Unilever Nigeria Sustains Turnaround, Builds N1bn Profit At Q3

Unilever Nigeria Plc has sustained the turnaround mood for the past two quarters at the end of the third quarter after returning to profit in the second quarter. The company earned N368 million profit in the third quarter, topping up to a closing profit of over N1 billion for the nine months of operations.

The company however lost the recovery momentum seen in the second quarter when it built an after-tax profit of N1.2 billion from a loss of N491 million in the first quarter. Nevertheless, the company maintained the course of a turnaround in the third quarter from a loss of N1.5 billion in the same quarter last year.

The high points of the company’s operations in the third quarter are an increase in sales revenue and a slight decline in cost of sales, which led to the outstanding growth of over 60 per cent in gross profit.

The strong growth in gross profit provided room to absorb moderate increases in selling/distribution expenses and marketing/administrative costs. A modest operating profit for the quarter was enhanced by a drop in impairment loss on receivables, a complete absence of finance expenses and the appearance of a net finance income.

The hopes for finishing the 2021 financial year at a profit have brightened further for Unilever with sustained profit in the third quarter. It will be the company’s first profit in three years after closing the preceding two years with major losses.

Despite slowing down, the company has retained the strength of growing sales as a key factor in the turnaround move this year. Sales revenue grew by 12.5 per cent quarter-on-quarter in the third quarter, decelerating from a 46 per cent increase in the first quarter and 41 per cent growth in the second quarter.

The company’s year-on-year reading shows a turnover of close to N59 billion for the nine months ended September 2021. This represents an increase of 31 per cent, which is a sustained upturn from a marginal increase of 1.3 per cent in turnover at the end of the 2020 full year.

The home/personal care product segment of the company continues to lead revenue growth at the end of the third quarter. It grew by 44 per cent year-on-year to over N28 billion at the end of the third quarter. This is a strong 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 per cent to N30.5 billion, accelerating however from a 9 per cent growth in the 2020 full year.

The company’s cost structure at the end of the third quarter reflects a further moderation in the third quarter. At roughly N43 billion, input cost continued slowing down from an increase of 51 per cent year-on-year in the first quarter to 37 per cent at half-year and further to a 23 per cent increase at the end of the third quarter.

The slowdown in cost of sales is at the centre of the company’s return to profit since the second quarter. Cost of sales has been growing at a slower pace than sales revenue since then – a change of direction from the first quarter position

The slowdown in input cost swelled gross profit at an increase of 60.5 per cent at the end of the third quarter to almost N16 billion with N6 billion generated in the third quarter. The proportion of sales revenue claimed by the cost of sales declined from 78 per cent in the same period last year to 73 per cent at the end of September 2021.

Selling/distribution expenses have continued slowing down from a 63 per cent rise in the first quarter to a 34 per cent increase at half a year and further to 24 per cent growth at the end of the third quarter.

Marketing and administrative expenses also slowed down from a year-on-year growth of over 36 per cent at half-year to less than 29 per cent increase to close at N12.4 billion for the third quarter.

The company 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. A net finance income of N738 million added up to a pre-tax profit of N1.4 billion at the end of the third quarter.

Unilever ended the third quarter operations in September 2021 with earnings per share of 19 kobo against 36 kobo loss per share in the same period last year. It closed the 2020 full year with a loss per share of 28 kobo.

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