Unilever Nigeria Plc reined in input costs while expanding sales revenue in the first quarter of 2022, which powered a turnaround from a loss position in the same period last year to an N1.8 billion profit.
Sales are picking up for the home/personal care company for the second year and management is realising it at a lower input cost than achieved in the preceding financial year.
The company’s unaudited accounts for the first quarter ended March 2022 show an upturn from a loss of N492 million in the first quarter of last year to an after-tax profit of roughly N1.8 billion – more than two and half times the full-year profit from continued operations the company posted at the end of 2021.
The enlarged room for profit in the first quarter came from stringent cost controls that prevented input costs from rising with sales during the period. Against an increase of 24.5 per cent in turnover year-on-year for the company to N20.6 billion in the first quarter, the cost of sales increased by 8.6 per cent to N13.5 billion.
The stronger growth in sales than the cost of sales reduced the cost per unit of sales, which has been a major area of challenge for the company in recent years. The cost per unit of sales dropped from 75 kobo in the same period last year to 65 kobo at the end of the first quarter of the current year.
Input cost claimed 71 kobo of the naira of sales at the end of 2021, which is also a reduction from 79 kobo in 2020. The spike in input cost in 2020 resulted in a loss of nearly N4 billion the company posted in the year. The reduction in 2021 spurred the moderate recovery while a further reduction in the current year has widened profit capacity for the company.
The cost-saving impacted margins significantly with gross profit advancing by 71.6 per cent to over N7 billion over the review period. This was reinforced by a moderated growth in marketing and administrative expenses, which grew by 8.6 per cent to N4 billion over the same period.
The developments recharged operating profit from a loss of N282 million in the same period in 2021 to N2.2 billion at the end of the first quarter.
Unilever maintains the operating advantage of minimal finance expenses at N121 million in the first quarter, which is more than offset by a finance income of N286 million, leaving a net finance income of N163 million for the period. The company’s balance sheet shows no interest-bearing debts.
Growing sales revenue has been the key factor in the improving performance of the company since last year. Sales revenue sprang from a drop of 13.7 per cent in 2020 to a 35 per cent rise to N70.5 billion in 2021.
Based on the current growth rate, turnover is projected to be in excess of N80 billion at the close of the 2022 financial year. That will yet leave sales revenue down from the five-year peak of N95 billion the company registered in 2018.
Sales revenue growth in the first quarter was led by the food products segment of the company’s market, which grew by 26 per cent year-on-year to close at over N11 billion for the quarter. The home/personal care product segment grew by 23.5 per cent to N9.4 billion over the same period.
Unilever closed the first quarter of operations with earnings per share of 31 kobo, recovering from a loss of 9 kobo per share in the first quarter of last year. It closed the 2021 full year with earnings per share of 59 kobo and paid out 50 kobo per share in cash dividends to shareholders.