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Unilever (ULVR)

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TheMotorcycleBoy
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Re: Unilever (ULVR)

#409166

Postby TheMotorcycleBoy » May 4th, 2021, 8:12 am

So is it just the Tea business they are planning disposal of?

I guess another concern of mine, is that presumably, the Tea BU is an earlier acquisition gone bad (or rather lower than expected OM).

If so, this is not a sign of good earlier judgement. I remember analysing Reckitt-Benckiser a while ago, and running a mile when I read how much damage the acquisition of a milk powder BU had done, and of course now the evitable process of them disposing of it. Shareholder value is wasted.

Matt

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Re: Unilever (ULVR)

#409170

Postby Dod101 » May 4th, 2021, 8:21 am

TheMotorcycleBoy wrote:The reason I ask is purely down to a potential shrinkage of their total business, which without replacement with other BUs, would *possibly* equate to shrinkage of revenue/income streams.

Since I'm very much in the building stage of mine (and Mels) portfolios, we really want to focus on firms that grow. Spinning off units clearly is not that.

Matt


I take your point Matt but a company like Unilever is always adjusting its portfolio. Not so long ago it sold its spreads business. Then last year they bought the Horlicks business in India (Where that is going given the situation in India goodness knows) so they are always adjusting their portfolio as tastes change.

The tea business is as far as I know the only business they have said they want to dispose of one way or another, but they have held it for many years and have no doubt done well out of it. They are always doing that sort of thing. Does your investment portfolio stay the same from one year to the next? It may for a year or two but will change from time to time. Look at Tate and Lyle. They said recently that their entire portfolio has changed in the last ten years or so. Just because they sell something does not mean that it is a dud or that it was a bad idea to have bought it in the first place.

Don't overthink things!

Dod

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Re: Unilever (ULVR)

#409175

Postby TheMotorcycleBoy » May 4th, 2021, 8:27 am

Dod101 wrote:
TheMotorcycleBoy wrote:The reason I ask is purely down to a potential shrinkage of their total business, which without replacement with other BUs, would *possibly* equate to shrinkage of revenue/income streams.

Since I'm very much in the building stage of mine (and Mels) portfolios, we really want to focus on firms that grow. Spinning off units clearly is not that.

Matt


I take your point Matt but a company like Unilever is always adjusting its portfolio. Not so long ago it sold its spreads business. Then last year they bought the Horlicks business in India (Where that is going given the situation in India goodness knows) so they are always adjusting their portfolio as tastes change.

The tea business is as far as I know the only business they have said they want to dispose of one way or another, but they have held it for many years and have no doubt done well out of it. They are always doing that sort of thing. Does your investment portfolio stay the same from one year to the next? It may for a year or two but will change from time to time. Look at Tate and Lyle. They said recently that their entire portfolio has changed in the last ten years or so. Just because they sell something does not mean that it is a dud or that it was a bad idea to have bought it in the first place.

Don't overthink things!

Dod

Very good points Dod.

TATE are doing very well. I hold them. I read something about them yesterday about how they've morphed over the years.

re. ULVR: Indians love Horlicks, the Hindus love sweets (I chat to a few of these fellows in my day job......I should probably check how one or two of them are doing), so the Horlicks purchase made a lot of cultural sense.

I'll never stop overthinking things, mind you! ;)

Matt

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Re: Unilever (ULVR)

#409187

Postby ReallyVeryFoolish » May 4th, 2021, 9:17 am

TheMotorcycleBoy wrote:The reason I ask is purely down to a potential shrinkage of their total business, which without replacement with other BUs, would *possibly* equate to shrinkage of revenue/income streams.

Since I'm very much in the building stage of mine (and Mels) portfolios, we really want to focus on firms that grow. Spinning off units clearly is not that.

Matt

My bold. Not necessarily. They may be ex growth businesses that once separated and ultimately disposed of may well allow the parent company to focus on more promising growth centric businesses. So the parent company might be strengthened by such action.

Or think of Zeneca (now Astra Zeneca) which was floated off from ICI. ICI collapsed due to poor management and lack of clear strategy. Zeneca was "merely" one division that has since grown and thrived. Hence, pretty much the opposite case of above where the demerged business goes on to be far more successful than the parent.

Look at companies that were originally part of Hanson before it was broken up for more examples.

So, it would be a mistake to apply the same line of thinking every time without looking at the fundamentals of the businesses involved.

Hope that helps.

RVF

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Re: Unilever (ULVR)

#409202

Postby wanderer » May 4th, 2021, 10:51 am

TheMotorcycleBoy wrote:The separation of a number of smaller beauty and personal care brands is also underway. These brands, which are predominantly sold in Europe and North America, will operate under the name Elida Beauty and will benefit from dedicated management focus. The brands include Q-Tips, Caress, Tigi, Timotei, Impulse and MonSavon, and together generated revenues of around €0.6 billion in 2020.

When ULVR mention "separation" of these businesses, are they just referring to moving them into different (i.e. more specialised) business units, rather than disposing of them? Otherwise I'd be worried!



I read that fairly clearly as saying they are on the block for disposal. One of the indicators is that they are mentioned in the same breath as the tea business. Another indicator is that they are described as "small" - hardly the most flattering adjective but from what I can see, fully justified, given they amount to £600m of over £50bn of revenues.

I wouldn't be inclined to make buy or sell decisions for my holding on the back of this sort of change. A business like Unilever needs to withdraw capital from brands which are subscale or which are unlikely to generate sufficient ROI and redeploy it to areas it can more effectively grow and nurture. Brands like Timotei have clearly been on the wane for a while when you compare the promotion activity compared to the likes of TRESemme. Why one is better positioned than the other for the 2020s and beyond, I have no idea, but I have to trust that Unilever know what they are doing as it's their job to prioritise investment in their different brands.

Disclosure: I hold (for me) a very big slug of Unilever.

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Re: Unilever (ULVR)

#409210

Postby 77ss » May 4th, 2021, 11:40 am

TheMotorcycleBoy wrote:So is it just the Tea business they are planning disposal of?

I guess another concern of mine, is that presumably, the Tea BU is an earlier acquisition gone bad (or rather lower than expected OM).

If so, this is not a sign of good earlier judgement....

Matt


If the acquisition(s) had been recent you might have a point; but one started 50 years ago? I think not.

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Re: Unilever (ULVR)

#409214

Postby TheMotorcycleBoy » May 4th, 2021, 12:05 pm

To be fair, I wasn't looking at reducing my ULVR holding. It's my 2nd biggest in terms of market value.

I just try to keep up with the trading updates wherever possible.

Presumably ULVR's eye is trained on the growing vegan/veggie business. Over the past 2 years, first my eldest kid (19), then my wife, now the youngest (16) have all become vegan or vegetarian. Whilst I respect their decisions, I'm certainly not favourable of making this move myself (I'm also sceptical of how the three of them are filling the dietary gap - but that's OT), it's clear that this is a growth area right now.

Fear not, I'm not overthinking - merely ever curious!

Matt

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Re: Unilever (ULVR)

#409218

Postby monabri » May 4th, 2021, 12:32 pm

Nowt wrong with being a vegetarian....

monabri (out & proud of being a beardy, sandal wearing veggie).

;)

When it comes to Unilever....I'll just leave them to get on with running the business.

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Re: Unilever (ULVR)

#409287

Postby tjh290633 » May 4th, 2021, 3:58 pm

TheMotorcycleBoy wrote:So is it just the Tea business they are planning disposal of?

I guess another concern of mine, is that presumably, the Tea BU is an earlier acquisition gone bad (or rather lower than expected OM).

If so, this is not a sign of good earlier judgement. I remember analysing Reckitt-Benckiser a while ago, and running a mile when I read how much damage the acquisition of a milk powder BU had done, and of course now the evitable process of them disposing of it. Shareholder value is wasted.

Matt

I inherited Brooke Bond Liebig from my mother in 1970. They were taken over by Unilever in Seoptember 1973, so they have had that business for 48 years. It has taken them a long time to think about disposal.

TJH

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Re: Unilever (ULVR)

#409296

Postby YeeWo » May 4th, 2021, 4:22 pm

TheMotorcycleBoy wrote:we really want to focus on firms that grow. Spinning off units clearly is not that.
Actual ROCE/Profitability is far more important than growth for growths' sake. With all the problems the Swire Group have with Cathay Pacific I wonder if their James Finlay business would be a reasonable candidate to build further scale in Tea via an acquisition from Unilever.

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Re: Unilever (ULVR)

#409308

Postby vrdiver » May 4th, 2021, 5:14 pm

TheMotorcycleBoy wrote:Presumably ULVR's eye is trained on the growing vegan/veggie business. Over the past 2 years, first my eldest kid (19), then my wife, now the youngest (16) have all become vegan or vegetarian. Whilst I respect their decisions, I'm certainly not favourable of making this move myself (I'm also sceptical of how the three of them are filling the dietary gap - but that's OT), it's clear that this is a growth area right now.

I think you may have a point re the growing vegan/veggie market. For a long time it was soy mince, tofu or Linda McCartney (brand, not the good lady herself), and quorn, until relatively recently when an explosion of own label and other "plant-based" meat substitute products started to appear.

They have, presumably, run the numbers and decided the capital invested in the tea business can be better utilised elsewhere. There is also the issue that even a profitable business unit, if margins are low, holds the rating of the overall business down. Unilever may simply be working a multi-decade roll on/roll off strategy of acquiring businesses that represent good margin, and disposing of the lowest margin BUs rather than becoming bloated with mediocre performing divisions?

Incidentally, I had to read your post twice to figure out you had two kids, rather than one kid and a very young wife :lol:

VRD

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Re: Unilever (ULVR)

#409326

Postby TheMotorcycleBoy » May 4th, 2021, 5:41 pm

vrdiver wrote:I think you may have a point re the growing vegan/veggie market. For a long time it was soy mince, tofu or Linda McCartney (brand, not the good lady herself), and quorn, until relatively recently when an explosion of own label and other "plant-based" meat substitute products started to appear.

For sure. Some folks here would be horrified when our big kid is back from Uni. The fridges are chocca block with plant-based bacon, sausages, chicken, pistrami, cheese. Non-milk/non-egg puddies and cakes. Mayonnaise without eggs....it's a sin!

Sorry I appreciate that I'm waffling, but the market is growing, and this stuff won't be particularly cheap.
They have, presumably, run the numbers and decided the capital invested in the tea business can be better utilised elsewhere. There is also the issue that even a profitable business unit, if margins are low, holds the rating of the overall business down. Unilever may simply be working a multi-decade roll on/roll off strategy of acquiring businesses that represent good margin, and disposing of the lowest margin BUs rather than becoming bloated with mediocre performing divisions?

Wouldn't surprise me!

Incidentally, I had to read your post twice to figure out you had two kids, rather than one kid and a very young wife :lol:

Unfortunately, that would be parallel universe time.

Matt

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Re: Unilever (ULVR)

#409329

Postby Dod101 » May 4th, 2021, 5:50 pm

YeeWo wrote:
TheMotorcycleBoy wrote:we really want to focus on firms that grow. Spinning off units clearly is not that.
Actual ROCE/Profitability is far more important than growth for growths' sake. With all the problems the Swire Group have with Cathay Pacific I wonder if their James Finlay business would be a reasonable candidate to build further scale in Tea via an acquisition from Unilever.


Yes and of course the Swire problems are not just Cathay so I am pretty sure that they will be looking closely at the Unilever assets to see if they would be a decent fit. I expect though that there will be quite a bit of interest and this is slightly off topic for the MotorcycleBoy's comments/queries. If anyone looks at the Unilever RNSs there are a continuous buying and selling of businesses . It is simply a part of their managing of the business so I do not think that too much should be read into the possible sale of their tea businesses.

Dod

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Re: Unilever (ULVR)

#409330

Postby ReallyVeryFoolish » May 4th, 2021, 5:51 pm

TheMotorcycleBoy wrote:
vrdiver wrote:I think you may have a point re the growing vegan/veggie market. For a long time it was soy mince, tofu or Linda McCartney (brand, not the good lady herself), and quorn, until relatively recently when an explosion of own label and other "plant-based" meat substitute products started to appear.

For sure. Some folks here would be horrified when our big kid is back from Uni. The fridges are chocca block with plant-based bacon, sausages, chicken, pistrami, cheese. Non-milk/non-egg puddies and cakes. Mayonnaise without eggs....it's a sin!

Sorry I appreciate that I'm waffling, but the market is growing, and this stuff won't be particularly cheap.
They have, presumably, run the numbers and decided the capital invested in the tea business can be better utilised elsewhere. There is also the issue that even a profitable business unit, if margins are low, holds the rating of the overall business down. Unilever may simply be working a multi-decade roll on/roll off strategy of acquiring businesses that represent good margin, and disposing of the lowest margin BUs rather than becoming bloated with mediocre performing divisions?

Wouldn't surprise me!

Incidentally, I had to read your post twice to figure out you had two kids, rather than one kid and a very young wife :lol:

Unfortunately, that would be parallel universe time.

Matt

I imagine (perhaps wrongly?) that the margins available on products that pretend to be meat are potentially very attractive. Given that for example, Quorn is protein taken from fungus (myco-protein, originally developed by ICI as a low cost animal food high in protein) and made into effectively synthetic meat, it sounds a very attractive line of development in the present social environment. There appears to be a growing population who are very attracted to eating "meat" products made in a factory without actual meat rather than grown on a farm. I kind of think the food makers will look to capitalise greatly on this trend.

(Sounds yummy......???)

RVF

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Re: Unilever (ULVR)

#409354

Postby Dod101 » May 4th, 2021, 7:13 pm

I am as keen as the next man re sausages from time to time but I must say I would never buy meat free sausages. What next, meat free ribeye?

Dod

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Re: Unilever (ULVR)

#409431

Postby absolutezero » May 4th, 2021, 11:39 pm

vrdiver wrote:For a long time it was soy mince, tofu or Linda McCartney (brand, not the good lady herself)

I do remember an advert from the 90s for Linda McCartney sausages.
They said "There's a little bit of Linda in each one"...
I do hope not.

They are actually very good sausages I might add.

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Re: Unilever (ULVR)

#409456

Postby csearle » May 5th, 2021, 7:51 am

absolutezero wrote:They said "There's a little bit of Linda in each one"...
I do hope not.
Er, I wonder which bit, gulp. C.

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Re: Unilever (ULVR)

#409457

Postby Dod101 » May 5th, 2021, 7:56 am

csearle wrote:
absolutezero wrote:They said "There's a little bit of Linda in each one"...
I do hope not.
Er, I wonder which bit, gulp. C.


Possibly finger tips?

Dod

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Re: Unilever (ULVR)

#409493

Postby scrumpyjack » May 5th, 2021, 9:54 am

Dod101 wrote:
YeeWo wrote: If anyone looks at the Unilever RNSs there are a continuous buying and selling of businesses . It is simply a part of their managing of the business so I do not think that too much should be read into the possible sale of their tea businesses.

Dod


Yes, but buying and selling businesses can give ample scope for creative accounting and that is something to be watched out for.
I am not suggesting that Unilever have done so, but it can allow for lots of expenses to be shovelled off into Extraordinary or Exceptional Items and for what are really capital profits to be treated as trading income. It can be used to disguise for a long time the problems of the business.

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Re: Unilever (ULVR)

#409505

Postby TheMotorcycleBoy » May 5th, 2021, 10:30 am

scrumpyjack wrote:
Dod101 wrote:
YeeWo wrote: If anyone looks at the Unilever RNSs there are a continuous buying and selling of businesses . It is simply a part of their managing of the business so I do not think that too much should be read into the possible sale of their tea businesses.

Dod


Yes, but buying and selling businesses can give ample scope for creative accounting and that is something to be watched out for.
I am not suggesting that Unilever have done so, but it can allow for lots of expenses to be shovelled off into Extraordinary or Exceptional Items and for what are really capital profits to be treated as trading income. It can be used to disguise for a long time the problems of the business.

From my current perspective I don't think there's any harm in being vigilent in all my holdings. Admittedly more so in some than others.


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