Dec 1, 2017
Unilever CEO defends balance between growth, margin
Dec 1, 2017
Unilever Chief Executive Paul Polman on Thursday defended his balancing of growth and margin, weighing in passionately after a weak third quarter on a debate sparked by this year’s unwanted approach from Kraft-Heinz.
Under pressure to show he could speed up returns as a standalone company after rebuffing a $143 billion (£105.86 billion) bid, the maker of Dove soap and Magnum ice cream in April pledged to lift its operating margin to 20 percent by 2020. Investors applauded the goal, but some analysts worried that marketing would be cut, which could hurt longer term sales growth.
A surprise slowdown in the third quarter fanned those fears.
On Thursday evening, at the end of a two-day investor conference in New Jersey, Polman stressed that Unilever was not doing anything that would hurt volume growth, and that margin benefits were the result of prior investments.
Polman said reductions in absolute marketing spending were due to efficiencies and criticised shareholders for pushing for margins but then changing their tune.
“Here you are all saying ‘I want shareholder value, I want you to drive it,’ and you’re pissing it away by not even asking us to give it,” Polman said. “To me that’s incomprehensible.”
Unilever’s shares remain 24 percent higher than before the Kraft approach, but are down more than 8 percent since last month’s results.
“The fiery finish might have been an expression of frustration with the perceived fickleness of investor appetite towards growth vs. margin, a debate which has been imbued with additional urgency following the slow Q3,” said Jefferies analyst Martin Deboo, who has a Buy rating on the stock.
Polman, in the top job for nearly nine years, also acknowledged the eventual end of his tenure on Thursday, a week after Britain’s Sky News reported that Unilever had hired an executive search firm to help find a successor.
When asked what characteristics his successor should have, Polman said the main skill was “being able to see and drive change and certainly feel very comfortable in a digital environment”.
He said Unilever’s next chief must also have a vision to evolve the company’s commitments around sustainability, which Polman has put at the heart of the Anglo-Dutch company.
“I have my opinions as long as I‘m here, but the next person would definitely have to bring that to the next level, as I would have to do if I would stay for the next ten years, which I‘m not,” Polman said.
The company’s presentations at the investor event were largely about Unilever’s plans to grow its business by reinvigorating its core brands and buying and creating new ones, expanding its distribution to new channels like drug stores and online, and making itself leaner and more agile.
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