Unilever Nigeria Plc’s Profit Before Tax (PBT) rose by 30.58% to N13.96 billion from N10.69 billion recorded in the same period in 2023.
The company’s financial performance for the first nine months of 2024 stands out as a remarkable turnaround, considering the broader economic turbulence in Nigeria, especially the ongoing foreign exchange (FX) crisis that has negatively impacted many multinationals.
The FX crisis has resulted in a volatile exchange rate environment, currency depreciation, and reduced foreign earnings for many companies. These factors have compounded the cost of importing raw materials, eroded profit margins, and made it difficult for companies to repatriate profits. Consequently, many multinationals in Nigeria have reported massive revenue losses. Against this backdrop, analysts believe Unilever’s financial results demonstrate resilience and agility in weathering the storm.
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Key Financial Highlights
Revenue Surge: Unilever Nigeria reported a 45% year-on-year (YoY) increase in revenue, climbing from N71.20 billion in the first nine months of 2023 to N103.84 billion in the same period in 2024. This surge was driven by the company’s ability to adapt its pricing strategies to reflect the devalued naira while maintaining product demand.
Cost of Sales and Gross Profit: Despite a 26% YoY rise in the cost of sales, which amounted to N60.95 billion, Unilever’s gross profit surged by 88% to N42.89 billion. The sharp increase in gross profit indicates improved margins resulting from a combination of strategic price adjustments, cost-cutting measures, and a more favorable sales mix that prioritized higher-margin products.
Operating Profit Growth: The company’s operating profit grew by 27% to N10.13 billion, reflecting successful cost management efforts and improved operational efficiencies that helped mitigate the impact of higher production costs and currency depreciation.
Finance Costs and Net Finance Income: While finance costs rose by 14% to N2.94 billion due to the FX-related pressures, Unilever managed to increase its net finance income by 40%, reaching N3.82 billion. This helped offset the impact of higher borrowing costs and supported overall profitability.
Profit After Tax and Earnings Per Share: The profit after tax for the period saw a dramatic increase of 563%, reaching N11.00 billion from N1.66 billion a year earlier. This significant jump was partly driven by a 9% decline in tax expenses. Consequently, the Earnings Per Share (EPS) grew by 48% to N1.92, signaling value creation for shareholders amid challenging market conditions.
Segment Analysis
Food Segment: The food product division, which includes items such as Gino tomato paste, pasta, malt, and beer, was a major revenue contributor, accounting for 59% of total revenue. Revenue in this segment surged by 42% from N43.18 billion in 2023 to N61.40 billion in 2024, reflecting strong demand and successful adjustments in pricing to accommodate rising costs.
Personal Care Segment: Revenue from personal care products, which covers diapers, cosmetics, wipes, and body supplements, increased by 48% to N34.67 billion. This segment made up 33% of total revenue and benefited from strategic efforts to capture more market share, especially in the mid-tier product category, amid changing consumer spending habits.
Beauty Products: Although the beauty product segment remains the smallest contributor, it experienced substantial growth, with revenue climbing 68% from N4.61 billion to N7.77 billion. The increase can be attributed to heightened consumer interest in self-care products, even in times of economic uncertainty, and effective marketing campaigns.
Navigating the FX Crisis
Over the past few years, Nigeria’s foreign exchange market has been characterized by multiple exchange rates, restricted access to U.S. dollars, and a widening gap between official and parallel market rates. This has made it difficult for companies to access the necessary foreign currency to import raw materials, settle international obligations, and repatriate profits.
However, the situation took a turn in 2023 following the decision of President Bola Tinubu to enact a reform that involved floating the FX market. This policy change resulted in a massive devaluation of naira, significantly cutting the profits of many multinationals, with many declaring losses.
Unilever Nigeria recorded a foreign exchange loss of N4.58 billion in 2023, compared to N1.65 billion in 2022.
The company continues to rely heavily on the domestic market for its revenue, with less than 3% (N3.23 billion) of sales coming from exports. However, analysts believe the reliance on local revenue also exposes the company to the risks associated with Nigeria’s economic instability, including inflation and FX fluctuations.
Share Price and Market Reaction
Unilever’s share price remained stable at N19 per share on the Nigerian Exchange (NGX) following the announcement of the financial results, underlining a cautious market outlook despite the strong numbers. Over the past year, the company’s share price peaked at N21.70, signaling investor interest.
However, the stock has struggled to gain momentum, likely due to lingering concerns about the broader economic environment and the company’s ability to sustain growth amid ongoing challenges.