HomeMarket NewsThe Unilever Shake-Up: Analyzing the UL Job Cuts and Ice Cream Spinoff

The Unilever Shake-Up: Analyzing the UL Job Cuts and Ice Cream Spinoff

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Unilever Layoffs - Unilever Layoffs 2024: What to Know About the UL Job Cuts, Ice Cream Spinoff

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Unilever (NYSE:UL) is embarking on a transformative journey, marked by a reduction of 7,500 jobs and the anticipated spinoff of its revered ice cream business.

The conglomerate, domiciled in England, faces mounting pressure from activist investor Nelson Peltz to enhance operational efficiency.

Following the announcement, Unileverโ€™s shares experienced a 2.7% boost overnight. The market greeted the news warmly, with the stock slated to commence trading at $49.87 per share today, reflecting a market capitalization of approximately $125 billion, on the heels of generating $65.8 billion revenue in 2023.

Peltzโ€™ Prelude

Unilever disclosed โ€œdisappointingโ€ results for its fourth fiscal quarter, underscoring a 3% dip in revenue and a waning market share. The company pivoted by scaling back price increases to mitigate this decline.

Nelson Peltz made his foray into Unilever through his investment vessel, Trian, in 2022, securing a coveted board seat. However, he divested his holdings early in 2023. Over the past two years, Unileverโ€™s stock has advanced by a modest 7%.

The latest strategic maneuvers are set to inject dynamism into the organizational landscape. Unilever intends to divest its ice cream business, boasting nearly $9 billion in sales. While Ben & Jerryโ€™s hogs the limelight, Unileverโ€™s portfolio also encompasses brands like Wall and Magnum.

The layoffs, encompassing approximately 6% of its 128,000-strong workforce, are framed as a โ€œproductivity enhancement scheme.โ€ Projections suggest that these workforce reductions could yield savings of approximately $900 million over a three-year period. The toll of the layoffs is estimated at 1.2% of the companyโ€™s revenue.

CEO Hein Schumacher assumed leadership reins in Unilever last June. His existing contract harbors provisions that could net him close to $19 million if profitability milestones are met. While his base salary hovers around $10 million, he ran aground on last yearโ€™s targets, culminating in a reduction of his bonus from 150% to 115% of his salary. Schumacher recently underscored that his strategies have garnered the approval of Peltz.

Unilever Layoffs: Unveiling the Road Ahead

The packaged goods segment stands as a quintessential facet of a mature industry, commanding limited analyst coverage. Notably, Morgan Stanley recently downgraded its rating on Unileverโ€™s stock from equal weight to underweight.

A primary allure of the stock rests in its dividend, which currently shells out a quarterly stipend of 46.5 cents, translating to a yield of 3.8%.

On the date of publication, Dana Blankenhorn did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

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