.

He told CNBC: “We have attracted a majority of investors that like our long-term compounding business model and the 190% shareholder return we’ve been seeing and it is those investors that obviously we are trying to listen to. There is a broad range of investors out there and a broad range of opinions.”

“The splitting of our food business from the rest of our business, frankly would lead to an enormous amount of dissynergies and less opportunity of our value creation, in our opinion.” 

Meanwhile Unilever has also said it plans to increase its net debt-to-Ebitda ratio, intending to use the debt for acquisitions as well as higher dividend payouts. 

In a Unilever statement about accelerating sustainable shareholder value creation, the company stresses its commitment to a “proven, long-term model of compounding growth and sustainable value creation.”

“Our growth model is simple, but powerful: growth that is consistent, competitive, profitable and responsible. This is fueled by sustained investment in our business. We have many of the best-known brands in the world and continue to build them with global and local innovations that add value with technology-driven benefits,” it says.

“Our geographic presence is very strong with both global scale and 57% of our sales in emerging markets where the future growth opportunities are greatest. As a result, we have consistently grown ahead of our markets, steadily improved profitability and cash flow, and delivered a Total Shareholder Return of 190% over the last eight years.”

In addition Unilever is also cutting back on its advertising costs with some reports suggesting it will reduce its spend with WPP - the British multinational advertising and public relations company -  and produce around 30% fewer ads. 

This move of reducing advertising spend is being replicated by other big companies cutting back on marketing investments, according to analysts.