HomeLatest newsSwapping CEO Alan Jope is the easy part of Unilever's comeback

Swapping CEO Alan Jope is the easy part of Unilever’s comeback

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It trades at 17 times its future profits, far behind P&G and Nestlé (22 and 21 times)

Unilever said yesterday that its CEO, Alan Jope, will retire at the end of 2023. But he started only recently, in early 2019, and the firm has not named a successor. The problem is that turning around is not just a matter of new staff.

Jope drew the ire of some investors over ESG issues, but his departure is more likely due to the numbers. The plan was to boost the group’s defenses by renewing operating margin, a source of much attention in 2017, when Kraft Heinz aborted its €148 billion bid for the giant. But that margin is expected to fall to 16%, from 19% when he started. Worse yet, he was forced to back out of a $56bn purchase of GSK’s parapharmacy in January after Unilever went public. Meanwhile, activist Nelson Peltz has made his way onto the council.

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Joppa’s successor will have the same problem. Unilever trades at 17 times its future earnings, far behind P&G and Nestlé (22 and 21 times). The way forward is to focus on medical devices, which are the fastest growing.

Reckitt Benckiser, who lacks a permanent CEO, would be a juicy target. The merger would allow Unilever to bolster its home care range, which only contributed 20% of its revenue in 2021. But investor reaction to the bid for part of GSK suggests bold mergers are out of the question.

Selling low return units sounds better. A new CEO could try to sell subscription shaving Dollar Shave Club, which was bought for a whopping $1 billion in 2016. But it may be difficult, given that Unilever has acknowledged it’s not going well. More broadly, potential suitors for Unilever’s remains, such as private equity, are constrained by the rising cost of debt.

Jope’s successor will have these headaches as it tries to weather an inflationary storm that could drive customers to cheaper, off-brand products. A CEO who has the support of investors is a good start, but little more than that.

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