THE LONDON TIMES: Dual chairmanship goes as Unilever delays over merger: BOARDS SHOW DUTCH COURAGE: “Shell proposed the merger of its two joint venture units, Royal Dutch and the Shell Transport & Trading Company, in October last year, in the wake of its reserves scandal. From May, all decisions will be taken by the company’s new board in The Hague, which has seven Dutch members and four Britons.” (ShellNews.net) 11 Feb 05
By Carl Mortished, International Business Editor
February 11, 2005
PATRICK CESCAU, Unilever’s French co-chairman, promised yesterday to defend the Anglo-Dutch group’s brands and repair the holes in its battered market share as he revealed a boardroom shuffle that will end Unilever’s dual-chairman structure.
The consumer goods giant shied away from radical change yesterday, postponing for a year any decision on merging its parent companies and creating single corporate headquarters, currently split between London and Rotterdam.
However, Unilever has yielded to calls for tighter management control: M Cescau is to become chief executive while his current co-chairman, Antony Burgmans, is elevated to non-executive chairman.
The Frenchman’s promise of bigger spending on advertising and better sales failed to entrance a stock market that was hoping for more dramatic news about reform in a company criticised for its sluggish response to changing circumstances.
A year of disasters has left Unilever with falling sales and net profits down by almost a third to €1.9 billion (£1.3 billion). Fourth-quarter profits turned to a loss of €283 million as the company was forced to write down the Slim-Fast diet foods business by €650 million to half its original value.
Sales recovered in the fourth quarter as Unilever began to defend its market share from a concerted attack by Procter & Gamble. The American rival launched a price war in the laundry sector in the Indian market, a Unilever heartland, and then extended the battle to Europe and into the personal care sector.
In response, Unilever’s revenues returned to positive territory, rising by more than 3 per cent in the fourth quarter, but not without cost. Aggressive promotions and a big increase in the advertising budget took their toll and the company’s operating profit fell 16 per cent to €1.47 billion in the three months to December 31.
M Cescau was contrite yesterday, refusing to cast blame on the former co-chairman, Niall FitzGerald, who is strongly identified with the Path to Growth targets of simultaneous revenue, margin and profits growth.
The Frenchman said that Unilever had boxed itself in with too many targets, and was slow in adjusting its pricing in the face of competitor threats. “This business should be able to grow at 3 per cent but is growing at zero per cent,” M Cescau said.
Promising a company more streamlined and more attentive to the consumer, he said: “We became too inwardly obsessed. We are not making that mistake again.”
Unilever is cutting a senior management team of 28, including the two chairman, to just eight individuals, including the chief executive. The new top team includes two Asians, Vindi Banga, head of the food business and a former chairman of Hindustan Lever, and Harish Manwani, another alumnus of Unilever’s Indian subsidiary, will be president of the Asia/ Africa region.
M Cescau declined to predict whether Unilever would follow Shell and move to a single company/headquarters structure, insisting his main priority was to restore growth. The corporate review will be headed by Mr Burgmans and the result is not expected until 2006.
M Cescau said that Unilever should be able to raise free cashflow, currently at the rate of €4.2 billion per year to between €25 billion and €30 billion over the period 2005 to 2010.
BOARDS SHOW DUTCH COURAGE
Unilever is moving from dual chairmen to a chief executive and non-executive chairman model, with Patrick Cescau becoming the first chief executive. Unilever is to choose an independent chairman when Antony Burgmans, the other co-chairman, retires in 2007. A management structure comprising an executive committee, two product divisions and 11 business groups will be reduced to three regional presidents (Europe, Americas, Asia/Africa), two heads of categories (food and soap), finance and HR.
Reed and Elsevier were brought together in 1993 by Pierre Vinken,of scientific publisher Elsevier, and Peter Davis, of Reed International. The dual board structure immediately caused problems. Mr Davis resigned in 1994 after falling out with Mr Vinken. Five years later the board agreed to unite.
Shell proposed the merger of its two joint venture units, Royal Dutch and the Shell Transport & Trading Company, in October last year, in the wake of its reserves scandal. From May, all decisions will be taken by the company’s new board in The Hague, which has seven Dutch members and four Britons.