Unilever to Cut 10% of Workforce in Revamp - TheStreet

Updated from 10:45 a.m. EST

Unilever

(UL) - Get Report

, the U.K.-Dutch consumer-goods giant, announced Tuesday that it would eliminate about 25,000 jobs, or 10% of its workforce, over the next five years as part of a $5.3 billion restructuring program to increase its profitability.

Most of the cuts would occur in Europe and North and South America.

Unilever's share price ticked up 7/8, or 4%, to 25 5/8 around midday Tuesday. The stock has recently shown some upward momentum after falling from a 52-week high of nearly $42 reached one year ago. Unilever closed up 1, or 4%, at 25 3/4.

A Unilever spokesman, John Gould, said the company hoped that some of the workforce reductions would come from attrition or the sale of some of the company's manufacturing sites, although he added that he could not offer any specifics about possible layoffs or which operations would be cut.

The company said that as part of its plan to accelerate revenue growth and improve profit margins, it would slash the number of brands it "actively" manages to 400 from 1,600 and increase its investments in these brands. The company will also sell off unnamed "nonstrategic" holdings and close about 100 manufacturing sites.

Over the next five years, the company said it would invest some $1.6 billion in additional marketing support for brands such as Dove, Lux, Lipton, Magnum and Calvin Klein fragrances, while reviewing its European bakery business and restructuring the cosmetics manufacturer Elizabeth Arden.

"The remaining businesses that do not meet performance standards or which are no longer part of our strategy will be reorganized or divested," the company said in a statement, noting that savings from the reorganization are estimated at an annualized $1.6 billion by 2004.

The company will use the savings to improve margins and allocate more resources to the 400 selected brands that "have been chosen both on the basis of the strength of their current consumer appeal and their prospects for sustained growth," the company said.

The average growth rate of the top 400 brands over the last two years has been 4.6% a year, compared with negative overall growth for the remainder. The company estimates that it will be able to increase growth for its leading brands to 6% by 2004.

Andy Smith, an analyst at

Schroder & Co.

in London, said he thought the restructuring moves were very positive, noting that they should help increase sales.

"This represents a material switch in emphasis and the possibility for stronger medium-term revenue growth," Smith said. "Since the company will be booking substantial exceptional charges, the thing to look at will be underlying performance."

Smith speculated that the company might look to unload its frozen foods business, which has suffered from sluggish growth. Smith, who currently rates the company a neutral/hold, said the recommendation was up for review. His firm has not done any underwriting for Unilever.

Gould of Unilever would not comment on the company's specific plans except to say that it would evaluate both potential sales as well as acquisitions.