Unilever PLC (LSE:ULVR) could confirm on Friday that it will spin out its ice cream arm via an initial public offer.
The owner of Cornetto and Ben & Jerry's is holding an investor day on November 22 in London, where the group's CEO and CFO will deliver presentations to major investors and analysts, along with the bosses of its global business units - with the "notable exception" of Ice Cream, analysts at UBS noted.
At last month's update, the FTSE 100 group indicated that the event would be an opportunity to share progress made so far and also to set out how it plans to build on its growth action plan (GAP) to "drive consistently improved performance in the years ahead [...] the next 3 to 5 years and in some cases, even beyond that".
UBS said it sees several areas where the company could provide some "additional colour" on issues important to investors, including how the Ice Cream business - which represents 13% of group turnover - will be separated, and confirmation of the expected timing, which is currently for it to happen by the end of 2025.
Unilever has recently switched its focus to spin off its ice cream division, according to an FT report, which the UBS analysts noting that plans to run a sales process had been shelved.
The large size of the unit and its complex supply chain reportedly contributed to cooling off private equity interests, but the newspaper said "a bidder could still emerge".
Based on the reported valuation of "about €10 billion to €15 billion in any deal", UBS said this would value Unilever's Ice Cream operations at between 7.4 times earning up to 11.1x on an EV/EBITDA basis. ]
Thus this would imply that excluding its ice cream brands, Unilever currently trades on 14.5x-15.0x EV/EBITDA - which compares with 12.5x for the European Food & HPC sector,
UBS hopes Unilever management also provides more detailed guidance for the current year and on medium term targets at the investor day, along with an update on the company's €800 million productivity programme.
"Although the group's market share development (and its recent improvement) will be a key focus point on the day, our understanding is that Unilever will wait until its FY24 results to provide a comprehensive assessment of its competitiveness."
What to expect from Unilever's upcoming CMD?What does consensus currently bake in?
For the medium term (2025-28), consensus expects Unilever to deliver an average USG of 4.2% - made of 2.5% UVG and 1.7% UPG, and an annual underlying operating margin improvement of c. 30bps. Gives underlying EPS growth of c. 7% p. a..
UBS has a ‘sell’, tp 4,000p