Unilever spins off Cornetto and flies on the stock exchange: +6%.
Plan to separate ice cream businesses including Walls (which includes Cornetto) and Magnum
2' min read
2' min read
Unilever spins off the croissant and flies into the stock market. The food group announced that it wants to separate its ice cream business. British consumer goods giant Unilever will separate its ice cream division, believing it can perform better as a stand-alone business, and announce an €800 million savings plan over three years that will impact 7,500 jobs.
6% rise in the stock market
The market reaction has been violent, with the shares jumping 6% on the stock market. 'The separation of the ice cream business will create a leading global business, operating in a highly attractive category, with brands that together have sales of €7.9 billion in 2023,' says Unilever, whose ice cream division owns five of the world's top 10 brands by sales including Walls (which includes Cornetto), Magnum, Ben&Jerry's and Italy's Grom. Analysts are positive about the restructuring deal, given the unit's slower growth and lower margins. "Unilever's plan to separate the ice cream business (€7.9 billion revenue, €760 million operating profit) for a probable divestiture makes sense, it eliminates seasonality and the drag on low margins." The separation pleases, given the slower growth profile and lack of cost synergies, writes RBC Capital Markets analyst James Edwardes Jones in a note.
Expected revenue growth
.The Anglo-Dutch retailer also outlines higher medium-term targets, mid-single digit underlying sales growth and modest margin improvement.
"We liked Unilever's previous guidance as it seemed conservative and left room to beat expectations, however we are reassured by the lack of a specific margin target given the risk of stranded costs," Jones says, adding that the value of previous divestments was diluted by significant costs that remained in the company after the divestment.
The spin-off will start immediately and is expected to be completed in 2025. Should the restructuring go through, the company will remain focused on four businesses: beauty and wellness, personal care, home care, and nutrition (even a competitor like Nestlé had previously separated its ice cream business by creating a joint venture with private equity firm PAI Partners). The ice cream division's profit margin, Bloomberg reports, is less than half that of the company's personal care unit. It is also a seasonal, capital-intensive business that has more complex logistics than the company's other divisions due to the need for cold storage.
