April 26, 2023/InvestmentOne Report

• Revenue: up 2.74% q/q, up 19.69% y/y
• Gross profit margin: down 1663bps q/q, up 818bps y/y
• PBT margin: down 2153bps q/q, up 624bps y/y
• PAT margin: down 1562bps q/q, up 161bps y/y
  

 Topline Performance Improvement

Unilever Nigeria Plc released its Q1 2023 unaudited financial report last week, and it showed that revenue was up by 19.69% y/y to N24.60 billion in Q1 2023 from N20.56 billion in the previous year, 2022. Given that the company is involved in the production, packaging, and marketing of food products and home and personal care products, the organization benefited from the rising cost of food and other essential items they produce. A breakdown of the revenue segment showed that revenue from food products grew by 41.19% y/y to N13.32 billion (accounting for 54.17%) of total revenue during the period, while the home and personal care segment increased marginally by 1.43% y/y to end at N11.28 billion. In the same vein, gross profit margin advanced by 818bps to 47.76% y/y, outpacing the cost of sales (+4.65% y/y) to boost profitability.

Consistent Bottom-Line Performance despite Cost Pressures

Despite increasing costs and the plan to divest from its home and personal care segment, the organization has been able to remain afloat. In details, operational costs rose by 21.20% y/y bringing expense to N6.04 billion in the period as compared to N4.98 billion in 2022.

Likewise, finance costs increased by 223.24% y/y to N391.54 million, while finance income decreased by 35.44% to N183.38 million, thereby causing a loss of N208.16 million. Relatedly, tax costs were up by 272.87% y/y from N450.12 million in the previous year to N1.68 billion in 2023. Undeterred by elevated costs, bottomline performance remained consistent, as profit before tax boosted by 85.06% y/y to N4.35 billion, almost double from this time last year. Concordant with PBT, profit after tax grew by 40.58% y/y to close at N2.67 billion in Q1, 2023, while profit after tax margin grew by 161bps.

Increased Tax and Finance Expense Mars Performance

On a q/q basis, gross profit fell by 25.87% while revenue rose (+2.74%) and the cost of sales within the period grew (+45.13%). Accordingly, gross margin contracted by 1663bps. In line with the drop in gross profit, PBT declined by 53.68%, corroborated by an increase in finance costs (+115.14%). Hence, PAT withdrew by 57.88% q/q to N2.67 billion.

Outlook

Going forward, considering the divestment from the home and personal care segments, we expect earnings to be subdued in the short to medium term. However, the company’s brand and goodwill, as well as its focus on the food segment, should provide support amidst the prevailing macroeconomic crunch.

Source: Company’s Financials, Investment One Research