Unilever names new CFO alongside “action plan”

Unilever has put in place an “action plan” to address underperformance with a new finance chief appointed to replace the outgoing Graeme Pitkethly.

The London-listed FMCG giant made multi-pronged announcements today (26 October), including third-quarter and nine-month results, which showed a decline in volumes across the group.

Volumes in nutrition and ice cream, encompassing Unilever’s foods’ business, also dropped in both periods, while volumes predominately increased in its three other divisional areas, personal and home care, and beauty and wellbeing.

However, Unilever said it has entered an agreement to sell a majority share in Dollar Shave Club but will retain a 35% interest. The sale is expected to close before the end of the year.

Hein Schumacher, who joined Unilever as CEO in July from dairy giant FrieslandCampina, described the men’s grooming business acquired in 2016 as an example of “unsuccessful attempts to move away from our core”.

Unilever has promoted from within to replace Pitkethly, who will step down from the CFO role and of the board on 31 December but is staying on at the company until 31 May under a transition process.

Fernando Fernandez, currently president of the beauty and wellness division, will step into Pitkethly’s shoes on 1 January. Fernandez, who will be on an annual salary of €1.18m ($1.2m), will also be eligible for a yearly bonus and performance share plan awards.

Schumacher said: “Fernando has had a very impressive track record throughout his Unilever career, in a variety of financial, marketing and general management roles. His deep financial and business experience, strategic acumen and leadership qualities will be critical in helping to drive the step-up in Unilever’s performance that we are all determined to deliver.”

“Action plan”

Unilever’s three-point action plan is centred on “faster growth; productivity and simplicity; and performance culture”, with a key requisite of the latter to “strengthen” the group’s “multi-year financial framework”, including achieving annual underlying sales growth (USG) of 3-5%.

Third-quarter USG rose 5.2% for a turnover of €15.2bn, which was down 3.8% in reported terms. Over the nine-months, the metric grew 7.7% to €45.8bn, with reported growth of 0.4%.

Unilever’s volumes dropped 0.6% and 0.4% for the two periods, respectively, with pricing of 5.8% and 8.1%.

Its so-called billion-euro power brands, which Schumacher said account for 70% of group turnover, posted a third-quarter USG print of 7.2%.

Schumacher explained the thinking behind the action plan today, including increasing innovation and investment in power brands and “leveraging the full strength of our operating model”.

He added: “Unilever is a company with strong fundamentals: a portfolio of great brands used by 3.4 billion people each day, number one or two category positions across 80% of its turnover, an unrivalled global footprint, and a team of talented people.

“Despite these strengths, our performance in recent years has not matched our potential. The quality of our growth, productivity and returns have all under-delivered.”

Delivering brand “superiority”, investment and returns, along with premiumisation, are goals within the faster-growth objective. And Unilever said it aims to “selectively optimise the portfolio” with “no major or transformational acquisitions”.

Rebuilding the gross margin and sustainability initiatives will fall within productivity and simplicity, while Unilever will instigate executive changes in business areas from 1 January under the performance culture objectives.

Executive reshuffle

In food and nutrition, Matt Close, the president of the ice-cream division, will leave Unilever at the end of the year and will be replaced by Peter ter Kulve, currently the president for home care.

Hanneke Faber, the president for nutrition, will also depart, with a replacement to be named later.

Meanwhile, Unilever has created a role for a chief growth and marketing officer to be filled by Esi Eggleston Bracey, currently general manager for personal care in North America.

In ice cream, Unilever said volumes were impacted by consumers downgrading to “value formats” with private label gaining market share, along with the “less favourable” summer weather, particularly in Europe.

Third-quarter retail ice-cream volumes fell 10.1% and were down 6.9% year to date, influencing all category volumes in Europe. For the group across all categories in the region, they declined 10.7% and 8.1%, respectively.

USG for ice cream in all regions fell 2.8% for the quarter to €2.2bn in turnover but was up 2.8% for the year so far at €6.7bn.

Nutrition volumes dropped 3.8% and 2.6% for the two periods, with a positive USG of 5.6% and 8.7% to deliver a turnover of €3.2bn and €9.9bn.