January 31, 2022/Cordros Report
UNILEVER published its Q4-21 and 2021FY unaudited results on Thursday (27 January), reporting an EPS of NGN0.68 in Q4-21 (Q4-20: NGN0.08) following significant revenue growth and gross margin expansion. For 2021FY, the EPS outturn was positive (FY-21: NGN0.61) compared to the Loss Per Share recorded in 2020FY (NGN0.69). The achieved revenue was in line with our estimate with a marginal 0.1% variance. Although we envisaged that EPS would turn positive, the 2021FY EPS was 191.1% ahead of our estimate, owing to a positive surprise in the gross margin.
Revenue grew by 42.2% y/y in Q4-21 (FY-21: +35.1% y/y), primarily driven by UNILEVER’s HPC (+55.8% y/y) segment, while the Food Products (-0.3% y/y) segment declined marginally. The former contributed 54.0% (Q4-20: 42.9%) to total revenue, while the latter contributed 46.0% (Q4-20: 57.1%). For 2021FY, the HPC (56.0%; 2020FY: 43.6%) segment contributed the bulk of the revenue with the Food Products (44.0%; 2020FY: 56.0%) segment accounting for the rest. Sequentially, revenue increased by 6.5% q/q, following increases from the HPC (+11.8% q/q) and Food Products (+0.9% q/q) business lines.
For the HPC segment, we attribute the growth to UNILEVER’s (1) increased investment in its distribution network, which drove strong volume growth and (2) marginal price increases in some core products. Meanwhile, for the Food Products segment, we highlight that cheaper substitutes in the seasonings market eroded UNILEVER’s market share and drove the decline in the segment.
Gross margin expanded to 33.4% in Q4-21 (Q4-20: 17.2%), owing to the substantial growth in the top line, which outpaced the cost of sales (+14.5% y/y). Consequently, the company recorded a positive operating profit (NGN2.32 billion vs operating loss of NGN3.06 billion in Q4-20), despite a significant increase in operating expenses (+54.7% y/y). Accordingly, EBITDA also turned positive (NGN3.83 billion vs negative EBITDA of NGN130.34 million in Q4-20).
UNILEVER recorded a net finance cost in Q4-21 (NGN278.12 million vs net finance income of NGN1.22 billion in Q4-20), as the company did not record any finance income in the period.
Overall, the company recorded a PBT of NGN2.04 billion (vs Loss Before Tax of NGN1.44 billion in Q4-20). Following a tax expense of NGN494.16 million, PAT printed NGN1.55 billion (vs Loss After Tax of NGN1.76 billion in Q4-20).
Comment: UNILEVER’s Q4-21 and 2021FY performance outperformed our expectations due to the significant revenue growth and gross margin expansion. For 2022FY, we expect the results to reflect the challenging operating conditions as real wage decline continues to impact sales volumes, even as FX illiquidity and inflationary pressures continue to impact input and fixed costs. YTD, the stock has appreciated by 4.5%. Market reaction to the result was tepid on Friday, and we expect the same reaction in subsequent trading sessions. Our estimates are under review.
