Unilever puts frozen foods arm up for sale

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The Independent Online

The consumer goods giant Unilever unveiled a 28 per cent jump in annual profits yesterday and put most of its frozen foods arm including Birds Eye and Iglo up for sale, with the private-equity groups BC Partners, Blackstone and Capvest circling the unit.

The company behind Dove soap and Knorr soups said it expected the recovery to continue this year as productivity improved, pushing the shares up 1.4 per cent to €59.35 yesterday.

City analysts reckon the frozen foods division, which saw a fall in underlying sales of 4.5 per cent last year, could fetch up to €1.4bn (£960m). BC, Blackstone and Capvest have all been investing in the food sector recently.

Unilever had been reviewing the future of the struggling division since last September but decided to hang on to the Italian frozen food unit with €500m of sales because of its better growth prospects and innovation potential. Analysts welcomed the decision to sell off most of the frozen foods business as it will remove a longstanding drag on group sales growth and should improve the quality of Unilever's portfolio.

The prospect of the sale had raised expectations of a cash bonanza for shareholders, with analysts confident that up to €1.5bn could be returned this year. But the group disappointed investors by saying it would stick to a share buy-back of €500m this year, depending on whether "tactical acquisitions" were made.

Patrick Cescau, Unilever's chief executive, has been trying to turn around the overall business by streamlining the organisation, slashing prices and boosting marketing in an attempt to stem a slide in sales and market share. That approach is starting to pay off: underlying sales rose 3.1 per cent to €39.7bn last year, with a strong fourth quarter. Pre-tax profits increased to €4.8bn.

As part of the overhaul, Unilever has cut its 170-strong top management by 15 per cent and the 800 to 900-strong second-tier management by a similar proportion, with further cuts to come. The group accordingly upped its cost savings target to €1bn from €700m. The extra savings should help mitigate cost pressures from higher oil and other commodity prices, which drove up packaging and transport costs by €600m last year.

Despite the improvements reaped from the "Path to Growth" plan, Unilever still has a long way to go to catch up with rivals such as Nestle and Procter & Gamble, analysts said. The group has suffered severe setbacks with its Slim-Fast brand, which has fallen out of favour as dieters seek healthier options and low-carb programmes.

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