…Despite a spike in OPEX (+190.6% y/y), Unilever recorded a lower operating loss (NGN386.36 million) in Q2-24 (vs NGN1.45 billion operating loss in Q2-23), underpinned by the improvement in gross profit (+277.7% y/y).
…Earnings per share of NGN0.19 (Q2-23: NGN0.22) was also reported, thus bringing H1-24 EPS to NGN0.77 (H1-23: NGN0.71).
…UNILEVER’s Q2-24 earnings was impacted by a significantly higher effective tax rate of 43.8% (Q2-23: 5.8%).
TUE JULY 23 2024-theGBJournal| Unilever Nigeria Plc (UNILEVER) Tuesday reported revenue growth of 27.0% y/y (N31.59 billion) (H1-24: +40.9% y/y) in Q2-24, driven by a broad-based increase across the Food Products (+28.7% y/y | 60.0% of revenue), Personal Care (+20.4% y/y | 33.3% of revenue), and Beauty & Wellbeing (+50.6% y/y | 6.7% of revenue) segments.
Codros Research analysts tells theG&BJournal that the strong revenue performance was likely fueled by price increases in response to high input costs and improved volume performance.
According to their channel checks, the company raised its prices across its product portfolio by c. 9.7%.
However, revenue declined by 2.2% q/q, due to decreased sales in Beauty & Wellbeing (-13.5% q/q) and Personal Care (-9.9% q/q) segments, while the Food Products segment saw a 4.2% q/q increase.
Gross margin for the period expanded significantly by 267bps y/y to 40.3% in Q2-24 (H1-24: +122bps y/y to 41.0%), indicative of the strong expansion in revenue (+27.0% y/y) which offset the increase in cost of sales (+12.2% y/y).
Despite a spike in OPEX (+190.6% y/y), Unilever recorded a lower operating loss (NGN386.36 million) in Q2-24 (vs NGN1.45 billion operating loss in Q2-23), underpinned by the improvement in gross profit (+277.7% y/y).
Meanwhile, the substantial rise in OPEX was mainly due to the impact of naira devaluation on foreign-denominated obligations, inflationary pressures, and investments across brands, as reflected by increases in overhead (+249.3% y/y) and brand and marketing (+178.8% y/y) costs.
Net finance income declined by 17.7% y/y to NGN2.31 billion in Q2-24 (H2-24: +6.8% y/y to NGN2.83 billion). The decline occurred despite a 54.3% y/y increase in finance income and an 85.6% y/y reduction in finance costs.
Overall, profit before tax increased by 42.0% y/y to NGN1.92 billion in Q2-24 (Q2-23: NGN1.35 billion). However, profit after tax fell by 15.3% y/y to NGN1.08 billion in Q2-24 (Q2-23: NGN1.28 billion) due to a higher effective tax rate of 43.8% (Q2-23: 5.8%).
Overall, profit before tax increased by 42.0% y/y to NGN1.92 billion in Q2-24 (Q2-23: NGN1.35 billion). However, profit after tax fell by 15.3% y/y to NGN1.08 billion in Q2-24 (Q2-23: NGN1.28 billion) due to a higher effective tax rate of 43.8% (Q2-23: 5.8%).
Earnings per share of NGN0.19 (Q2-23: NGN0.22) was also reported, thus bringing H1-24 EPS to NGN0.77 (H1-23: NGN0.71). UNILEVER’s Q2-24 earnings was impacted by a significantly higher effective tax rate of 43.8% (Q2-23: 5.8%).
”UNILEVER’s operating performance in Q2-24 reflects a challenging environment,” says Cordros.
Despite strong revenue growth, the company faced significant strain from elevated operating expenses, driven by naira devaluation and inflation, which led to an operating loss, although it was lower compared to the previous period.
The high tax expenses further exacerbated the impact on profitability. Moving forward, while we expect strong revenue expansion on price increases and volume growth, escalating operating expenses and currency-related challenges raise concerns about margin sustainability.
Cordros say they anticipate a greater focus on cost optimisation for improved profitability.
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