March 24, 2017/InvestmentOne Research
NIGERIA | EQUITIES | CONSUMER GOODS | UNILEVER NIGERIA PLC
Q4:2016 results highlight: Improved bottom-line numbers supported by exchange gain on financial income
§ Strong sales performance : up +13.1%q/q; up +20.48% y/y.
§ Strong PBT and PAT: up 10842% and 537% q/q; up +263% and 664% y/y on lower-base effect.
§ Mixed Gross margins : expanded by over +340bps q/q ;contracted by -932bps y/y.
UNILEVER NIGERIA Plc (UNILEVER) yesterday released its audited Q4 2016 results which showed appreciable topline growth with support from y/y positive growth across segments: Food (+17.2%) , Homecare (+47.3%) and Personal care (+7.7%). However, due to the impact of exchange rate pass-through on input costs gross margin of 28.1% contracted by -932bps y/y driving the –9.5% y/y decline in Gross profit.
We highlight that the +20.48% y/y growth in topline to c.N19.9bn may have seen support from a combination of price hike as well as seasonal pick up in household demand often associated with festive season.
Moving down the P&L line, PBT and PAT margins expanded by +874bps y/y and +640bps y/y supported by a combination of 853bps y/y contraction in opex/sales ratio and 213% y/y growth in financial income on exchange gain which offset the +26.22% spike in finance expense. Consequently, both PBT and PAT were up by over 200% and 600% y/y.
On a sequential basis, Unilever recorded improved performance in key metrics. While turnover was up +13.1% q/q, gross profit margin expanded by +340bps q/q, consequently driving the 28.69% q/q growth in gross profit. Furthermore, with support from exchange gain on derivative instruments and export proceeds, financial income was up by over 1000% q/q. This, in addition to –418bps q/q contraction in opex/sales ratio serves to boost both Q4 2016 PBT and PAT of c.N2.6bn and c.N1.15bn respectively. Having said that, we point out the +1084% and +537% growth in both bottom-line numbers, were largely flattered by lower base effects given the weak numbers recorded by the company in Q3 2016.
Overall, the result was headlined by strong rebound in sales, recovery in margins, as well as spike in financial income.
In conclusion, while we are impressed by the appreciable growth in topline and recovery in margins despite the tough macro backdrop, we however highlight that near term earnings performance will continue to be reflective of macro headwinds ranging from rising inflation, shrinking disposable income among others.
Over the medium to longer term, we see support to performance from increased efforts at local sourcing of raw material, potential for improvement in access to FX from CBN’s special intervention auction for manufacturing, agriculture and aviation sector players.
Our models are under review. We rate UNILEVER a SELL
Unilever Nigeria Plc Q4 2016 figures ( N’ millions)
Q42016 | Q/Q | Y/Y | I-one est. | Actual vs | FY2016 | Y/Y | I-one est. | Actual vs I-one est. (%) | |
Sales | 19,906 | 13.14% | 20.48% | 19,314 | 3.06% | 69,777 | -15.8% | 69,185 | 0.86% |
Cost of Sales | -14,311 | 8.04% | 38.42% | -13,951 | 2.58% | -49,481 | -7.9% | -49,121 | 0.73% |
Gross Profit | 5,595 | 28.69% | -9.52% | 5,363 | 4.33% | 20,296 | -3.6% | 20,064 | 1.16% |
Gross margin | 28.1% | 340bps | -932bps | 27.8% | 34bps | 29.1% | -645bps | 29.0% | 9bps |
OPEX | -3,020 | -11.29% | -22.88% | -3,625 | -16.70% | -14,615 | -11.3% | -15,221 | -3.98% |
Opex/sales | 15.2% | -418bps | -853bps | 18.8% | -360bps | 20.9% | -689bps | 22.0% | -105bps |
Financial Charges | -981 | 15.34% | 26.22% | -776 | 26.48% | -2,726 | -14.0% | -2,521 | 8.15% |
Financial income/(losses) | 883 | +1254.38% | +213.83% | 113.0 | 681.93% | 1,028 | 240.4% | 257.3 | 299.38% |
PBT | 2,602 | 10842.88% | 263.48% | 1,075 | 142.03% | 4,106 | 131.9% | 2,604 | 57.67% |
PBT margin | 13.1% | 1294bps | 874bps | 5.6% | 751bps | 5.9% | 289bps | 3.8% | 212bps |
Tax | -1,091 | 611.67% | 110.44% | -778 | 40.12% | -1,035 | 78.8% | -722 | 43.24% |
Tax rate | 41.9% | 93831bps | -3048bps | 72.4% | -3048bps | 25% | -748bps | 27.7% | -254bps |
PAT | 1,511.5 | 537.92% | 664.82% | 297 | 409.32% | 3071.89 | 157.6% | 1,882 | 63.21% |
PAT margin | 7.6% | 625bps | 640bps | 1.5% | 606bps | 4.4% | 239bps | 2.7% | 168bps |
