TUE 26 OCT, 2021-theGBJournal- UNILEVER published Q3-21 unaudited result after the close of business on Friday (22nd October), reporting an EPS of NGN0.06 as opposed to a loss per share of NGN0.27 recorded in Q3-20. The positive performance was supported by a 12.5% topline growth and a surge in finance income (+284.0% y/y).
Revenue grew by 12.5% y/y to NGN19.73 billion in Q3-21 (9M-21: 31.3% y/y to NGN58.72 billion), primarily driven by strong revenue growth in the HPC (+33.2% y/y) segment. We believe growth in this segment was supported by (1) increased investment in its distribution network, which drove strong volume growth and (2) marginal price increases in some core categories. Meanwhile, the Food (-3.4% y/y) segment contracted for the first time in five quarters, owing to intensified competition from cheaper substitutes in the seasonings market.
Gross margin increased markedly by 323bps to 30.6% in Q3-21 – the highest since Q2-19 (31.9%), as revenue growth (+12.5% y/y) outpaced the cost of sales. Notably, sales cost (-0.6% y/y) surprised positively during the period, declining for the first time in five quarters despite the heightened operational challenges facing companies in the sector. Given that the company imports about 50.0% of its inputs, we believe the reduction in cost of sales was underpinned by reduced exposure to the spiking rate at the parallel market.
Similarly, EBITDA margin printed 6.1% in Q3-20 (Q3-20: -3.3%) owing to the growth in gross margin amid an 11.1% y/y expansion in operating expenses. The higher OPEX was due to the 18.1% y/y increase in marketing and administrative expenses amid the decelerating impairment loss on trade receivable (-52.2% y/y).
UNILEVER recorded a net finance income of NGN133.03 million in the period (vs net finance costs of NGN584.16 million in Q3-20). The outturn was driven mainly by a 284.0% y/y increase in the finance income, in the absence of finance costs.
Overall, the company recorded a PBT of NGN385.77 million (vs Loss Before Tax of NGN1.54 billion in Q3-20). Following a tax expense of NGN17.79 million, PAT printed NGN367.98 million (vs Loss After Tax of NGN1.54 billion in Q3-20).
Comment: We like that UNILEVER complemented the prior quarter’s profit with sustained topline growth, bringing the 9M-21 EPS to NGN0.19. Although we anticipate reduced earnings from its food segment in the final quarter as the company completes the spinoff of its tea business, we expect the HPC segment to sustain the revenue growth. As such, we believe the company remains on track to deliver positive earnings in 2021E. Our estimates are under review.
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