Unilever PLC's (LSE:ULVR) plan to scoop out its Ben & Jerry's, Walls and Magnum ice cream division as a separately listed company is a "clear positive step" towards making the company grow faster, said analysts at Barclays, and could bring questions about other parts of the conglomerate.
The fourth-largest group in the FTSE 100 said on Tuesday morning that it plans to dispose of the ice cream business, most likely as a standalone company but with other options on the table too.
Unilever's chief executive Hein Schumacher, who was appointed last July, and his predecessors have been under pressure from investors to boost profits and market share, with the decision understood to have been influenced by activist investor Nelson Peltz, who has had a board seat since 2022 and made similar changes at rival P&G.
Alongside the ice cream sale, the group also flagged the intention to launch a "productivity programme", including cutting 7,500 jobs, that is anticipated to deliver total cost savings of around €800 million over the next three years, though raising likely restructuring costs up to 1.2% of sales from 1% earlier.
Post the disposal Unilever will operate through four main business divisions: Personal Care, Beauty & Wellbeing, Nutrition and Home Care.
"This announcement is another step to shift its portfolio more towards HPC [home and personal care]," said Barclays analyst Warren Ackerman.
"There will now be inevitable questions about the future of its Nutrition division which is also dilutive to growth," he added.
Ice Cream has "clearly been dilutive" to both overall sales growth (OSG) and profit margins, thus ensuring improved medium-term guidance compared to at its recent full-year results.
"It is good to see Unilever targeting mid-single-digit growth post the separation", compared to 3-5% previously, Ackerman said.
The analyst noted that the company has "long admitted there is very limited synergies with ice cream and the rest of its portfolio and now they are moving forward with a proactive plan".
With management looking at a number of options to create shareholder value, he acknowledged "it will take time to execute, possibly not until the end of 2025".
For the Ice Cream business, the Barclays analyst sees "a very big opportunity to improve the cost base" under the leadership of new boss Peter Ter Kulve, who brings a track record of improving profitability at Unilever’s Homecare operations.
For the group as a whole, another "big positive" is the likely benefit to ongoing gross margins, with Ice Cream gross margins around 10% points below the 42% group gross margin Unilever delivered in 2023.
"Our view continues to be that the longer-term gross margin ambition is to get to close to 50% and the announcement today is a big step forward."
Overall, the analyst said the announcements were "firm action that the market has been looking for" but Unilever "still has a big job to improve competitiveness but we think it is moving in the right direction".