Consumer products giant Unilever PLC (LON:ULVR) has confirmed it planning to sell or demerge its Spreads business, which includes Flora and Stork margarines, and is looking at changing its dual-listed corporate structure.
The Anglo-Dutch firm revealed its plans in the results of a strategic review to improve shareholder value, published today, which it launched at the end of February after the shock of a failed bid move for the group by US food giant Kraft Heinz Co (NASDAQ:KHC).
WATCH: ETX Capital's Neil Wilson on Unilever moves ...
READ: Unilever launches strategic review …
Aside from the “active portfolio management” moves, Unilever also plans to combine its Foods and Refreshment into one organisation, to unlock “growth and faster margin progression.”
The firm said it is to accelerate its “Connected 4 Growth” programme and is targeting a 20% underlying operating margin, before restructuring, by 2020.
Unilever is also establishing a net debt/ EBITDA target of 2x, launching a share buy-back of €5bn this year, and will raise dividends by 12% in the coming year “reflecting increased confidence in the outlook for profit growth and cash generation.”
Paul Polman: the FTSE100-listed firm’s chief executive officer said: “Our recent review concluded once more that our strategy for long-term value creation through growth and compounding returns on investment is the right one for Unilever and for our shareholders.”
He added: “After a long history in Unilever, we have decided that the future of the Spreads business now lies outside the Group. We will look to increase our strategic flexibility for further portfolio optimisation through a review of the dual-headed legal structure, with a view to simplifying it.”
Polman concluded: “For 2017, we remain on track to deliver underlying sales growth ahead of our markets, in the 3-5% range, and we expect an underlying operating margin improvement of at least 80bps.
“We feel confident that the changes we are announcing today will accelerate the transformation of Unilever and the delivery of sustainable shareholder value over the long term."
In a note to clients, Shore Capital analyst Darren Shirley said: “We will have to work through the financial implications of the new strategic targets, though we expect the broad based outcome from the review (aggressive margin expansion, disposal of underperforming asset and cash returns) to be taken well by the market and reiterate our buy recommendation on Unilever.”
However, in early morning trading, Unilever shares drifted 0.7%, or 27.0p lower to 3,912.5p reflecting a weak FTSE 100 index this morning following sharp falls overnight on Wall Street.
-- Adds broker comment, share price --