Unilever to cut 20,000 jobs, sell US business

Unilever to cut 20,000 jobs, sell US business
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First Published: Thu, Aug 02 2007. 11 59 PM IST
Updated: Thu, Aug 02 2007. 11 59 PM IST
Amsterdam: Unilever, the owner of over 400 brands from Dove soap to Knorr soup, plans to eliminate 11% of its workforce and expects sales to rise at the fastest pace since 2001.
Second-quarter profit at the London- and Rotterdam-based company rose 16%, beating analysts’ estimates, on price increases and ice-cream sales. Unilever, which will cut 20,000 jobs over four years, also plans to sell the North American laundry division that makes All and Wisk detergent.
Unilever’s Indian subsidiary, Hindustan Unilever Ltd (HUL), said the decision to sell the American laundry business will have no bearing on the Indian laundry business. “The laundry business in India will continue to be a priority focus for us,” said Paresh Chaudhry, head, corporate communications, HUL. He added that the 20,000 jobs Unilever plans to cut over over four years would mainly “be in Europe.”
Unilever chief executive officer Patrick Cescau unveiled the biggest reorganization in six years after shares and sales growth trailed those of Procter & Gamble Co., the world’s biggest consumer products company. Cescau said sales will grow as much as 5 % this year. “It has taken an inordinately long time, but Unilever has finally got the message,” Collins Stewart analyst Rob Mann said in an emailed note, raising the stock to “buy”. The job cuts will occur as up to 60 factories are closed or reorganized and most cost savings will be focused on Europe, the company’s biggest market.
Unite, a British union, said that it was “extremely concerned” about the cuts and demanded to meet management. The company’s second-quarter net income rose 16% to $1.56 billion. Sales grew at the fastest pace in two years, led by Moo ice-cream in Asia and US demand for Dove soap and face creams. Second-quarter revenue rose 5.8 % to $14.36 billion, excluding acquisitions, divestments and currency movements.
Annual sales growth lagged P&G since 2001 as a five-year plan to lift growth by shedding 1,200 brands failed. Shares of P&G, the maker of Ivory soap and Pringles potato chips, have still gained 46% in the past five years, compared with a 13.7 percent increase for Unilever.
Unilever, created in a 1930 merger between UK and Dutch companies, responded by eliminating its dual chairman structure and named Cescau the first sole CEO in 2005 to simplify decision making and speed response to consumer demand. He sold European frozen-food brands Iglo and Birds Eye last year.
Unilever will sell assets with sales of $2.7 billion, including US laundry brands Wisk and All, chief financial officer Rudy Markham said on a conference call. “It’s a positive surprise Unilever wants to sell its US laundry business,” said Robert Jan Vos, an analyst at Fortis in Amsterdam.
“The company is the No. 2, far behind market leader Procter & Gamble. They would be better off using the proceeds for their other businesses.”
Archna Shukla in New Delhi contributed to this report.
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First Published: Thu, Aug 02 2007. 11 59 PM IST