Unilever promises more profit. Can it stay cuddly too?

Having sent Kraft packing, the company says shareholders will get more. It will be a challenge to achieve that while retaining high ratings from people like FTSE4Good and Oxfam 

James Moore
Wednesday 22 February 2017 17:31 GMT
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Unilever: Can the company stay cuddly?
Unilever: Can the company stay cuddly?

Well that was quick. Just a couple of days after Unilever sent Kraft packing, it has promised to come up with a plan to do more or less what Kraft promised to do: Slash ’n’ burn to boost returns.

The official statement tried to make that a little less scary. Hem, hem: “Unilever is conducting a comprehensive review of options available to accelerate delivery of value for the benefit of our shareholders.

“The events of the last week have highlighted the need to capture more quickly the value we see in Unilever. We expect the review to be completed by early April, after which we will communicate further.”

It really doesn't take a rocket scientist to see what's coming, however. Cost cutting, job cutting, disposals. Count on it.

Underneath the statement, in the about the company bit where businesses like to talk about how wonderful they are, there were several paragraphs detailing what Unilever thinks makes it different.

It included a nod to Unilever’s "Sustainable Living Plan". That commits the company to helping more than a billion people take action to improve their health and well-being by 2020, halving the environmental impact of its products by 2030, enhancing the livelihoods of millions of people by 2020.

It would take a rigorous assessment to ascertain how much of that is real, and how much of it is fluff so the executives can feel good about themselves.

However, I get the impression that Unilever bosses at least like to think they believe in this sort of thing. And, to be fair, they've picked up some merit badges along the way.

The company points out that it was ranked number one in its sector in the 2016 Dow Jones Sustainability Index. In the FTSE4Good Index, it achieved the highest environmental score of 5. It has led the list of Global Corporate Sustainability Leaders in the 2016 GlobeScan/SustainAbility annual survey for six years. I’ve never actually come across that one, but it sounds good.

Unilever also points to a ranking as the most sustainable food and beverage company in Oxfam’s Behind the Brands Scorecard in 2016 for the second year. I've certainly heard of Oxfam.

So perhaps Unilever does point the way to a better sort of capitalism. It's still a business, it still makes profits, but it wants to show that can be done without behaving horribly.

The City gave the company’s statement a resounding thumbs up. The shares got a shot in the arm. They’re now not far off the level they reached when Kraft first made its interest in a takeover known.

Unilever is going to have to deliver on its promises to investors, however, because if it doesn’t the door will be opened to the wolves at Kraft. Or to something equally as bad.

Can Unilever make itself more profitable while at the same time retaining its FTSE4Good USP? That's the billion dollar question. We’ll soon find out the answer.

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