October 26, 2023/CSL Research

Unilever Nigeria (Unilever) reported a 26.0 y/y growth in Revenue to N81.56bn for 9M 2023 from N64.77bn in 9M 2022. Q/q however, Revenue was down 49.5% in Q3 2023 compared with Q2 2023 reflecting persisting inflationary pressures. The company’s Gross Profit Margin came in lower at 25.2% in 9M 2023 from 28.5% 9M 2022 which is a reflection of the 30.7% y/y rise in its Cost of Sales excluding depreciation to N61.0bn from N46.28bn in 9M 2022. Gross Profit was up to N20.58bn (+11.3% y/y) from N18.49bn in 9M 2022.

Impairment Loss on Trade and Receivables came in at N1.72bn in 9M 2023 from a gain of N54.08m in 9M 2022 while total operating expense excluding depreciation waned by 4.21% y/y to N15.55bn in 9M 2023 from N16.23bn in 9M 2022. The company’s EBITDA rose significantly, up 43.1% y/y to N3.31bn in 9M 2023 from N2.31bn in 9M 2022.

Net finance Income advanced by N3.18bn from a Loss of N71m. Consequently, the company’s Profit Before Tax surged by 937.3% y/y to N4.91bn in the period from N473m in 9M 2022. Due to a higher tax rate applied in 9M 2023 compared with 9M 2022, Profit After Tax grew to N1.67bn from a Loss After Tax of N348m in 9M 2022.

We maintain our price target of N12.33/s implying a downside potential of 14.08% from the current price of 13.60/s. We have a SELL rating on the stock.

Unilever 9M 2023

Source: NGX, CSL Research

Revenue boosted by H1 2023 performance

Unilever Nigeria Plc. (Unilever) reported a 26.0 y/y growth in Revenue to N81.56bn in 9M 2023 from N64.77bn in 9M 2022. All revenue segments appreciated significantly as the Food Products advanced by 40.8% y/y to N43.18bn from N38.39bn in 9M 2022 while its Home and Personal Care (HPC) advanced by 12.6% y/y to N38.39bn in the period from N34.11bn in 9M 2022. In review of Q3 2023 standalone (3M from July – August 2023), the company’s revenue reflected the impact of persisting inflationary pressures. Its Food products and HPC segments declined by 46.0% and 53.2% q/q to N15.13bn and N12.34bn in Q3 2023 from N28.04bn and N26.16bn in Q2 2023 respectively. However, these quarterly numbers were still higher than the prior year’s Q3 standalone numbers.

Unilever 9M 2023 Revenue Segment

Source: NGX, CSL Research

EBITDA increases in the period

Unilever’s EBITDA grew to N3.31bn in 9M 2023 from N2.31bn in 9M 2022. Operating Expense without depreciation was down to N15.55bn (-4.21% y/y) from N16.23bn in 9M 2022. The Marketing and Administrative (ex-depreciation) came in lower at N12.14bn from N13.13bn in 9M 2022 while Selling and Distribution Expenses (ex-depreciation) grew to N3.40bn in 9M 2023 from N3.10bn in 9M 2022. Overall, the OPEX margin was down to 21.17% compared with 25.0% in 9M 2022. The company reported Impairment Loss on its Receivables of N1.72bn in 9M 2023 from a writeback of N54m in 9M 2022. The company’s receivable settled at N24.12bn in 9M 2023 from N21.25bn in FY 2022.

Exchange difference boosted Net Finance Income

Unilever made a gain of N2.92bn in exchange difference on Bank Accounts in 9M 2023 from a loss of N479.14m in 9M 2022. However, the Interest on third party bank loans and Employee Benefit rose to N2.36bn and N115.98m in 9M 2023 from N364.74m and N113.60m in 9M 2022 but this was masked by the exchange gain resulting in a net positive position of N448.02m from a Loss of N957m. The company reported Finance Income of N2.73bn in 9M 2023 (vs N887mn in 9M 2022) bringing the Net Finance Income to N3.18bn, a significant growth from the Net Finance Cost of N71m reported in 9M 2022. This boosted its Profit Before Tax (PBT) to N4.91bn from an abysmal performance of N348m in 9M 2022. However, the company’s PBT for Q3 2023 showed that is finance expense of N1.04bn (-169.8% q/q) paid on its revenue segments eroded its profitability resulting in a Loss After Tax of N1.09bn in the period.

Valuation: Stock fairly valued; SELL recommendation maintained

We retain our target price of N12.33 per share. Current price of 14.35/s. The company’s discontinuance of the HPC segment is expected to weigh down on the company’s bottom-line performance.

Unilever Nigeria Plc, 9M 2023, Nm

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Source: Company, CSL estimates

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