April 25, 2023/CSL Research

Unilever Nigeria’s Q1 2023 showed a 19.7% y/y growth in Revenue to N24.6bn in Q1 2023 from N20.6bn in Q1 2022. The Food segment – Blue Band, Knorr and Royco, recorded strong growth, up 39.1% y/y to N13.3bn in Q1 2023 from N9.6bn in Q1 2022, with 50% contribution. The Home and Personal Care products segment grew marginally by 0.1% y/y to N11.28bn in Q1 2023 from N11.26bn in Q1 2022. However, q/q, Revenue moderated by 2.7% to N24.96bn in Q1 2023 from N23.95bn in Q4 2022, triggered by a 5.9% decline in the Home and Personal Care products to N11.28bn in Q1 2023 from N11.82bn in Q4 2022. Looking ahead, we expect the company’s revenue to be mainly driven by the Food Product segment due to the company’s recent corporate notice to exit its Home and Personal care segment (a large contributor) owing to unsustainable business condition.

Cost of Sales (adjusted for depreciation) grew faster than Revenue, up 47.2% to N13.6bn in Q1 2023 from N9.3bn in Q4 2022 as global inflation and Naira devaluation continued to impact on raw materials import. Gross Profit grew 44.1% y/y to N10.9bn in Q1 2023 from N7.6bn in Q1 2022 while Gross Margin rose by 7.5ppts to 44.6% in Q1 2023 from 37.1% in Q1 2022.

In the face of pressured Revenues and input costs, management maintained its strategy of keeping a ceiling on Operating Costs. The company’s Marketing and Administrative Expenses (adjusted for depreciation) only grew by 12.6% y/y to N4.49bn in Q1 2023 from N3.99bn in Q1 2022. Selling and Distribution Expenses (adjusted for depreciation) also grew by 30.3% to N1.15bn in Q1 2023 from N883m in Q1 2022, which raised OPEX Margin slightly by 0.5ppt to 24.0% in Q1 2023 from 23.5% in Q1 2022.

EBITDA increased significantly by 81.7% y/y to N5.07bn in Q1 2023 from N2.79bn in Q1 2022. Hence, EBITDA Margin grew by 7.0ppts to 20.6% in Q1 2023 from 13.6% in Q1 2022. However, given a 15.4% y/y decline in Depreciation & Amortisation, Operating Profit grew by 110.5% y/y to N4.53bn in Q1 2023 from N2.15bn in Q1 2022. 

The company recorded a 35.4% decrease in Interest Income to N183m in Q1 2023 from N284m in Q1 2022. With Interest Expense of N392m, Net Finance Cost was (N208m) in Q1 2023 compared to a Net Finance Income of N163m in Q1 2022.  

Profit Before Tax increased by 85% to N4.35bn in Q1 2023 from N2.35bn in Q1 2022. Effective Tax Rate expectedly rose to 38.6% in Q1 2023 from 19.1% in Q1 2022. In effect, Profit After Tax rose 48.7% to N2.67bn in Q1 2023 compared to N1.79bn in Q1 2022. 

Our estimates are under review. Current Price: N12.65/s 

Unilever Q1 2023 (Nm).

 Source: Company, CSL Research