Unilever’s aborted Rotterdam plot still jars with investors
Paul Polman needs cheering news next week to wash away the bad taste of a new pay plan and its Dutch farce, writes Rob Davies
The safest course of action after a humiliating defeat at the hands of your own shareholders is to duck below the parapet and get on with your day job. Unfortunately for Unilever, maker of household staples from Dove soap to Hellmann’s mayonnaise, keeping a low profile isn’t going to be an option for at least another week.
Chief executive Paul Polman scrapped plans last month to simplify the company’s Anglo-Dutch legal structure and transplant headquarters from London to Rotterdam, a move that would have seen its shares depart the FTSE 100. City shareholders, many of whom would have been forced to remove Unilever and its steady returns from their portfolios as a result, opposed the plan and were not shy about saying so.
Polman duly caved in, but the highly public contretemps with investors left some observers questioning his future in the post he has occupied for nearly a decade.
Now might be the time to keep quiet and concentrate on performance but instead Unilever will find itself back in the public eye, giving evidence alongside Royal Mail at a select committee session on executive pay on Tuesday, then, two days later, presenting interim results.
The first of these could prove a bruising encounter for Unilever, given the predisposition among MPs to use select committees to indulge in gleeful grandstanding. The company recently tweaked its pay structure, swapping it for one that would allow it to pay bigger bonuses and award chunkier pay rises.
This change was approved against stiff opposition last May, and Polman – who could pocket nearly £13m under the new scheme – could do without it being dredged up by headline-hungry politicians. He’s probably looking to Thursday for a chance to silence his critics – or at least muffle them temporarily – with a strong set of numbers, even if they’re only for the third quarter.
Last time out, quarterly sales growth of 1.9% disappointed investors, and the company that makes Marmite was left promising jam tomorrow, in the form of price rises mitigating increased commodity costs. Analysts at Hargreaves Lansdown are hopeful that Unilever will show something positive to offset what they call the “recent drama”.
“Progress in the group’s emerging markets has been a bit sluggish of late, but overall sales growth for the full year is still expected to come in between 3% and 5%,” said equity analyst Nicholas Hyett. “Improvements to operating margins are also due. Next week’s statement will hopefully show Unilever on the right track to hit those targets.”
Anything less will add to the worries keeping Polman up at night. In practice, neither the select committee session nor the third-quarter numbers are big enough affairs to further loosen the Dutchman’s grip on the chief executive’s chair. But his position has come under greater scrutiny than ever since the company rebuffed a $143bn bid from Kraft Heinz in February last year. It was a huge bid to spurn, and the decision forced Unilever to make overtures to investors, showing them that it was not resting on its laurels.
The result was a flurry of moves to unlock greater value, most notably the sale of its spreads business – including Flora and I Can’t Believe It’s Not Butter – to KKR for £6bn at the end of last year. The company has also cut costs to boost margins, bought back shares and increased dividends. All well and good, but disgruntlement over pay and the failure of Polman’s Rotterdam gambit have detracted from these efforts.
What Unilever needs now is a period out of the spotlight, allowing Polman and co to lick their wounds. Negative publicity has a way of gathering a momentum all of its own.
Polman has come under greater scrutiny than ever since he rebuffed an eye-watering $143bn bid from Kraft Heinz
The maker of Marmite was left promising shareholders jam tomorrow after the last set of quarterly results.