On February 13, Unilever, the prominent British consumer goods giant, revealed a drop in net profits for the 2024 fiscal year. This downturn is largely attributed to the company’s strategic exit from the Russian market and the associated costs of restructuring.
Financial Performance Overview
The figures tell a story of contrast: while profit after tax saw an 11% decline to €5.7 billion (approximately USD 5.9 billion), sales managed to inch up by nearly 2%, totaling €60.8 billion. Underlying sales shone brighter, with an impressive 6.5% increase driven by a 5.1% rise in volume sales. The Beauty & Wellbeing category emerged as a standout performer, reflecting its status as the organization’s top segment. Similarly, the Personal Care division grew by 5.2%, buoyed by strong deodorant sales.
Strategic Changes and Market Reaction
Hein Schumacher, the company’s CEO, remarked that these results represent a transitional year focused on significant improvements in Unilever’s operational performance. The decline in net profits was mainly linked to asset divestitures and rising expenses associated with an accelerated drive to enhance productivity.
Unilever completed its departure from Russia late last year, offloading its local operations to Arnest Group. This move aligns with the broader trend of major multinationals distancing themselves from Russia following the start of the Ukraine conflict in February 2022.
In addition to its exit strategy, Unilever is undergoing a major overhaul that includes substantial job reductions and a plan to spin off its ice cream division in pursuit of growth. This decision comes on the heels of mounting pressure from activist investors, including billionaire Nelson Peltz.
The market reaction to the announcement was swift, with Unilever shares declining nearly 7% on the FTSE 100 index, which itself was down 0.7% in late morning trading. The company intends to list the new independent ice cream business on stock exchanges in Amsterdam, London, and New York by year’s end. This separation, which was previously disclosed, is estimated to yield savings of €800 million by 2026, despite resulting in the loss of around 7,500 office jobs.
Future Outlook
Unilever is determined to create a more streamlined organization that fosters accountability. As part of its restructuring effort, the company will focus on its top 30 brands, which are responsible for a significant 70% of total revenue.
Despite these ambitious changes, Unilever projects a cautious outlook for the coming year, anticipating sluggish market growth. Russ Mould, an investment director, indicated that the company must navigate a challenging global landscape, where consumers are increasingly adopting a cautious spending approach and turning to private-label products instead of established brands.
Additionally, Mould cautioned that escalating inflation and sustained high interest rates could add further pressure on Unilever’s performance in the near future.
Source: Premiumbeautynews