FSDH Initial Reaction: Unilever Nigeria 1Q23 results
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April 26, 2023/FSDH Research

Key Performance Highlights:

• Unilever Nigeria recorded a robust 19.7% YoY increase in revenue to N24.6 billion in 1Q23, powered by a 41.2% spurt in Food Products, supported by a marginal 1.4% increase in Home and Personal Care revenue. The increase in revenue combined with a relatively lower rise in the cost of sales resulted in a spectacular 818 bps YoY increase in gross margin to 43.1% in 1Q23. The company reported a gross profit of N10.6 billion in 1Q23 versus N7.2 billion in 1Q22. However, the company’s operating costs also increased in line with the revenue growth as the Marketing and Distribution expenses rose 12.1% YoY to N4.5 billion in 1Q23, and Selling and Distribution expenses grew 24.5% YoY to N1.3 billion in 1Q23.
• The company reported an operating profit of N4.6 billion in 1Q23, a massive 108.3% rise, compared to N2.1 billion in the prior year, mainly due to increased revenues. However, finance income was down by 35.4% YoY to N183 million in 1Q23, primarily from a decrease in the interest from call deposits and bank accounts. Finance costs vaulted 223% YoY to N392 million in 1Q23, primarily driven by interest paid on third-party bank loans. Consequently, the company’s net finance income declined significantly to negative 208 million in 1Q23. Despite higher tax expenses of N1.7 billion in 1Q23, a 272.9% YoY increase, the company’s net profit grew 48.7% YoY to N2.7 billion in 1Q23 versus N1.8 billion in 1Q22. Additionally, the company’s operating cash flow increased by 140.4% YoY to N12.0 billion in 1Q23, primarily due to favourable working capital movement.
• Looking at the sequential performance, Unilever recorded a 2.7% QoQ growth in revenues in 1Q23 to N24.6 billion, driven by a 11.4% QoQ rise in Food Products revenue to N13.3 billion, partially offset by a 5.9% QoQ decline in Home and Personal Care revenue to N11.3 million in 1Q23. The decrease in Home and Personal Care revenue and a 45.1% QoQ rise in the cost of sales led to a 1663 bps QoQ fall in gross margin to 43.1% in 1Q23. However, the company’s operating costs declined slightly as Marketing and Administrative expenses were down by 8.4% QoQ to N4.6 billion, while Selling and Distribution Expenses declined by 5.2% QoQ to N1.3 billion in 1Q23. The impairment loss was N263 million in 1Q23 compared to a merely N4 million in 4Q22. Consequently, the company reported an operating profit of N4.6 billion in 1Q23, a 43.5% QoQ decline, compared to N8.0 billion in 4Q22. In 1Q23, the company incurred a net finance loss of N208 million compared to a net finance income of N1.4 billion in 4Q22. Unilever reported tax expenses of N1.7 billion in 1Q23, down 45.0% QoQ, against N3.1 billion in 4Q22. Accordingly, the company reported a net profit of N2.7 billion in 1Q23 against a net profit of N6.3 billion in 4Q22. Unilever Nigeria’s EBITDA and net margin declined meaningfully to 20.7% (-1516 bps) and 10.9% (-1562 bps), respectively, in 1Q23, against an EBITDA and net margin margins of 35.9% and 26.5% in 4Q22.
• The Food Products segment’s revenue grew by 41.2% YoY to N13.3 billion, while the Home and Personal products segment reported a marginal increase of 1.4% YoY to N11.3 billion in 1Q23. Moreover, both the segments recorded an increase in operating performance, with the Food Products segment’s operating profit coming in at N2.5 billion (+145.7% YoY), while the Home and Personal Care segment recorded N2.1 billion profit in 1Q23 (+76.5% YoY).
• The Board of Directors appointed Mrs. Abidemi Ademola as an Executive Director of the company with effect from 16 March 2023. Furthermore, the Board appointed Mrs. Afolasade Olowe as the Company Secretary of Unilever Nigeria Plc starting from 16 March 2023. On 21 April 2023, the company announced the resignation of Mr. Carl Raymond R. Cruz as Managing Director with effect from 4 May 2023, post the Annual General Meeting. In addition, the company appointed Mr. Tim Kleinebenne as Managing Director, effective 5 May 2023.

Market Reaction: The investor reaction to the solid 1Q23 results was positive as the stock popped 6.72% to N13.50 versus a 0.49% gain for the All-Share Index (25/4).

Unilever Nigeria Earnings Highlight 1Q23