Unilever announces major restructuring

Unilever announces major restructuringConsumer products giant Unilever plans to sell its spreads division and combine its foods and refreshments units as part of a major review of operations, following the takeover bid by rival Kraft Heinz that fails in February.

Alongside new plans to "go faster and further" with its restructuring programme, Unilever upped its annual dividend guidance and launched a €5bn share buyback.

Following a review of the group's strategy after fighting off a bid from U.S. rival Kraft Heinz, the Anglo-Dutch consumer goods group's new plans include establishing an integrated Foods & Refreshment unit, targeting an increased €6bn of cost savings and a possibly controversial review of its dual-headed UK-and-Netherlands legal structure.

Chief executive Paul Polman said review reinforced the view that the group's basic business model was "the right one for Unilever and for our shareholders" but that the "Connected 4 Growth" programme launched last year strategy could be accelerated.

Setting up the integrated Foods & Refreshment unit as a leaner and more focused business is expected to lead to an expansion of the underlying operating margin, not including restructuring, from 16.4% in 2016 to 20% and contribute to a doubling of the group cash conversion ratio to 100% by 2020.

Polman also upped targets for cutting overheads, with cumulative cost savings over the next three years through increased efficiency of brand and marketing investment and from a more efficient supply chain were upped from over €4bn to a combined €6bn, though total restructuring costs are expected to be around €3.5bn between 2017 and 2019.

The Baking, Cooking and Spreads unit set up in 2015 has performed well enough but as the underlying category faces continued challenges in developed markets, the decision has been taken to launch a process to either sell or demerge the Spreads part.

"As we evaluated the alternatives for our Spreads business, it was apparent that our dual-headed (NV and PLC) legal structure adds complexity when undertaking such changes. Accordingly, we will review our legal structure with the objective of achieving greater simplification and strategic flexibility. As part of this review, which we expect to complete by end of 2017, we will investigate and take actions, if appropriate, that assist in implementing that corporate structure change," the company said.

Chairman Marijn Dekkers, who was appointed last year, said the review was "detailed and comprehensive" and was "fully supported" by the board.
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