Unilever split may mean demerger

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The Independent Online

Unilever, the ice-cream to washing powder giant, yesterday split itself into two divisions in a move that analysts say could lead to a multi-billion pound demerger.

Unilever, the ice-cream to washing powder giant, yesterday split itself into two divisions in a move that analysts say could lead to a multi-billion pound demerger.

Unveiling a 14 per cent drop in second-quarter profits, the Anglo-Dutch group said it would reorganise its top-end management to help improve its brand focus and speed up the integration of Bestfoods, the US-based Hellmann's mayonnaise and Knorr soups maker that Unilever acquired for $20.3bn (£13.5bn) in June.

The shake-up will see the formation of two global units, one for foods and the other for home and personal care. It follows Unilever's announcement in February that it would cull three-quarters of its product lines to concentrate on 400 core brands and drive sales and margin growth.

A spokesman for Unilever said: "We want to create a tighter and closer alignment between our strategy and operations. In the new structure, [the two division directors] will be responsible for both the top and bottom line."

The food unit will be run by Patrick Cescau, currently group finance director, while Keki Dadiseth, who carried out the six-month review that led to the changes, has been named worldwide head of home and personal care. Both men will take up their new posts on 1 January 2001, with the restructuring scheduled for completion by 2002.

The reorganisation would not affect the roles of the joint chairmen Niall FitzGerald and Antony Burgmans, the spokesman said. But he would not rule out possible job losses further down the ladder. "Inevitably, there will be changes in the next strata of the management.... But whether there will be any fall-out as far as jobs go, I am not in a position to say." Unilever has already said it will shed as many as 25,000 jobs over the next five years as part of its Path to Growth strategy.

Analysts said splitting the operations was likely to lead to a full-scale demerger. One said: "The market looks at this and thinks, 'Well, they're preparing to strip the businesses in two.'" But the Unilever spokesman said: "This is not a precursor to a demerger.... It is a realignment of the business."

Another analyst said: "There is very little reason to demerge the two units at the moment. But three years down the line, one would hope both divisions will have sufficient scale to flourish on their own. That might be the time to demerge."

The analyst said Unilever's second-quarter results, which showed pre-tax profits down by 155m euros (£93m) to 928m euros (£557m), were better than expected, helped by the contribution of SlimFast Foods and Ben & Jerry's Homemade, both of which it bought in April.

Turnover rose 3 per cent to 10.9bn euros (£6.54bn), while operating profits rose 10 per cent before one-off costs relating to the Path to Growth programme. Underlying second-quarter operating margins improved to 11.3 per cent from 10.6 per cent the previous year, reflecting lower raw material prices and cost-cutting.

Unilever shares closed up 5p at 431p.

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