Unilever plc (ADR) (NYSE:UL) announced its decision to create a standalone company for its spreads business on Thursday.
During its investor presentation, Jean-Marc Huet, CFO of Unilever plc (ADR) (NYSE:UL) said the business will be called Unilever Baking, Cooking and Spreading. The new standalone company will consist of Flora and I Can’t Believe It’s Not Butter brands.
Huet said the business will be more focus and flexible in making necessary decisions. He said, “We’re going to provide even more focus to this business, the speed of execution should increase over time, and the category will be permitted to take more radical action if required.”
At present, the spreads business unit is part of the overall food business of Unilever plc (ADR) (NYSE:UL). The spreads business accounts 7% of the company’s total turnover of almost €50 billion last year.
Unilever said spreads remain a core part of its business
Market observers speculated that the decision of Unilever plc (ADR) (NYSE:UL) to spin off its spread business is a prelude to a sale. They noted that the company is struggling to turnaround the business as it was impacted by a decline in bread and margarine consumption. Its revenue from the spreads segment declined 3.1% last year and 3.2% during the first 9 months of 2014.
Unilever plc (ADR) (NYSE:UL) rejected the speculation and emphasized that the spreads segment remains a core part of its business.
“We are not planning to sell or spin-off spreads. It remains a core part of our business and the cash delivery is important to us. This proposal is all about reigniting the growth of our spreads business to drive Unilever’s long term success,” according to the company’s spokesperson.
A positive move
Morningstar analyst Philip Gorham commented that the decision of Unilever plc (ADR) (NYSE:UL) will be seen as positive in general. He added, “They are saying they won’t spin it off, but clearly look at this business as non-core now, so this could be the first step to doing just that.”
In May, Unilever plc (ADR) (NYSE:UL) agreed to sell its Ragu and Bertolli pasta sauce business to Mitzkan Group for approximately %2.15 billion. The company also sold its Slim-Fast weight loss product lines to Kainos Capital in July. The company announced its acquisition of Talenti Gelato e Sorbetto last Tuesday.