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Unilever - announces new CEO

Unilever has announced Hein Schumacher will be the new Chief Executive Officer.

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Unilever has announced Hein Schumacher will be the new Chief Executive Officer. He will begin as CEO on 1 July 2023, after a one month handover period.

Schumacher will replace current CEO, Alan Jope, who announced his retirement in September 2022.

Schumacher became a non-executive director of Unilever in October last year. He is also currently CEO of the global dairy and nutrition business Royal FrieslandCampina - an €11bn turnover business operating in over 40 countries.

Prior to joining Royal FrieslandCampina as CFO in 2014, he worked for H.J. Heinz for over a decade. In his last four years at Heinz, he was based in China where he led a turnaround of the Asia Pacific zone.

Schumacher said that he will be "very focused on working with the Unilever team to deliver a step-up in business performance".

The shares were broadly flat following the announcement.

See the latest Unilever share price, charts and how to trade

Our View

Unilever's announcement of Schumacher as its next CEO comes as welcome news to many shareholders, who were ready for the next chapter in the group's story. Schumacher, who's been on the Unilever board since October last year, has already stated his intention to step up business performance and is convinced by the group's "clear growth potential".

All things considered, Unilever's third quarter was relatively strong, with revenue and underlying sales growth both ahead of analyst expectations. That gave management confidence to upgrade full-year expectations. That's all well and good but there are challenges.

Volumes are falling, and though it's only by low single-digit percentages for now, declines are expected to push a little higher. This isn't a Unilever specific issue though, as we've seen with other names in the wider industry, raising prices and keeping volumes ticking higher is beginning to become a mammoth challenge.

In Unilever's case, a small drop in volumes when the group's pushing record price hikes onto consumers isn't the end of the world. The reason they've been able to keep demand somewhat intact is down to the host of strong branded products in the armoury. In unfavourable conditions, brand power is king.

It's for that reason, protecting the quality of those brands is Unilever's number one priority, and that comes at a hefty cost. Brand and marketing investment racked up €3.7bn in the first half, with that expected to increase into the second. That's all part and parcel with the group's strategy of locking in long-term customers with well-known, trusted brands.

This part of the business is a non-negotiable, so if revenue starts to weaken margins will come under pressure.

Luckily there are other levers to pull. The group's shifted its organisational structure following a period of lacklustre growth and pressure from investors. Greater focus and cost savings of €600m over the next couple of years certainly sounds good. The issue here is that turning a beast like Unilever into a streamlined outfit isn't a quick process. But after two roughly decade-long stints with his previous employers, the new CEO will know all about how long transition can take.

On a more positive note, free cash flow at the half year mark was €2.2bn and net debt was 2.3 times cash profits (EBITDA), which helps underpin ongoing investment and the dividend. There's a prospective yield of 3.9% on offer, please remember though there are no guarantees.

The group's valuation has come down below the long-term average, reflecting the market's uncertainty. This could prove attractive if the incoming CEO can navigate through the turbulence effectively, but of course, there are challenges ahead.

Unilever key facts

All ratios are sourced from Refinitiv. Please remember yields are variable and not a reliable indicator of future income. Keep in mind key figures shouldn't be looked at on their own - it's important to understand the big picture.

This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. It was correct as at the date of publication, and our views may have changed since then. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by Refinitiv. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.

This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication. Non-independent research is not subject to FCA rules prohibiting dealing ahead of research, however HL has put controls in place (including dealing restrictions, physical and information barriers) to manage potential conflicts of interest presented by such dealing. Please see our full non-independent research disclosure for more information.

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Written by
Aarin Chiekrie
Aarin Chiekrie
Equity Analyst

Aarin is a member of the Equity Research team. Alongside our other analysts, he provides regular research and analysis on individual companies and wider sectors. Having a keen interest in global economics, he knows how macro-events can impact individual companies.

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Article history
Published: 30th January 2023