Unilever exits Russia

Castlefield Partner, Ita McMahon updates on the sale of Unilever's sale of Russian operations following a suitable buyer being identified.

We hold Unilever shares in both our UK Opportunities and our European fund. We noted with interest that the company announced the sale of its Russian operations in October 2024.

We had engaged with the company on this issue at the time of the Russian invasion of Ukraine to understand why the company had not sought a local buyer, unlike so many of its peers.

The company was keen to stress that it was operating under UK sanctions law, whereby the Russian business was ring-fenced from the rest of Unilever’s operations.

At the time of our initial engagement, the company said that it had been unable to find a suitable buyer that would safeguard its 3,000 local staff. It pointed out that its Russian operations were producing important food and hygiene products, rather than non-essential items and that Russia only represented 2% of global revenue.

The company was keen to stress that it was operating under UK sanctions law, whereby the Russian business was ring-fenced from the rest of Unilever’s operations. In addition, no profit was repatriated to Unilever’s headquarters.

We kept a close eye on the situation and followed up with the investor relations team again some months later. Although not an ideal situation, our view was that the company was attempting to work through the issue carefully. We also recognised that the ubiquitous nature of multinational companies means that, with the ebb and flow of world events, it is inevitable that there will be some exposure to controversial markets at some point.

That said, we were uneasy about Unilever’s continued presence in the region and, as such, we are supportive of the company’s decision to sell its Russian business. Although the company had made a statement denouncing the invasion, its continued presence in Russia made it an outlier amongst its Western peers. In addition to these reputational risks, there was an increasing likelihood of Russian state interference in the business.

Unilever confirmed the sale of Unilever Russia on 10 October 2024, with Hein Schumacher, CEO of Unilever, releasing a statement on the sale:

"Unilever has today completed the sale of its Russian subsidiary to Arnest Group, a Russian manufacturer of perfume, cosmetics, and household products.

"The sale includes all of Unilever’s business in Russia and its four factories in the country. Our business in Belarus is also included in the sale.

"Over the past year, we have been carefully preparing the Unilever Russia business for a potential sale. This work has been very complex, and has involved separating IT platforms and supply chains, as well as migrating brands to Cyrillic.

"The completion of the sale ends Unilever Russia’s presence in the country."

Written by Ita McMahon

Source:

https://www.unilever.com/news/press-and-media/press-releases/2024/unilever-statement-oct-2024/