January 28, 2025/Cordros Report
Unilever Nigeria Plc (UNILEVER) published their Q4-24 unaudited results yesterday reporting a 29.2% decline in standalone earnings per share to NGN0.85 (Q4-23: NGN1.20), bringing 2024FY EPS to NGN2.77 (2023FY: NGN2.86). We attribute the decline in earnings per share to the spike in operating expenses (+44.8x y/y to NGN6.27 billion) during the quarter.
Q4-24 revenue grew by 50.3% y/y (2024FY: +44.2% y/y), largely driven by significant growth in the Food Products (+64.4% y/y | 68.5% of revenue) and Beauty & Wellbeing (+204.0% y/y | 11.3% of revenue) segments, which offset the decline in the Personal Care (+4.3% y/y | 20.3% of revenue) segment. We believe higher pricing was the key driver of the strong revenue performance during the quarter. Additionally, export sales (+27.6% y/y | 2.8% of revenue) also grew, supported by a higher FX rate. Sequentially, revenue rose by 14.9% q/q, reflecting the pricing adjustments.
Gross margin improved, rising by 65bps to 28.1% (Q4-23: 21.6%), owing to the faster increase in revenue (+50.3% y/y) relative to costs (+37.8% y/y). We highlight that the increase in costs was as a result of rising raw material costs following the sticky inflation print and depreciation of the naira.
Meanwhile, UNILEVER’s EBIT (-258bps y/y to 16.3%) and EBITDA (-334bps y/y to 18.0%) margins were weakened by a surge (+44.8x y/y) in operating expenses. Precisely, the higher OPEX outturn was driven by a substantial increase (+97.6% y/y) in brand and marketing expenses for the quarter, with the impact of the naira devaluation on foreign-denominated obligations also driving overhead costs (+153.5% y/y to NGN11.27 billion) higher.
The company reported a net finance income of NGN300.00 million in the quarter (vs net finance cost of NGN2.62 billion in Q4-23), owing to a faster decline in finance costs (-97.8% y/y to NGN90.00 million). For 2024FY, net finance income increased by 153.2% y/y to NGN4.13 billion driven by the higher income (3.9x to NGN3.44 billion) from foreign exchange gain on bank balances.
Overall, profit before tax declined by 24.0% y/y to NGN7.78 billion in Q4-24 (Q4-23: NGN10.23 billion). After accounting for a tax expense of NGN2.88 billion (Q4-23: NGN1.90 billion), UNILEVER reported a 50.0% decline in profit after tax to NGN4.90 billion (Q4-23: NGN9.80 billion).
Comment: UNILEVER’s Q4-24 performance was mostly in line with our expectations. Specifically, topline growth was remarkable, showing resilience amid the tough operating environment. However, the substantial increase in operating expenses limited the impact on profitability. For 2025E, we still see scope for sustainable growth in revenue, even as economic conditions, though abating, remains inhibiting factor. Our estimates are under review.
