Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Unilever signals likely FTSE exit as Brazil strike hits sales

Published 06/14/2018, 07:23 AM
Updated 06/14/2018, 07:30 AM
© Reuters. FILE PHOTO: Traffic and people pass by the front of the Unilever building in central London

© Reuters. FILE PHOTO: Traffic and people pass by the front of the Unilever building in central London

By Martinne Geller

LONDON (Reuters) - Unilever (AS:UNc) (L:ULVR) is "extremely unlikely" to stay in Britain's FTSE 100 blue chip share index (FTSE) after the consumer products company moves its headquarters to the Netherlands.

Unilever also said on Thursday that a truckers strike in Brazil would hit sales more than expected, contributing to a 4 percent drop in the company's shares.

The group said the strike in Brazil last month - which prevented all deliveries to factories or stores for 11 days - would reduce second-quarter sales by 150 million euros ($177.38 million).

That translates to about 120 basis points of sales growth for the second quarter and 60 basis points for the half year, Chief Financial Officer Graeme Pitkethly said.

He said Unilever's overall sales growth for the first half of the year would be below its full-year target range of 3 to 5 percent because of the strike, but it would be in that range for the full year.

Liberum analyst Anubhav Malhotra estimated the strike would cost Unilever 10 to 15 basis points of organic sales growth for the full year and no more than a 1 percent reduction in earnings-per-share consensus.

"The magnitude was a bit higher than some of us would've expected," Malhotra said. Brazil accounts for about 6 percent of Unilever sales.

FTSE-LOOSE

Unilever said in March that Rotterdam would be its headquarters in a blow to Britain just before Brexit. The group is ditching its dual-headed legal structure to simplify the company and give it greater flexibility when doing mergers and acquisitions.

Pitkethly said that after extensive engagement with listings group FTSE Russell, it was clear its new shares were "extremely unlikely" to be included in the FTSE UK series.

The group has certain listing requirements and analysts had previously predicted that Unilever would not meet them.

"We understand and appreciate that a departure from the FTSE index has negative implications for some investors that are benchmarked to it, however simplification is the right thing for the company and our shareholders as a whole," Pitkethly said.

"We'll be maintaining a premium listing in London and we would hope that those investors who are impacted have got sufficient flexibility in their portfolios to continue to hold Unilever."

Pitkethly said he expected the shares would be likely to have increased weighting in pan-European indices instead.

The company is on track to send out documentation about the move early in the third quarter, ahead of shareholder votes at the end of the third quarter, with the change being completed by the end of the year.

© Reuters. FILE PHOTO: Traffic and people pass by the front of the Unilever building in central London

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.