Today, Unilever (UL, Financial) shares are on the rise, up 2%, following the announcement of a comprehensive growth strategy. The global conglomerate, known for its wide range of products in beauty, personal care, home care, nutrition, and ice cream, is set to enhance productivity through several key initiatives. These include the separation of its Ice Cream business and a reduction in headcount, aiming for €800 million in cost savings over the next three years.
With the Ice Cream division's spin-off expected by the end of 2025, Unilever projects mid-single-digit underlying sales growth and moderate margin improvement in FY24. This move is anticipated to counterbalance the operational dis-synergies from the division's separation. The Ice Cream unit, featuring brands like Ben & Jerry's and Magnum, and nearly €8.0 billion in sales, is poised to become one of the largest standalone ice cream companies globally.
Despite the Ice Cream business's recent underperformance, with a mere 2.3% growth in FY23, Unilever sees the separation as a strategic step forward. The company's other sectors, including Beauty & Wellbeing, are experiencing robust demand, overshadowed by the Ice Cream segment's sluggish sales. Furthermore, Unilever aims to improve its operating margins, which fell by 150 basis points to 16.4% in FY23, through its productivity initiatives and increased investment in R&D.
Unilever's recent performance has been hampered by inflation and a shift towards cheaper alternatives, leading to a stagnant share price. However, the company's new growth plan, coupled with a €1.5 billion share buyback program and a 3.7% annual dividend yield, signals a potential turnaround for its stock. Unilever's strategic adjustments may finally offer a solution to its recent challenges.
