Unilever Nigeria Plc got a big profit break-out of N6.3 billion in the final quarter which bailed it out of a loss of N2.3 billion in the third quarter. The third quarter loss had wiped off the company’s half-year profit of N1.9 billion and created a net loss of N338 million.
The upswing in the final quarter dressed up the company’s earnings story for the year, preventing a backswing into the red. The home/personal care company only returned to a profit of N3.4 billion in 2021 from two years of losses – N7.6 billion in 2019 and about N4 billion in 2020.
The full-year financial report of the company yet to be audited shows two major developments on both sides of cost and income that changed its fortunes drastically in the final quarter.
The first is an aggressive trimming of the cost of sales – which dropped by 30.5 percent or over N4 billion quarter-on-quarter to N9.6 billion for the quarter. This is against an increase of over N3 billion or 15 percent in sales revenue over the same period.
The development is a sudden change of direction for the company from the third quarter reading when the cost of sales grew two and half times faster than sales.
The gain in sales and drop in the cost of the same powered a top record growth in gross profit at 105.5 percent quarter-on-quarter to over N14 billion for the final quarter. This represents a gain of N7.3 billion in gross profit during the quarter.
The second leg of the company’s outstanding performance in the closing quarter is a net finance income of about N1.4 billion breaking out of a net finance cost of N278 million in the same quarter in 2021.
The favourable combination of cost reduction and gains in income enabled Unilever Nigeria to generate a pre-tax profit of N9.4 billion in the final quarter – more than 95 per cent of the full-year figure of less than N9.9 billion.
The company’s full-year numbers show that sales revenue amounted to N88.7 billion, representing an increase of 25.8 percent. This is a slowdown from the 35 percent growth in turnover the company recorded at the end of 2021.
Unilever Nigeria is just recovering from two years of sales revenue plunge that saw its numbers crash from over N95 billion in 2018 to N52 billion in 2020.
The major cut in the cost of sales in the final quarter slowed down the growth at a full year from about 33 percent at the end of the third quarter to 14 percent to close at N57 billion. That lifted gross profit by 54.6 percent to N31.5 billion for the year.
Getting the cost of sales to grow at a much slower pace than sales in the final quarter instead of well ahead of it, is the critical development that made the difference for the company at full year.
The cost per unit of sales went down from over 73 kobo at the end of the third quarter to 64.5 kobo at the end of the year.
A major increase of 44.6 per cent in selling and distribution cost to N4.8 billion was diluted by a moderated increase of 20 per cent in marketing and administrative expenses and a reversed movement in impairment loss on trade receivables from a net charge of N829 million in 2021 to a net write-back of over N50 million.
The favourable changes enabled the company to build an operating profit of N8.6 billion at the end of the year.
Despite a big increase in finance cost from less than N96 million in 2021 to N548 million in 2022, finance income of N1.8 billion absorbed the increase and created a net finance income of N1.3 billion at full year. That was an increase from net finance income of N931 million in the preceding year.
The resulting pre-tax profit of N9.86 billion is more than five times the N1.88 billion figure the company earned in 2021. After-tax profit amounted to slightly below N6 billion – a big leap from N688 million in the prior year.
The company’s closing profit of N3.4 billion in 2021 was constituted largely by a profit of N2.7 billion from discontinued operations.
Earnings per share amounted to N1.04 at the end of 2022 operations, rising from 59 kobo per share in 2021 when the company paid a cash dividend of 50 kobo per share for its 2021 operations.
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