Magnum sales boost Unilever as it sharpens knives on employee flights

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is sharpening its focus on profitability by lifting prices and cutting spending on everything from employee flights to product reformulations as activist investors take aim at consumer-goods giants wrestling with slow growth.

The maker of Hellmann’s mayonnaise and Dove soap said it’s stepping up an efficiency drive as it responds to a failed takeover bid from and rivals Nestle SA and Procter & Gamble coming under pressure from activists Dan Loeb and Nelson Peltz.

“The good people of Unilever took 30 per cent less flights in the first six months of the year,” chief financial officer Graeme Pitkethly said in an interview after the company reported first-half earnings that exceeded estimates. The cost per seat of every flight taken was down about 24 per cent, he said.

The Anglo-Dutch company increased prices by 3 per cent in the second quarter, offsetting stagnant volumes, it said in a statement Thursday. That helped underlying sales rise by the same percentage. The shares were up as much as 0.6 per cent in early London trading.

Unilever said it achieved savings of more than £886m in the first half, putting it on track for a target of £5.3bn and a 20 per cent underlying operating margin by 2020. It cut £442m ($576m) through supply-chain initiatives, including reformulations, reducing the cost of ingredients in laundry brands. Spending on advertising agencies was down 17 per cent in the first half.

Increases in profitability will accelerate in the second half of the year, lifting profit margins by a full 100 basis points, Mr Pitkethly said.

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The underlying revenue gain at London- and Rotterdam-based Unilever compared with the 3.1 per cent median estimate of analysts surveyed by Bloomberg. Growth accelerated slightly from the first quarter’s 2.9 per cent uptick. The volume sold in the period was unchanged, with price increases of 3 per cent accounting for the growth in sales.

Unilever shares have gained about 25 per cent since Kraft Heinz’s takeover approach was made public in February. The company pledged greater profitability after spurning the bid, increased its dividend payment by 12 per cent and has committed to repurchasing £4.4bn of stock. Since then Mr Loeb’s Third Point has disclosed a stake in Nestle while Mr Peltz’s Trian Fund Management has begun a campaign at Procter & Gamble.

Bloomberg

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