Unilever to cut 20,000 jobs over 4 years

LONDON, England (Reuters) -- Consumer goods giant Unilever says it expects to cut around 20,000 jobs, or about 11 percent of its workforce, over the next 4 years as part of a drive to accelerate its recovery program.

The Anglo-Dutch company plans to close or streamline around 50 of its 300 manufacturing sites and to reduce its regional centers to 25 from around 100, a spokesman said Thursday.

He added that most of the job cuts would be in Europe, but declined to be more specific.

Earlier Thursday, the world number-three consumer goods and foods group nudged up its 2007 sales forecast after a strong quarter and said it would sell slower growth businesses and make savings to spur recovery and fight surging food costs.

Shares in Unilever NV/Plc, the Anglo-Dutch maker of Dove soap, Knorr soups and Sunsilk shampoo, climbed as much as 8.3 percent on hopes it is finally getting to grips with years of under performance.

"There is now real evidence of sustained improvement in the group," Panmure analyst Graham Jones wrote in a research note, raising his rating on Unilever shares to "buy" from "hold."

Unilever reported a 5.8 percent rise in second-quarter underlying sales, beating analysts' forecasts of 4.2 percent to 5.5 percent, and said it now expected full-year growth at the upper end of its 3-5 percent target range.

Chief Financial Officer Rudy Markham told reporters that growth was across the range of its products, but picked out Knorr soups, Magnum ice creams, Clear anti-dandruff shampoo and small and mighty fabric cleaners among the strongest performers.

Markham said the firm's commodity costs rose about 300 million euros ($410 million) in the first half of the year and expected this trend to continue amid soaring prices for edible oils and dairy products.

But Unilever would more than offset this by raising its own prices and cutting costs, he said, and the firm kept its target to improve underlying operating margins this year. The margin increased 30 basis points in the April-June period.

Second-quarter earnings per share from continuing operations rose 15 percent to 0.38 euros, compared with analysts' forecasts of 0.32 to 0.40 euros.

Unilever said on Wednesday that it had appointed James Lawrence, currently finance chief at U.S. food group General Mills, to succeed Markham when he retires in September.

Unilever has been on a steady recovery path since a shock profits warning in September 2004, by focusing spending on top brands such as Hellmann's mayonnaise, Lipton tea and Omo detergents and cutting costs.

But its sales growth has still generally lagged rivals such as Switzerland's Nestle in food and U.S. consumer products group Procter & Gamble.

Markham said the strong first-half performance had laid the foundations for a faster recovery.

"We've created the right conditions for accelerated progress," he said on a conference call.

Unilever said it would step up innovation, particularly in fast-growing personal care products, sell off over 2 billion euros of turnover from slower growing businesses, including its North American laundry operation, and seek to reduce its cost base by about 1.5 billion euros a year by 2010.

It said this would increase its chances of beating its target for an operating margin of over 15 percent by 2010.

Rabobank analysts welcomed the disposal plan.

"(It's) a signal that management does not tolerate under performers in the portfolio," they wrote in a research note, adding the North American laundry business could fetch up to 1.6 billion euros.

Investec analysts said the cost cutting plan added 500 million euros to the existing commitment to make 1 billion euros of savings by 2008.

"We cheer the desire to change, but it is a very lengthy process," Petercam analysts wrote in a research note.

At 0920 GMT, Unilever shares were up 5.6 percent at 1,588 pence, the biggest rise on the UK's benchmark FTSE-100 index and valuing the business at about 21.3 billion pounds.

The stock trades at 16.6 times forecast earnings, below Nestle on 17.7, U.S. food group Kraft on 18.2, and Procter & Gamble on 20.4, according to Reuters Estimates. E-mail to a friend

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