Unilever Likely to Exit FTSE 100, Signals Lower Sales Growth

UK consumer giant Unilever signaled its likely exit from the country’s FTSE 100 blue chip stock index on Thursday, as the company relocates its dual headquarters in the Netherlands.

Unilever Chief Financial Officer Graeme Pitkethly said it was highly unlikely that the new NV shares will be listed in the FTSE UK series, due to the group’s plan to consolidate its British-Dutch legal structure in the city of Rotterdam rather than in London.

The move came as the consumer goods maker aims to simplify the company and make it more flexible when doing mergers and acquisitions.    

Unilever have been criticized for its dual-headed legal structure, as critics saw that it is unwieldy and can hinder the group from using its stock to accomplish big acquisitions.

The two shares are not convertible and the value of a single share in each operating company must remain equal, making it difficult to issue new stock to finance a transaction.

Shifting to a single share class also removes a number of administrative burdens, such as board members being required to attend yearly back to back shareholder meetings in London and Rotterdam.           

The decision to combine the two establishments was announced back in March and came after several months of assessment prompted by an unwelcome $143 billion takeover offer from US food company Kraft Heinz Co. last year.

However, leaving FTSE 100 might mean the stock is unlikely to be included in the UK fund managers’ portfolios.

Pitkethly stated that they will be keeping a premium listing in London and they hope that the affected investors would have enough flexibility in their portfolios to maintain their hold on Unilever.

On the other hand, weightings of Unilever’s shares in the pan-European indexes could receive a boost. The firm will be listed in the Netherlands and the US as well.

Unilever is set to release documentation regarding the plan early in the third quarter, ahead of shareholder votes at the end of the third quarter, with the move being completed by the end of the year.

Unilever Warns Lower Sales Growth

Unilever also stated that its sales growth in the first half of the year would be lower than its full-year target of 3 percent to 5 percent, due to the truckers strike in Brazil in May, but would be in that range for the full year. Brazil represents about 6 percent of the group’s sales.  

The impact of the strikes will also reduce sales by €150 million ($177 million) in the second quarter.

That translates to around 120 basis points of sales increase for the second quarter and 60 basis points for the half year, according to Pitkethly.

Analyst Anubhav Malhotra expected last month’s strike would cost the consumer goods maker 10 to 15 basis points of organic sales growth for the full year and no more than a 1 percent drop in earnings-per-share consensus.   

Shares of Unilever were down 3.16 percent to £4,026.00 in London on Thursday.

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