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Unilever shares fall, its future in UK indexes in doubt

Unilever NV's shares fell June 14 after its CFO warned that second-quarter sales had been hurt by a strike in Brazil and signaled the fast-moving consumer goods giant would be dropped from London's benchmark FTSE 100 index when the Anglo-Dutch company ends its dual-listed structure and consolidates its headquarters in the Netherlands.

In a presentation at Deutsche Bank's annual global consumer conference in Paris, CFO Graeme Pitkethly told investors and analysts that, following discussions with the index publisher, it was "extremely unlikely" that the unified holding company would be included in the FTSE U.K. indexes after it completes its transformation.

In addition, a logistics strike in Brazil, a market that generates about 6% of group sales, had cost the company about €150 million in lost sales in May, which meant that first-half growth now likely would be "below the bottom end of our full-year range of 3% to 5%," he said, adding that guidance for 2018 was unchanged.

In lunchtime trading in London, shares of Unilever PLC were down 175.50 pence, or 4.2%, at 3,974.50 pence. On the Euronext in Amsterdam, Unilever NV's shares traded down €1.81, or 3.8%, at €45.65.

Shares of the Dutch-listed entity now represent 55% of the ordinary share capital of the group and are represented in the Euro Stoxx indexes. The company's U.K. business, Unilever PLC, which represents the other 45% of the share capital, is a component of the FTSE 100 and FTSE All-Share indexes.

The maker of Dove soaps and Magnum ice creams on March 15 announced that it planned to introduce a single holding company that would be incorporated and tax-resident in the Netherlands with one class of shares that it intended to be listed in London, Amsterdam and New York.

Unilever could implement its new structure, which requires shareholder approval, toward the end of 2018. The restructuring, prompted by an unsuccessful $143 billion takeover bid from Kraft Heinz Co. in January 2017, is designed to provide greater flexibility for strategic portfolio change and help drive long-term performance.

The loss of its place in the prestigious FTSE 100 index would be a blow to Unilever's image. When Unilever unveiled its plans in March, Pitkethly told investors and analysts during a conference call that "it would be absolutely ideal to retain representation in both indices."

FTSE Russell, a subsidiary of London Stock Exchange Group PLC that manages the FTSE Russell indexes, did not immediately respond to an emailed request for comment by S&P Global Market Intelligence.

The FTSE 100 is a market-capitalization-weighted index of U.K.-listed blue chip companies. It is designed for use in creating index-tracking funds and derivatives and as a performance benchmark, according to FTSE Russell's website, which notes that about $16 trillion is benchmarked to its indexes.

Unilever's exclusion from the FTSE 100 would mean that some investors that follow the benchmark no longer would be allowed or required to hold the company's shares.

"We'll be maintaining a premium listing in London, and we would hope that those investors who are impacted have got sufficient flexibility in their portfolios to continue to hold Unilever," Pitkethly said during the conference in Paris on June 14.