FSDH Initial Reaction: Unilever Nigeria FY23 results
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January 23, 2024/FSDH Research

Key Performance Highlights:

• Unilever Nigeria reported a solid set of results with revenue growth of 50.7% YoY to N97.4 billion and a net profit increase of 91.3% YoY to N8.5 billion in FY23. The jump in revenue was primarily attributable to the 45.5% YoY spurt in Food Products, further boosted by a 61.3% YoY jump in the Beauty & Wellbeing and Personal Care segment. It’s worth noting that the Company exited Home Care and Skin Cleansing categories from the Home & Personal Care segment (which now is named as Beauty & Wellbeing and Personal Care segment) on 17 March 2023. However, the rise in Cost of Sales, up 76.4% YoY to N67.6 billion in FY23 from N38.3 billion a year ago, pulled the gross profit growth down to 13.4% YoY. Subsequently, the gross margin significantly contracted by 1,008 bps YoY to 30.7% in FY23 from 40.7% in FY22.
   
• Selling and Distribution costs grew 48.7% YoY to N3.9 billion in FY23, while marketing costs declined 5.5% YoY to N13.3 billion in FY23, helped by N1.6 billion revaluation gains on foreign currency-denominated receivables in overheads. Furthermore, higher other income owing to a discounted promissory note and impairment write-backs of N3.5 billion in FY23 aided in controlling operating costs. Consequently, the operating profit grew 88.1% YoY to N17.1 billion in FY23. Net Finance Income was up 38.4% YoY due to higher Interest on call deposits and bank accounts, partially offset by increased Interest on third-party bank loans and employee benefit charges. Despite tax expenses increasing by 53.5% YoY, Unilever Nigeria posted a Net Profit of N8.5 billion, up 91.3% YoY from N4.5 billion a year ago. Moreover, the Company’s net income margin improved by 186 bps YoY to 8.8% in FY23 compared to 6.9% in FY22.
   
• Looking at the Company’s quarterly performance, the significant revenue growth was partially offset by the rising cost of sales. Despite Unilever Nigeria’s quarterly revenue growing 63.7% YoY, to N30.5 billion from N18.6 billion in 4Q22, the Cost of Sales significantly increased by 190.5% YoY to N19.8 billion from N6.8 billion in 4Q22. Consequently, gross profit decreased by 9.2% YoY to N10.7 billion, and gross margin contracted by a whooping 2,829 bps YoY to 35.2%. However, aided by lower Marketing and Administrative expenses of N2.9 billion, which were down 26.0% YoY, and higher other income and impairment write-backs of N5.5 billion in 4Q23, the operating profit was up 82.8% YoY in 4Q23 to N12.8 billion. Consequently, operating margin grew 438 bps YoY to 42.1% in 4Q23 compared to 37.7% in 4Q22. However, the Company reported a net finance cost of N2.6 billion in 4Q23 from N1.0 billion in 4Q22 due to increased Interest on third-party bank loans. Although Unilever reported tax expenses of N1.9 billion in 4Q23, down 37.8% YoY, against N3.1 billion in 4Q22, the Company reported a quarterly profit of N6.9 billion compared to N6.3 billion in 4Q22, up 8.4% YoY. Moreover, the net margin fell 1,148 bps YoY to 22.5% in 4Q23 compared to 34.0% in 4Q22.
   
• In 4Q23, Food Products revenues grew 65.9% YoY to N20.3 billion, Beauty & Wellbeing and Personal Care segment revenue surged 59.6% YoY to N10.3 billion. Moreover, both segments recorded an operating performance improvement, with the Food Products segment operating profit coming in at N8.5 billion, while the Beauty & Wellbeing and Personal Care segment recorded N4.3 billion profit in 4Q23.
   
• On 18 January 2024, the Board of Directors of Unilever Nigeria announced the resignation of Mr Jaime Aguilera as Non-Executive Director, effective 17 January 2024. Moreover, the Board also approved the appointments of Mr. Obinna Emenyonu as Executive Director and Mr. Ben Langat as Non-Executive Director, effective from 18 January 2024.
   
• On 19 January 2024, the Company appointed Mr. Michael Ikpoki as Interim Chairman of the Board of Unilever Nigeria, pending the appointment of a substantive Chairman of the Board.

Market Reaction: The investor reaction to the FY23 results was buoyant as the stock jumped 7.96% to N21.70 versus a 1.30% rise for the All-Share Index (22/1).

Unilever Nigeria Earnings Highlight FY23