MON, 24 OCT, 2022-theGBJournal| Unilever Nigeria Plc (UNILEVER) published its Q3-22 unaudited results last week Friday, reporting a standalone loss per share of NGN0.39 (vs EPS of NGN0.21 in Q3-21), bringing 9M-22 loss per share to NGN0.06 (vs EPS of NGN0.19 in 9M-21).
The loss per share in the period was driven by a decline in operating profit (-19.5% y/y) following a 10.5% y/y increase in operating expenses.
Q3-22 revenue grew by 7.1% y/y (9M-22: +10.3% y/y), underperforming our expectations with the sluggish outturn driven majorly by the revenue lag in the Food Products (-33.5% y/y| 51.5% of revenue) segment amid a slow increase in HPC (+1.0% y/y | 48.5% of revenue) sales.
Cordros Research analysts believe lower volumes drove the sub-par revenue performance in the quarter as our channel checks reveal that the company raised its prices across its product portfolio by c. 15.0%.
Sequentially, revenue declined by 9.8% y/y on a q/q basis, following the decline in HPC sales (-20.6% q/q) during the quarter – Food Products sales grew by 3.4% q/q.
Gross margin bucked the trend from the previous quarters in the year, as it fell by 16.39ppts to 14.2% (Q3-21: 30.6%), owing to the faster growth in the cost of sales (+32.4% y/y), which outpaced the increase in the top-line (+7.1% y/y).
Consequently, EBITDA (-22.2% y/y) and EBIT (-19.5% y/y) declined following the fall in gross profit (-50.2% y/y) amid a 1.6% y/y reduction in operating expenses.
UNILEVER’s net finance cost declined by 23.7% y/y in the quarter, owing to a 391.5% y/y increase in finance income; finance cost for the period was NGN328.89 million (Q3-21: Nil).
Overall, loss before tax printed NGN2.51 billion in Q3-22 (vs profit before tax of NGN385.77 million in Q3-21). Following a tax credit of NGN251.02 billion (vs NGN17.79 million tax expense in Q3-21), the company recorded a loss after tax of NGN2.25 billion (vs profit after tax of NGN367.98 million in Q3-21).
Cordros Research in their review of UNILEVER’s performance said, the company’s earnings performnce came in as they predicted in their Q2-22 First Glance, though they did not envisage the slow revenue growth witnessed in the quarter.
‘’The slow sales growth reiterates our view of increased competition diluting volumes, especially in the HPC segment following the influx of cheaper unlisted brands. For Q4-22, while we expect an improvement in demand from the company’s Food Products segment driven by festive-induced consumption, we believe UNILEVER’s profitability will remain under pressure following the aforementioned stiff competition in the HPC segment and cost pressures, Cordros said.
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