FSDH Initial Reaction: Unilever Nigeria FY22 results
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January 25, 2023/FSDH Research

Key Performance Highlights:

• Unilever Nigeria recorded a solid 25.8% YoY increase in revenue to N88.7 billion in FY22, powered by a 37.5% spurt in Food Products coupled with a 16.6% 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 661 bps YoY increase in gross margin to 35.5% in FY22. The company reported a gross profit of N31.5 billion in FY22 versus N20.4 billion in FY21. However, the company’s operating costs also shot up in line with the revenue growth as the Marketing and Distribution expenses rose 20.9% YoY to N18.3 billion in FY22, whereas Selling and Distribution expenses grew 44.5% YoY to N4.8 billion in FY22.
   
• The company reported an operating profit of N8.6 billion in FY22, a massive 659.5% rise, compared to N1.2 billion in a prior year due to increased revenues and other income, supported by an impairment write-backs of N50 million versus an impairment loss of N830 million in FY21. Finance income soared a massive 78.6% YoY to N1.8 billion in FY22, primarily from an increase in the interest from call deposits and bank accounts. Finance costs also shot up to N548 million in FY22, primarily driven by interest paid on third-party bank loans. Consequently, the company’s net finance income increased by 38.1% YoY to N1.3 billion in FY22. Despite higher tax expenses of N3.9 billion in FY22, a 225.3% YoY increase, the company’s net profit grew 75.8% YoY to N6.0 billion in FY22 versus N3.4 billion in FY21. However, the company’s operating cash flow declined 35.3% YoY to N13.1 billion in FY22, primarily due to adverse working capital movement.
   
• Looking at the quarterly performance, Unilever recorded a solid 14.9% YoY growth in revenues in 4Q22 to N24.0 billion, driven by a 24.8% YoY rise in Food Products revenue to N12.0 billion, along with a 6.4% YoY growth in Home and Personal Care revenue to N12.0 billion in 4Q22. The robust revenue growth and the decline in the cost of sales led to a solid expansion in gross margin to 59.7% in 4Q22. However, the company’s operating costs continued to grow as Marketing and Administrative expenses grew 42.2% YoY to N5.0 billion while Selling and Distribution Expenses jumped 28.7% YoY to N1.3 billion in 4Q22. The impairment loss was merely N4 million in 4Q22 compared to N156 million in 4Q21. Resultantly, the company reported an operating profit of N8.0 billion in 4Q22, a massive 246.5% YoY rise, compared to N2.3 billion in 4Q21. Helped by the finance income of N0.9 billion, the company’s net finance income for the period came in at N1.3 billion compared to a net finance loss of N0.3 billion. Unilever reported tax expenses of N3.1 billion in 4Q22, up 683.8% YoY, against N0.4 billion in 4Q21. The company reported a net profit of N6.3 billion in 4Q22 against a net profit of N3.9 billion in 4Q21. Unilever Nigeria’s EBITDA and net margin improved significantly to 35.9% (+1,610 bps) and 26.5% (+785 bps), respectively, in 4Q22, against an EBITDA and net margin margins of 19.8% and 18.6% in the prior-year quarter.
   
• The Food Products segment’s revenue grew by 24.8% YoY to N12.0 billion, while the Home and Personal products segment reported an increase of 6.4% YoY to N12.0 billion in 4Q22. Moreover, both the segments recorded an operating performance improvement, with the Food Products segment operating profit coming in at N3.9 billion, while the Home and Personal Care segment recorded N4.2 billion profit in 4Q22.

Market Reaction: The investor reaction to the robust FY22 results was buoyant as the stock popped 9.91% to N12.20 versus a marginal loss of 0.9% for the All-Share Index at the close of the day on 24/1.

Unilever Nigeria Earnings Highlight FY22

Source: Company Financials, FSDH