Unilever puts hold on acquisitions to push new products in pipeline

Anthony Burgmans, Chair-man of Unilever NV, said his company has put a hold on acquisitions for now, simply because the company was saddled with a US$16 billion debt. Burgmans was recently in TT to tour Lever Brothers West Indies Limited (Lever), a subsidiary of Unilever. His visit to TT was the first stop in his Latin American tour of Unilever companies throughout the region. Unilever is a global company and about 40 percent of their turnover is in Europe; 25 percent in the United States (US) and the rest is in the Caribbean, Latin America, Africa and Asia. In an interview at Levers’ headquaters in Champs Fleurs, Burgmans noted  that acquisitions are not really their first priority right now. He explained that about three years ago Unilever acquired Best Foods at a cost of about US $26 billion. He said that acquisition, together with two others amounted to about US $30 billion. “That is a huge amount of money so we decided that for the time being we would concentrate on integrating Best Foods into our operations,” he said.

Additionally, he said those acquisitions affected Unilever’s balance sheets and the company now has a debt of US $16 billion. “We want to bring that down a bit to about US $12 to US $15 billion. So acquisitions are not really our first priority right now. We are concentrating on integrating the acquisitions we already made and putting our balance sheet back in order.” Burgmans is one of two chairmen at the head of the fast moving consumer goods multinational, Unilever. He is the chairman of the Dutch branch, Unilever NV. He said while he is quite pleased with Lever’s performance in TT, they have to wait and see how the free trade situation develops before they decide whether or not they want to expand their operations in the country. He noted that Unilever’s activities does not only include manufacturing, noting that this is just a small, but important part of their operations. Burgmans said Unilever also makes huge investments in their selling and marketing operations, as was done with Sedal, a shampoo. “There are huge investments involved with these activities especially in advertising. This benefits the country in which they are operating because these type of investments tend to be very huge,” he said. Apart from their own operations, Burgams said they also have a great interest in the countries in which they operate. He said Unilever worldwide provides employment for a number of people. “I have been told that for everyone person which we have on our payroll, indirectly two other people work full time for Unilever as well. So there is an enormous multiplier effect in every country where we operate.”

Pressed on their expansion plans for TT, he stressed that this is all depends on how the free trade situation develops. Harish Manwani, Latin American group president, Unilever, said while acquisitions and expansion are not  on the top of their lists, they always have new products in the pipeline. “Our business is to constantly innovate. The first thing that we always do is focus on the number of brands which we manage. The onus is on us to really make these brands grow aggressively. There is really only one way to grow these brands and that is to constantly innovate.” Burgmans also reviewed Lever’s financial performance. He said he is quite pleased with the direction the company is moving. “Lever not only has a good achievement record but I have found that they are very clever in the way they network and interact with sister companies in the region.” He said there are many resources available on the Latin American scale in Unilever which have been leveraged here in a very efficient and effective manner.

Burgmans added that Unilever has always promised in its strategy “Path to Growth” that every year it will deliver low double digit earnings per share. “This has been our promise in the last three years and in 2000 we delivered ten percent; 2001, 12 percent and last year 21 percent.” However, he said while this year has been a bit tough for many reasons, they have confirmed to their markets that they will deliver their double digit earnings per share. “Post 9/11 has affected consumer confidence worldwide not only in North America. We are seeing consumer confidence weaken in Europe as well. There is also a hesitant growth in other larger economies around the world and so far it has been a very bumpy year.” But Burgmans assured that under all these difficult circumstances, Unilever has been fairly resilient. “But then again one would expect that from a consumables company, after all people continue to take a shower or have breakfast,” he joked. On small countries, like TT and their survival in a global environment, he said such countries have the advantage of being very flexible which allows them to move more quickly than larger economies.