April 27, 2022/CSL Research

Unilever Nigeria in its recently released Q1 2022 financials reported a 24.5% y/y increase in Revenue to N20.6bn from N16.5bn in Q1 2021. Across product segments, y/y performance was also strong in Q1 2022 as Food (+26.2% y/y to N9.4bn) and HPC (+23.2% y/y to N11.1bn) both increased. On a q/q basis, Unilever, however, recorded a decline in Revenue, down 1.4% from N20.9bn in Q4 2021. The q/q decline in Revenue was dragged by both Food and HPC as both segments declined by 1.5% q/q and 1.3% q/q, respectively. 

Supported by cost management practices, Cost of Sales (adjusted for depreciation) increased moderately, up 9.0% y/y to N12.9bn in Q1 2022 from N11.9bn in Q1 2021. Given the sub-inflationary growth in Cost of Sales, Gross profit grew by 64.2% y/y to N7.6bn in Q1 2022 from N4.6bn in Q1 2021. In addition, Gross margin expanded by 9.0ppts y/y to 37.1% in Q1 2022 from 28.1% in Q1 2021.  

Operating Expenses (adjusted for depreciation) grew moderately, up 14.6% y/y to N4.8bn in Q1 2022 from N4.2bn in Q1 2021. The growth in Opex was largely driven by strong growth in Selling & Distribution Expenses (up 48.0% y/y to N883m), further increased by Marketing & Administrative Expenses (up 9.1% y/y to N3.9bn). Furthermore, an impairment reversal on receivables of N45m in Q1 2022 supported EBIDTA growth. As a result, EBITDA grew 511.4% to N2.9bn from N472m in Q1 2021. Depreciation & Amortisation fell by 2.6% y/y to N735m in Q1 2022 and the company reported Other Income of N36m in Q1 2021 compared to nothing in Q1 2021. Overall, the firm reversed Operating Loss of N282.4m in Q1 2021 to an Operating Profit of N2.2bn in Q1 2022.

Net Finance Income increased, up 6.9% y/y to N163m in Q1 2022 from N152m in Q1 2021 driven largely by stronger Finance Income (up 52.1% y/y to N284m) despite the 252.4% growth in Finance Cost to N121.1m in Q1 2022. The modest growth in Net Finance Income, coupled with a solid topline performance, resulted in a reversal in the Loss booked in Q1 2021 to a Profit before Tax of N2.4bn in Q1 2022.  As a result, Profit after Tax from continuing operations came to N1.8bn compared with a Loss after Tax of N574m in Q1 2021.

Our estimates are under review. Current Price: N13.50

Source: Company Financials, CSL Research