Unilever has ruled out pursuing major acquisitions “in the foreseeable future” after an abortive £50bn bid for GlaxoSmithKline’s consumer health business sparked a backlash from shareholders.
Instead, the maker of Dove soap, Hellmann’s mayonnaise and Domestos bleach said on Thursday it would buy back up to €3bn of shares over the next two years as it seeks to appease an investor base frustrated by the group’s languishing stock price.
“We have engaged extensively with our shareholders in recent weeks and received a strong message that the evolution of our portfolio needs to be measured. We therefore do not intend to pursue major acquisitions in the foreseeable future,” said Alan Jope, chief executive.
The pledge came as Unilever announced its strongest full-year sales growth in nine years. It pushed up underlying sales growth, a key metric for the sector, by 4.5 per cent, ahead of analysts’ expectations.
Price rises accounted for 2.9 per cent of the growth as the company sought to pass steeply rising commodity prices and the higher transport costs on to consumers.
“The major challenge of 2021 has been the dramatic rise of input costs,” said Jope.
The company said price rises would help take growth to between 4.5 per cent and 6.5 per cent this year, but margins would still be hit, with underlying operating margin expected to drop by between 140 and 240 basis points.
“Rather than any strategic reset, the margin guide looks to be a function of commodity pressure of 15 per cent to 20 per cent in 2022 . . . It amounts to a further negative surprise,” said Martin Deboo, analyst at Jefferies.
Unilever faces additional pressure from the arrival of activist investor Trian on its shareholder register. Following the failed bid for the GSK unit, Unilever last month announced a reorganisation into five business groups which will entail 1,500 management job cuts. The company employs about 149,000 people globally.
But many investors remain unhappy. One top-10 shareholder told the Financial Times they wanted the company to separate the food division from the rest of the business, while a top-20 investor called for the departure of the chair Nils Andersen.
The group has underperformed rivals such as Nestlé and Procter & Gamble, where Trian founding partner Nelson Peltz sat on the board for three years. Unilever’s shares have fallen just over 4 per cent this year and 7.2 per cent since Alan Jope became chief executive at the start of 2019.