A net loss of over N1 billion in the third quarter has slashed Unilever Nigeria’s closing profit from N2.7 billion at the half-year to less than N1.7 billion at the end of the third quarter.
Operating results worsened for the second quarter after rising production costs dried up profit in the second quarter, adding just a little over N91 million to the elevated profit of N2.8 billion in the first quarter.
The third quarter interim financial report of the home/personal care products manufacturer for the period ended September 2023 shows that the company has addressed the pressure from production costs but massive increases in finance and tax expenses in the third quarter threw the bottom line into the red.
Reversing the growth pattern in the second quarter when input costs rose well ahead of sales, the cost of sales provided a cost-saving point for the company in the third quarter.
At N27.4 billion, third-quarter sales revenue grew by 30.6 percent year-on-year, beating an increase of 17 percent in production costs to N21 billion. This is against an increase of 67 percent in the cost of sales and 27 percent growth in turnover in the second quarter.
The much improved cost-income balance in the third quarter powered a jump of 111.7 percent in gross profit to N6.3 billion in the quarter. This is a rebound from a drop of 64.6 percent in gross profit to N2.5 billion in the second quarter.
Selling/distribution and administrative expenses remained moderated in the third quarter, which enabled the company to recover from a huge operating loss of N2.6 billion in the same quarter last year to post an operating profit of about N447 million in the third quarter. The figure is also a recovery from an operating loss of over N3 billion recorded in the second quarter.
A further boost came from finance income of over N977 million for the third quarter, which is an increase of over 127 percent year-on-year.
Finance costs however multiplied more than three times from N329 million to over N1 billion over the period, which left a net finance cost of over N57 million.
A tax expense of about N1.5 billion consumed a pre-tax profit of N389 million for the third quarter, creating a net loss of over N1 billion for the quarter year-on-year. The loss figure still represents a drop of 51.6 percent from a net loss of about N2.3 billion in the same period in 2022.
The company’s nine-month position is a sum up of two bad quarters dragging down the good performance of the first quarter. The second quarter contributed less than N92 million to the first quarter’s profit of under N2.7 billion while the third quarter brought in a loss of over N1 billion.
Sales revenue for the nine months of trading amounted to N81.6 billion, which is an increase of 26 percent year-on-year, improving moderately from 23.7 percent at the half year.
The pressure from production costs remained a challenge for the company despite the slowdown in the third quarter. At over N62 billion, the cost of sales still grew ahead of turnover at 30.6 percent compared to 26 percent, declining however from the 39 percent rise at the half year.
The reduced pressure from input costs enabled the company to raise gross profit by 12.9 percent to N19.4 billion at the end of September 2023, picking up from a decline of 7 percent to N13 billion at half year.
Selling and distribution costs remained under control at N3.7 billion and administrative expenses went down by 7.5 percent over the period to N12.3 billion.
The challenge came from impairment loss on receivables that towered at N1.7 billion at the end of the third quarter from a net write-back of N54 million in the same period last year. Despite that, operating profit grew more than three times to N1.7 billion at the end of September, reversing from a drop of 56.7 percent to less than N1.3 billion at the half year.
There was a windfall of N2.7 billion in finance income, more than three times the increase from N886 million in the same period last year. Foreign exchange gain absorbed finance costs of about N2.4 billion and added N448 million to finance income – creating net finance income of N3.2 billion at the end of the third quarter.
With the inflow from net finance income, Unilever lifted pre-tax profit all the way from N473 million to N4.9 billion year-on-year at the end of the third quarter.
Tax expenses claimed N3.2 billion or 66 percent of the figure, leaving an after-tax profit of less than N1.7 billion at the end of September, down from the half-year figure of roughly N2.8 billion.
The company closed the third quarter operations with earnings per share of 29 kobo, up from a loss of 6 kobo per share in the same period last year but down from earnings per share of 48 kobo at half year.
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