FSDH Initial Reaction: Unilever Nigeria 1Q24 results
Kindly click here to download the report.

April 22, 2024/FSDH Research

Key Performance Highlights:

• Unilever Nigeria reported strong revenue growth of 57.8% YoY to N32.3 billion in 1Q24. The substantial revenue growth was primarily driven by a 97.8% YoY jump in the Personal Care and Beauty & wellbeing category to N14.1 billion, supported by a 36.4% YoY surge in the Food Products category to N18.2 billion. It’s worth noting that the Company exited the Home Care and Skin Cleansing categories from the Home & Personal Care segment (now named Beauty & Wellbeing and Personal Care segment) on March 17, 2023. Nevertheless, the increase in Cost of Sales, which surged by 75.0% YoY to N18.8 billion in 1Q24, dampened gross profit growth to 38.8% YoY to N13.5 billion. Consequently, this led to a considerable shrinkage in the gross margin by 571 bps YoY, falling to 41.8% in 1Q24 from 47.5% in 1Q23.
   
• Unilever’s Marketing and Administrative expenses more than doubled to N8.3 billion from N3.9 billion in 1Q23, mainly due to increased Brand and marketing spending in media. Selling and Distribution Expenses also soared to N1.4 billion Vs. N909 million in 1Q23. Further, 1Q23’s impairment loss of N263.0 million turned positive to N4 million in 1Q24, while Other income remained somewhat flat. Subsequently, the higher Operating Costs pulled down the Operating Profit by 17.5% YoY to N3.8 billion in 1Q24 from N4.7 billion in 1Q23. However, the Operating margin steeply declined from 22.8% in 1Q23 to 11.9% in 1Q24. Additionally, EBITDA also declined 15.5% YoY to N4.4 billion in 1Q24 Vs. 5.2 billion in 1Q23 due to higher operating expenses, while the EBITDA margin contracted from 25.4% in 1Q23 to 13.6% in 1Q24.
   
• The Company reported a Net Finance Income of N516.0 million compared to a Net Finance Cost of N160.0 million in 1Q23, driven by increased Exchange differences on bank balances and Interest on call deposits and bank accounts, partially offset by higher Interest on third-party bank loans. The Tax expense decreased to N1.0 billion from N1.7 billion in 1Q23, resulting in a Net Profit of N3.4 billion during the quarter, compared to N2.7 billion in 1Q23 (after deducting a loss from discontinued operations in 1Q23 of N150 million). The Company recorded N0.58 EPS from continuing operations versus N0.49 in the prior year quarter. The Net margin declined to 10.4% from 13.0% in 1Q23.
   
• During the quarter, Food Products segment revenues (56% of 1Q24 sales) were up 36.4% YoY to N18.2 billion from N13.3 billion in 1Q23, whereas its Operating Profit decreased 12.4% YoY to N2.2 billion Vs. 2.5 billion in 1Q23. Although Personal Care and Beauty & Wellbeing revenues (44% of 1Q24 sales) shot up (97.8% YoY) to N14.1 billion compared to N7.1 billion in 1Q23, the Operating Profit declined to N1.7 billion in 1Q24 from N2.2 billion in 1Q23 (-23.3% YoY).
   
• Looking at the sequential performance, revenues were up 5.8% QoQ, while Gross Profit increased 25.6% QoQ from N10.7 billion to N13.5 billion. Operating Profit was significantly down by 70.1% QoQ to N3.8 billion compared to 12.8 billion in 4Q23. Moreover, the Net Profit almost halved to N3.3 billion on a QoQ basis. The Personal Care and Beauty & Wellbeing category exhibited a 37.3% QoQ sales growth, while Food products showcased a 10.2% QoQ revenue decline. Operating profits declined for both categories sequentially.
   
• On April 3, 2024, the Company declared a final dividend of 75 kobo to be paid on May 10, 2024. Dividends will be paid electronically to shareholders with a record date of Friday, April 26, 2024.
   
• The Board accepted Mr. Mutiu Sunmonu CON’s resignation as an Independent Non-Executive Director effective April 18, 2024. Mr. Sunmonu’s replacement on the Board will be announced in due course.

Market Reaction: The investor reaction to the 1Q24 results was positive as the stock jumped 5.15% to N14.30 versus a 0.13% rise for the All-Share Index (22/4).

Unilever Nigeria Earnings Highlight 1Q24