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April 27, 2022/CSL Research

Key Performance Highlights:

• Unilever Nigeria recorded a robust 24.5% YoY increase in revenue to N20.6 billion in 1Q22, powered by a 26.2% spurt in Food Products coupled with a 23.2% jump in Home and Personal Care revenue. The robust increase in revenue combined with a relatively lower rise in the cost of sales resulted in a spectacular 957 bps YoY increase in gross margin to 34.9% in 1Q22. The company reported a gross profit of N7.2 billion in 1Q22 versus N4.2 billion in 1Q21. However, the company’s operating costs also shot up in line with the revenue growth as the Selling and Distribution expenses rose 38.8% YoY to N1.0 billion in 1Q22, whereas Marketing and Administrative expenses grew 8.6% YoY to N4.1 billion in 1Q22.
   
• The company recorded N35.9 million as other income from a Transitional Service Agreement (TSA) following the disposal of their Tea business to Unilever Tea MSO Nigeria Limited. The agreement will last for 15 months, during which time Unilever Nigeria Plc will give production and sales support to Unilever Tea MSO Nigeria Limited in exchange for a fee. Unilever Nigeria also recorded an impairment loss on trade and intercompany receivables of N45.0 million in 1Q22, resulting in an operating profit of N2.2 billion in 1Q22, compared to a loss of N282.4 million in the prior period. Finance income soared a massive 52.1% YoY to N284 million in 1Q22, primarily from an increase in the interest from call deposits and bank accounts, partially offset by a 252.4% YoY jump in finance costs, resulting in a 6.9% YoY increase in the net finance income to N163 million in 1Q22. The company’s net profit came in at N1.8 billion in 1Q22 versus a loss of N492 million in 1Q21. Despite the high inflationary pressures during the quarter, the 1Q22 profit was supported by improved cost management practices as production costs increased merely by a single digit. The company’s net operating cash flow jumped 2.8x YoY to N5.0 billion in 1Q22, owing to strong operating performance.
   
• Looking at the sequential performance, Unilever recorded a 1.4% QoQ decrease in revenues in 1Q22 to N20.6 billion, driven by a 1.5% QoQ decline in Food Products revenue to N9.4 billion, along with a 1.3% QoQ decrease in Home and Personal Care revenue to N11.1 billion in 1Q22. The lackluster revenue growth and a relatively higher fall in the cost of sales led to a 151 bps increase in the gross margin to 34.9% in 1Q22. On a sequential basis, the 1Q22 performance declined primarily due to a 16.2% QoQ rise in the Marketing and Administrative expenses, slightly offset by a 2.0% decline in selling and distribution expenses to N1.0 billion in 1Q22. The impairment write-back stood at N45 million in 1Q22 compared to an impairment loss of N156.3 million in 1Q21. It’s worth noting that the company had reported a profit from discontinued operations (the company sold its tea business) of N2.3 bn in 4Q21. Consequently, the company reported a net profit of N1.8 billion in 1Q22 against a net profit of N3.9 billion in 1Q21, a 53.7% QoQ drop. Unilever Nigeria reported an EBITDA and a net margin of 13.7% and 8.7%, respectively, in 1Q22, against margins of 19.8% and 18.6% in the prior-year quarter.
   
• The Food Product segment’s revenue grew by 26.2% YoY to N9.4 billion, while the Home and Personal products segment reported a 23.2% YoY jump to N11.1 billion in 1Q22. Moreover, both the segments recorded an operating performance improvement, with the Food Products segment operating profit of N1.0 billion while the Home and Personal Care segment recorded an N1.2 billion profit in 1Q22 as against the operating losses of N128 million in the Food Products segment and operating losses of N154 million in the Home and Personal Care segment in 1Q21.
   
• Unilever Nigeria Plc. has appointed Mrs. Folake Ogundipe as an Executive Director of Unilever Nigeria Plc. with effect from 1 April 2022.

Market Reaction: The investor reaction to the solid quarterly result was extremely positive as the stock popped 9.84% (25/4) versus a 0.17% gain for the All-Share Index (25/4). The stock further spurted 1.49% to close at N13.60 on April 26.

Unilever Nigeria Earnings Highlight 1Q22

Source: Company Financials, FSDH