Unilever splits units as Q2 profits fall

Unilever splits units as Q2 profits fall
REUTERS

LONDON, AUG 4: Anglo-Dutch consumer products group Unilever Plc/NV on Friday announced a shake-up of its top management, splitting the company into two separate global units, even as it reported a 14 per cent fall in second quarter (Q2) profits.

The Lipton teas, Dove soap and Flora margarine group, which took over US Bestfoods for $20.3 billion in June, reported Q2 pre-tax profits slipped to 928 million euros ($839.1 million) on turnover up three per cent at 10.9 billion euros.

But stripping out one-off items, operating profits rose 10 per cent, driven by a pick-up in sales growth from a sluggish one per cent in Q1, and increased margins, reflecting lower raw material prices and ongoing restructuring. "The profit figures are above consensus, driven by margin expansion, and we would see the shares going better," said Lehman Brothers food industry analyst Nick Sockovsky. Analysts had looked for a Q2 pre-tax figure of around 800 million euros.

The group said underlying Q2 operating margins rose to 11.3 per cent from a previous Q2 figure of 10.6 per cent, compared to its 2004 target of 16-17 per cent. But many analysts said the margin boost came largely from one-off factors and doubted whether the momentum could be kept up.

Two new global divisions: In the management shake-up, Unilever is to form two global divisions - food and home & personal care - to help fulfil its `Path to Growth' strategy announced in February, to drive up sales and margins and focus on its top 400 key brands such as Elizabeth Arden, Magnum ice cream and Close-Up toothpaste.

But Unilever denied the move paved the way for a demerger. "This is not a precursor to splitting Unilever, it is a realignment of the business bringing the strategic and operational functions closer," said a company spokesman.

On the foods side, current finance director Patrick Cescau takes over from Alexander Kemner from January 2001 as global chief. Kemner plans to retire in May 2001.

Dadiseth gets new role: Meanwhile, Keki Dadiseth, who undertook the six-month management review, will become worldwide home & personal care chief from the same date and takes over from Clive Butler, who becomes corporate development director. Dadiseth is the former chairman of Hindustan Lever Ltd, which is 51 per cent owned by Unilever.

The group gave an upbeat outlook, reiterating its 8-10 earnings target for this year and said it expected increased marketing investment and underlying revenue growth in the year.

"Before exceptional items and excluding the effect of recently completed acquisitions, this should result in earnings per share growth at constant exchange rates in the expected range of eight to 10 per cent," said joint chairmen Niall FitzGerald and Antony Burgmans in a statement.

The group's Q2 sales growth of three per cent was helped by acquisitions such as mustard and mayonnaise maker Amora-Maille and also contributions from US acquisitions Ben & Jerry's and Slim-Fast, but still lagged French food group Danone which showed first half like-for-like sales up 8.1 per cent.

Patrick Cescau, currently financial director, will become foods director, responsible for Unilever's Foods business worldwide, with effect from January 1, 2001. Until that time he will lead the planning of the integration with Bestfoods and take immediate responsibility for Unilever's North American foods operations. Among other changes, Alexander Kemner, currently foods category director, will support the integration process until his planned retirement in May 2001. Rudy Markham, currently strategy and technology director, has become finance director with immediate effect while retaining responsibility for Information Technology.

The role of the executive committee remains unchanged, it is responsible for the overall results and performance of Unilever. Similarly, the responsibilities of Andre van Heemstra, Charles Strauss and Roy Brown are unaffected. Unilever chairman Antony Burgmans, said: ``Our 1996 reorganisation released much energy in Unilever but the business has continued to evolve making this review of our structures timely. These changes have been specifically designed to ensure effective execution of our `path to growth strategy.''