Unilever Nigeria Maintains Recovery With N1b Profit In Q3

Unilever Nigeria Plc maintained the course of recovery in the third quarter, topping up after-tax profit to over N1 billion at the end of September 2021. Despite that, quarterly profit thinning down from N1.2 billion in the second quarter to N468 million in the third, the food and personal care products manufacturing company is hopeful for profit this year after two preceding years of huge losses.

The company is seeing a profit for the second quarter, having begun the current financial year with a first-quarter loss of N491 million. Despite the profit slowdown in the third quarter, the figure still represents a big rebound from a loss of more than N1.5 billion in the same quarter in 2020.

The closing profit for the nine months of the year also represents a big upturn from a loss of over N2 billion at the same period last year. This has sustained the path of profitability for the company, almost ruling out any prospects for registering a loss for the third straight year.

The return to profit is helping to rebuild reserves after net losses of over N4 billion and N1.6 billion in 2019 and 2020 respectively drained retained earnings.

The company’s strength for a turnaround revolves around improving sales revenue combined with cost moderation. However, sales revenue slowed down in the third quarter from a 46 per cent increase in the first quarter and a 41 per cent growth in the second quarter to 12.5 per cent in the third. The slowdown explains the drop in quarterly profit for the third quarter.

The company’s nine-month operations closed with a turnover of N58.7 billion, which represents an increase of 31 per cent year-on-year, slowing down from 43 per cent at half-year. It is nevertheless a sustained upturn from a marginal increase of 1.3 per cent in turnover at the end of last year.

The home/personal care product segment of the company continues to lead revenue growth at the end of the third quarter at an increase of 44 per cent to over N28 billion at the end of the period. This is a sustaining recovery from a drop of 7 per cent for the product segment at the end of last year.

The food products segment of the company’s market grew at a slower pace of 21.4 per cent to N30.5 billion, yet much better than a 9 per cent increase at the end of last year.

The company maintained cost moderation achieved in the second quarter and kept revenue growing generally ahead of costs. Cost of sales continued slowing down from 51 per cent rise in the first quarter to 37 per cent growth year-on-year at half-year and further to 23 per cent increase to about N43 billion at the end of September 2021.

This marks the critical development in the company’s cost-income structure in the last two quarters – trimming input expenses to reduce the cost of the naira of sales revenue.

The slowdown in input cost has sustained rapid growth in gross profit at 60.5 per cent at the end of the third quarter to almost N16 billion. The proportion of sales revenue claimed by the cost of sales went down from 78 per cent in the same period in 2020 to 73 per cent at the end of September 2021.

Selling/distribution expenses have also maintained a slowdown from a 63 per cent surge in the first quarter to a 34 per cent increase at half-year and further to 24 per cent to close at N2.5 billion at the end of the third quarter.

The same is true of marketing and administrative expenses, which decelerated from over a 36 per cent rise at half-year to a year-on-year increase of less than 29 per cent to N12.4 billion at the end of the third quarter.

Profit performance was also boosted by a sharp drop in impairment loss on receivables from over N1 billion in the same period last year to N206 million.

Unilever closed the third quarter operations with an operating profit of N675 million, a turnaround from an operating loss of over N2.8 billion in the same period last year. This was reinforced by a net finance income of N738 million, nearly three times the corresponding figure in the preceding year.

With seasonal sales likely to reinforce growing sales revenue against slowing costs, the company is expected to raise profit delivery for the final quarter.

Unilever ended the third quarter operations in September 2021 with earnings per share of 19 kobo against loss per share of 36 kobo in the same period last year. It closed the last year’s operations with a loss per share of 28 kobo.

Insidebusiness.ng