FSDH Initial Reaction: Unilever Nigeria 3Q23 results
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October 24, 2023/FSDH Research

Key Performance Highlights:

• Unilever Nigeria reported total revenue of N27.4 billion in 3Q23, up 30.6% YoY from N21.0 billion in 3Q22, mainly driven by an increase in revenue from the Food Products (+40.3% YoY), supported by Personal Care segment revenue growth (+20.3% YoY). The cost of sales in 3Q23 increased to N21.1 billion, witnessing a YoY rise of 17.1% from N18.0 billion in 3Q22. Consequently, the company’s gross profit in 3Q23 stood at N6.3 billion, up 111.7% YoY from N3.0 billion in 3Q22. The increase in revenue combined with a relatively lower rise in the cost of sales resulted in a spectacular 884 bps YoY increase in gross margin to 23.1% in 3Q23.
   
• Unilever Nigeria’s Marketing and Administrative expenses in 3Q23 were N4.7 billion, up 5.3% YoY from N4.4 billion in 3Q22. Selling and Distribution Expenses declined marginally by 0.5% YoY to N1.2 billion. The company reported other income of N45 million in 3Q23, which increased by 60.0% YoY from N28 million in 3Q22. Unilever Nigeria recorded an impairment loss of N62 million in 3Q23, compared to a write-back of N2 million in 3Q22. The company reported an operating profit of N447 million in 3Q23, compared to an operating loss of N2.5 billion in 3Q22, mainly due to increased revenues. Finance income surged to N977 million in 3Q23, up 127.1% YoY from N430 million in 3Q22 due to higher interest on call deposits and bank accounts. However, finance costs vaulted 214.6% YoY to N1.0 billion in 3Q23, primarily driven by interest paid on third-party bank loans. Consequently, the company’s net finance income declined to negative N57 million in 3Q23, compared to net finance income of N102 million in 3Q22.
   
• The company’s tax expenses surged to N1.5 billion in 3Q23, compared to 3Q22’s tax credit of N251 million. Consequently, Unilever reported a net loss of N1.1 billion in 3Q23 versus N2.3 billion in 3Q22. Moreover, Unilever Nigeria’s EBITDA in 3Q23 improved to N1.6 billion, compared to a negative N2.0 billion in 3Q22. Looking at margins, the gross margin in 3Q23 was 23.1%, experiencing a significant YoY growth of 884 bps from 14.2% in 3Q22. Moreover, the EBITDA margin and operating margin came in at 5.8% and 1.6% in 3Q23, compared to negative -9.6% and -12.4% in 3Q22. The net margin improved to -4.0% in 3Q23 from -10.8% in 3Q22.
   
• Looking at the sequential performance, Unilever recorded a 7.5% QoQ decline in revenues in 3Q23 to N27.4 billion, primarily due to a 17.7% QoQ decline in Home and Personal Care revenue, partially offset by a 2.8% YoY rise in Food Products revenue. Noteworthy to mention, the company’s cost of sales decreased 22.3% QoQ, leading to a 1465 bps QoQ rise in gross margin to 23.1% in 3Q23, compared to 8.4% in 2Q23. Despite Marketing and Administrative expenses rising by 51.0% QoQ to N4.7 billion, Selling and Distribution Expenses declined by 9.3% QoQ to N1.2 billion in 3Q23, and Unilever Nigeria reported an impairment loss of N62 million compared to a N1.4 billion in 2Q23. Consequently, the company’s operating profit came in at N447 million in 3Q23, compared to an operating loss of N3.8 billion in 2Q23. The company incurred a net finance loss of N57 million in 3Q23, compared to a net finance income of N3.4 billion in 2Q23. Additionally, Unilever reported tax expenses of N1.5 billion in 3Q23, against N78 million in 2Q23. Accordingly, the company reported a net loss of N1.1 billion in 2Q23 against a net profit of N91 million in 2Q23.
   
• Unilever Nigeria’s Food Products segment recorded revenue of N15.1 billion in 3Q23, marking a substantial YoY growth of 40.3% from N10.8 billion in 3Q22. On a QoQ basis, the segment’s revenue increased by 2.8% from N14.7 billion in 2Q23. The Home and Personal Care segment’s revenue was N12.2 billion in 3Q23, reflecting a 20.3% YoY growth from N10.2 billion in 3Q22. However, on a sequential basis, the segment’s revenue declined 17.7% to N12.2 billion in 3Q23 from N14.9 billion in 2Q23. The Food Products segment reported an operating profit of N247 million in 3Q23, compared to an operating loss of N1.2 billion in 3Q22. Similarly, the Home and Personal Care segment also recorded an operating profit of N200 million in 3Q23, compared to an operating loss of N1.4 billion in 3Q22.
   
• On 20 October 2023, the company announced the resignation of His Royal Majesty, Nnaemeka A. Achebe, CFR, mni, Obi of Onitsha, as a non-executive Director and Chairman of the Board, effective 31 December 2023.

Market Reaction: The investor reaction to the 3Q23 results was muted as the stock remained unchanged at N13.60 versus a 0.06% marginal loss for the All-Share Index (23/10).

Unilever Nigeria Earnings Highlight 3Q23

Source: Company Financials, FSDH